Employers objected to the unpredictability of the court system, which every once in a while produced a large judgment against them. They worried, too, about the potential for fostering labor unrest at a time when unions were growing in influence. Elected officials were troubled by all of these flaws as well as the strain that the growing number of lawsuits placed on their court systems. Workers, employers, and public officials all viewed the legal system as wasteful: attorney fees and insurance company profits and overhead consumed a large fraction – often more than half – of the monies spent.
Shortly after the turn of the century, many state legislatures created special industrial accident commissions to analyze the status quo and recommend changes. In most instances, these commissions found so many flaws that they suggested an entirely new approach – industrial accident insurance, modeled after laws in Europe. The new system was based on the principle of liability without fault. Employers would pay not because they were negligent, but because accidents were inherent in an industrial society and therefore a cost of doing business. Injured workers and their families would now be guaranteed compensation. Although the benefits would be lower than the largest court awards, they would also be more predictable, more widespread, and paid more rapidly.
The first of these laws were overturned by the state courts. Maryland’s 1902 law was declared unconstitutional in 1904, and Montana’s 1909 law suffered a similar fate. The most famous case involved New York, which had passed workers’ compensation in 1910. New York’s highest court ruled unanimously in 1911 (Ives v. South Buffalo Railway Company) that the law, which applied to eight “especially dangerous” occupations, was unconstitutional.8 One problem was that the law compelled employers to participate, which was held to be a violation of the due process clause in the 14 Amendment.9 Another problem was that reliance on administrative agencies to handle the problems of injured workers deprived employers of a jury trial, a violation of state and national constitutions. The Ives case might have posed a greater threat to the spread of state laws if not quickly followed by a series of headline-grabbing disasters. One day after the court’s decision, the Triangle Factory fire in New York City claimed the lives of 150 workers. During the next few weeks over 75 Pennsylvania miners died in a cave-in, and 150 convicts working in an Alabama coal mine were killed in an explosion (Dodd 1936: 30-31; Shor 1990: 73). The question for states was not whether to act, but how to act legally. 7 th
Subsequent to the Ives decision, states started to make participation in workers’ compensation elective, while at the same time keeping benefits low and so restricting employers’ legal defenses that most employers would “freely” elect to join the new system. As soon as participation was made elective, workers’ compensation laws started to withstand judicial scrutiny and diffuse rapidly across the nation. Ten states passed such laws in 1911 and four more followed suit in 1912.10 Some of these early adopters were important industrial states (Massachusetts, New Jersey) and some were not (Arizona,