Financial Services Commission of Ontario

Commission des services financiers de l’Ontario

Neutral Citation: 2005 ONFSCDRS 166

FSCO A04-001504

BETWEEN:

DANIEL COLE

Applicant

and

ALLSTATE INSURANCE COMPANY OF CANADA

Insurer

REASONS FOR DECISION

Before:

David Leitch

Heard:

October 17, 2005, at the offices of the Financial Services Commission of Ontario in Toronto.

Appearances:

David Levy for Mr. Cole

Ian D. Kirby for Allstate Insurance Company of Canada

Issues:

The Applicant, Daniel Cole, was injured in a motor vehicle accident on June 17, 1995. He applied to Allstate Insurance Company of Canada ("Allstate") for statutory accident benefits payable under the Schedule.¹ Allstate paid certain benefits but denied Mr. Cole's claim for loss of earning capacity benefits (LECBs). This benefit was payable if Mr. Cole continued to qualify for income replacement benefits (IRBs) two years after the accident and if his pre-accident earning capacity (his PEC) exceeded his residual earning capacity (his REC). In March 2001, Arbitrator Palmer decided that Mr. Cole remained entitled to IRBs two years after the accident and that he was, therefore, entitled to an LECB "offer" from Allstate, this being the first step in the procedure for determining his entitlement to LECBs.² While the parties subsequently reached an agreement with respect to Mr. Cole's PEC, they were unable to agree on how to calculate his REC. This dispute was the subject of a failed mediation and Mr. Cole applied for arbitration at the Financial Services Commission of Ontario under the Insurance Act, R.S.O. 1990, c.I.8, as amended.

The issue in this hearing was:

Are Mr. Cole's overtime earnings relevant in the calculation of his REC?

Result:

Mr. Cole's overtime earnings are not relevant in the calculation of his REC.

Introduction

Much of the pertinent background is set out in Arbitrator Palmer's decision.

At the hearing before her, Allstate took the position that Mr. Cole's injuries did not prevent him from returning to his pre-accident job as a machine operator at Northern Telecom Limited (Nortel). Further, pointing to the fact that Nortel downsized and eliminated Mr. Cole's job soon after his accident, Allstate argued that this was "the only reason" he did not return to work there. Arbitrator Palmer rejected both of these arguments. She found that Mr. Cole sustained two injuries in the accident which left him with significant residual impairments: a broken left clavicle, which limited his ability to lift his elbows above shoulder height, and a brain injury, which reduced his intellectual and cognitive capacities. She wrote:

I find bi-manual overhead reaching every few minutes was an integral, essential part of Mr. Cole's job as a machine operator with Nortel. In addition, the job required quick-thinking and problem-solving skills. In my view, Mr. Cole could not perform the essential tasks of his employment as a machine operator at Nortel in January 1996 both because of his left shoulder impairment and the effects of a brain injury incurred in the accident of June 1995.³

As to the layoff at Nortel, Arbitrator Palmer held, albeit implicitly, that this was irrelevant. She observed that the relevant question was the one posed by section 7(1) para. 1 of the Schedule, namely, did Mr. Cole, as a result of his accident-related impairments, suffer from a substantial inability to perform the essential tasks of his pre-accident employment? Having answered that question affirmatively, Arbitrator Palmer then applied section 10(3) of Schedule by deducting from Mr. Cole's IRBs a percentage of his post-accident employment. Arbitrator Palmer described Mr. Cole's post-accident employment as follows:

Mr. Cole was successful in obtaining a new full-time job near the end of September 1996, after a period of about five months of performing intermittent temporary labouring jobs. The job of set-up operator he now holds at Meritor Suspension Systems Company requires very little or no overhead reaching and has fewer cognitive demands than his pre-accident job at Nortel, since any trouble-shooting of his machine is performed by another employee. Mr. Cole now earns close to $20 per hour, but that is less than what he was earning at Nortel in 1995.⁴

Neither party challenged any of these findings on appeal.⁵

Mr. Cole has continued to work at Meritor Suspension Systems Company (Meritor) as a line operator. The parties agreed that this employment satisfied the criteria of section 30(2) of the Schedule, that is, they agreed that Mr. Cole's residual earning capacity could be properly determined by reference to this type of employment. The issue was whether Mr. Cole's voluntary overtime earnings at Meritor were relevant in the calculation of his REC.

As argued, this issue was a dispute about the appropriate comparison. Mr. Kirby submitted that the appropriate comparison was between Mr. Cole's pre-accident earning capacity and his residual earning capacity. Since Mr. Cole's overtime earnings at Nortel were relevant in the calculation of his PEC, his overtime earnings at Meritor must be equally relevant in the calculation of his REC. Only that approach would permit "an apples to apples" comparison. Mr. Levy submitted that the appropriate comparison was between an insured person whose REC is determined prior to his/her return to work and an insured person whose REC is determined after his/her return to work at a job with the possibility of working overtime hours. Since the first insured person's REC would not take overtime earnings into consideration, the second insured person's REC should not do so either. Entitlement to LECBs should not be determined by either the mere timing of the REC assessment or by the insured person's willingness to work voluntary overtime hours.

As was pointed out by Director's Delegate Draper in GAN Canada Insurance Company and Lehman, the LECB provisions "must all be read together to sensibly interpret any particular part."⁶ I will, therefore, begin by reviewing the relevant provisions. After analysing the parties' arguments in light of these provisions and the case law interpreting them, I will arrive at an answer to the question stated at the outset. I will not determine Mr. Cole's exact REC because I was not asked to do so. However, I will resume the hearing to make that determination if requested to do so within three months of the date of this decision.

A review of the LECB provisions of the Schedule

Most, but not all, of the LECB sections are found in Part VI of the Schedule, commencing at section 20. I will set out the substantive provisions applicable to the present case and provide brief descriptions of the sections which are important for comparative purposes or which illustrate the legislative design of LECBs.

Section 21(1) para. 1 contemplates that where the insured person was employed at the time of the accident and continues to qualify for IRBs two years after the accident, the insurer will "promptly" deliver an LECB offer.

(1) ... an insurer shall promptly deliver a written offer to an insured person with respect to the payment of weekly loss of earning capacity benefits if one or more of the following circumstances occurs:
The insured person qualified for weekly income replacement benefits under Part II and continues to qualify for those benefits 104 weeks after the onset of the disability in respect of which he or she first qualified for those benefits.

Section 21(5) requires the insurer's LECB offer to specify the insurer's views about the following four things:

21.(5) An offer under subsection (1) shall specify,

(a) the insured person's pre-accident earning capacity determined in accordance with section 29;

(b) the type of employment that best satisfies the criteria set out in subsection 30 (2);

(d) the amount of the weekly loss of earning capacity benefit, if any, determined in accordance with section 28.

Section 28(1) stipulates that an LECB is only payable if the insured person's PEC exceeds his/her REC and that the amount payable is 90% of the difference.

(1) The amount of a weekly loss of earning capacity benefit for an insured person shall be determined in accordance with the following formula:

A = 0.90 x (B – C)

where,

A = the amount of the weekly loss of earning capacity benefit,

B = the person's pre-accident earning capacity, determined in accordance with section 29,

C = the person's residual earning capacity, determined in accordance with section 30.

Section 29(1) states that where the insured person was employed at the time of the accident, whether working, on strike, on layoff, on leave or under a contract to commence work within a year, his/her PEC will, with one exception, be almost the same as his/her net weekly income from employment, that being the figure used to calculate his/her IRB rate under section 10.

(1) For the purpose of determining the amount of a weekly loss of earning capacity benefit under this Part, the pre-accident earning capacity of a person who is entitled to receive weekly income replacement benefits under paragraph 1 [employed], 3 [under contract], 4 [on strike or on layoff] or 6 [on leave] of subsection 7 (1) shall be deemed to be the person's net weekly income from employment used in section 10 in determining the amount of weekly income replacement benefits immediately before payment of the weekly loss of earning capacity benefits begins, converted to a full-time net weekly income in accordance with section 86, if section 86 applies.

The "almost the same" qualification stems from the indexation section of the Schedule, section 79(1) para. 1, which requires annual adjustments of "the net weekly income from employment used in section 10 in determining the amount of weekly income replacement benefits." This figure will, therefore, be slightly higher "immediately before payment of the weekly loss of earning capacity benefits begins" than it was two or more years earlier when IRBs were first paid.

The exception stems from the final words of the section which permit an insured person who worked only part-time to nevertheless claim a PEC based on full-time employment if the conditions established by section 86 of the Schedule are satisfied, in particular, "if the person would have worked on a full-time basis at some time after the accident." The section then sets out a specific formula or method for converting part-time income to full-time income.

If section 86 applies, the insured person's PEC will obviously never go beyond full-time employment to include overtime earnings. Subject to this exception, however, the PEC of an insured person who was employed at the time of the accident may well reflect his/her pre-accident overtime earnings just as his/her IRB rate did. This is because both the PEC and the IRB rate are calculated by reference to "net weekly income from employment", a figure which is derived from the insured person's gross annual income from employment prior to the accident, determined in accordance with section 9, and then reduced to a weekly net figure, in accordance with section 81 or 82.

Sections 29(2) and (3) are important to describe for comparative purposes. While section 5 of the Schedule states that employment generally includes self-employment, section 29(2) specifies how to calculate the PECs of insured persons who were self-employed at the time of the accident. Section 29(3) does the same for persons who were not employed or were caregivers at the time of the accident but who were employed at some point in the 156 weeks before the accident. Sections 29(2) and (3) recognize that these are all persons who, at the time of their accidents, do not have easily ascertained or recent earnings histories. Their PECs are, therefore, based on the incomes they "could reasonably have earned at the time, having regard to [their] personal and vocational characteristics at that time." For persons who were not employed or were caregivers at the time of the accident, these are obviously purely notional earnings. Section 29(3), therefore, "deems" them to have been earning the determined amount.

Turning to the calculation of the REC, the central issue in this case, section 30 unfortunately provides more guidance on the issue on which the parties agree, namely, the type of employment, than it does on the issue on which they disagree, namely, the income to be attributed to that employment. The section confirms that the REC, like the PEC, is a net weekly income figure derived from a gross annual income and that the calculation is made in accordance with section 81 or 82. The calculation is not in dispute. The issue is how to determine an insured person's gross annual income from a type of employment which he/she may, or may not, have at the time of the assessment. Just as sections 29(2) and (3) solve a similar problem through the use of the words "could reasonably have earned" and, in section 29(3), through the use of the the word "deemed", section 30 also uses the words "could earn" and "deemed."

(1) For the purpose of this Part, the residual earning capacity of a person shall be deemed to be the net weekly income determined in accordance with section 81 or 82 using the gross annual income that the person could earn from the type of employment that best satisfies the criteria set out in subsection (2).

(2) The criteria referred to in subsection (1) are:

The person,

i. is able and qualified to perform the essential tasks of the employment, or

ii. would be able and qualified to perform the essential tasks of the employment if the person had not refused to obtain treatment or participate in rehabilitation that was reasonable, available and necessary to permit the person to engage in the employment.

The employment exists in the area in which the person lives and is accessible to the person.
It would be reasonable to expect the person to engage in the employment having regard to the possibility of deterioration in the person's impairment and to the person's personal and vocational characteristics.

(3) For the purpose of subsection (2), a person is able and qualified to perform the essential tasks of an employment if,

(a) the person does not have any impairment that permanently prevents the person from performing those tasks; and

(b) the person has the job skills and any licence or other credentials required to perform those tasks, or could obtain those skills and the licence or credentials without significant effort. O. Reg. 776/93, s. 30.

The words "personal and vocational characteristics", used in both sections 29 and 30, are the subject of further clarification in section 1 of the Schedule: they "include, (a) employment history, (b) education and training, (c) vocational interests and aptitudes, (d) vocational skills, (e) physical abilities, (f) cognitive abilities and (g) language abilities."

In order to understand the legislative design of LECBs, the following sections must also be briefly described.

Sections 20 and 31 make it clear that LECBs are intended to replace IRBs and are payable for life. They are, however, subject to indexation and age adjustments, in accordance with sections 79, 80 and 29(5)⁷, and they can also be varied or stopped, but only in certain situations or at certain points in time.

First, section 32 allows an insured person who returns to work to claim an LECB supplement for a period not exceeding one year if, as a result of an accident-related disability, he/she becomes temporarily unable to engage in employment. The section states that the benefit is available whether or not the insured person returned to the type of employment that was used to determine his/her REC. It also recognizes that the net weekly income of the employment which the insured person is temporarily unable to perform might be higher than the net weekly income attributed to the type of employment that was used to determine his/her REC. It does this by limiting the amount of the LECB supplement to 90% of the lower of the two figures, thus acknowledging that the REC figure may be the lower of the two.

Second, section 33 requires the insurer to review the insured person's entitlement to LECBs at two specific points in time: three years after such benefits were first paid and eight years after such benefits were first paid. At these times, the insurer may either state its belief that there has been no material change in the insured person’s REC or make a new LECB offer based on its estimate of the insured person’s current REC, again determined in accordance with section 30.

Third, section 34 allows an insured person to demand a review of his/her LECB entitlement if he/she suffers a permanent deterioration in his/her accident-related impairment and, for that reason, becomes unable to engage in employment which would generate the income attributed to the employment that was used to determine his/her REC. Again, the section states that this review is possible whether or not the insured person returned to the type of employment that was used to determine his/her REC. It requires only that a review be requested more than one year after a previous review.

Analysis

Fairness

The case law demonstrates a concern to apply the LECBs provisions fairly. Indeed, fairness has been recognized as a relevant consideration in making both of the comparisons advanced by the parties in the present case, though not in relation to overtime earnings.

In Wawanesa Mutual Insurance Company and Ford, the issue on appeal was whether the arbitrator properly applied section 79 to the indexation of a PEC determined under section 29(1). Director’s Delegate Draper upheld the arbitrator’s decision, observing: "LECBs are calculated by comparing PEC with REC. As REC is measured in current dollars, it is only fair that PEC include the indexing provided in s. 79(1). "⁸ In Liberty Mutual Insurance Company and Angolano, the issue on appeal was whether the arbitrator had properly determined the the PEC of a self-employed person under section 29(2). Director’s Delegate Draper held that "the arbitrator determined [the insured person's] pre-accident income in a manner that allowed a fair comparison with his residual capacity."⁹

On the other hand, in Lehman, the case referred to in the Introduction, the issue on appeal was whether the arbitrator had properly calculated the PEC of an insured person under section 29(3). Director's Delegate Draper noted that the PECs of insured persons who were employed at the time of their accidents are, under section 29(1), "based on their past performance - it is a measure of demonstrated capacity, not theoretical capacity. This prevents someone who was underemployed in the three years before the accident from arguing that his or her pre-accident earning capacity is actually higher than his [or her] employment history suggests." He reasoned that PECs determined under section 29(3) should not, therefore, be measured "in the broadest sense. That would be inconsistent with the treatment of those who were employed at the time of the accident."¹⁰ He later confirmed that the same restraint should be shown in determining PECs under 29(2).¹¹ If consistent treatment of insured persons is important in the determination of their PECs, it must be equally important in the determination of their RECs.

Nonetheless, I am not empowered to re-write the legislation to ensure a fair result. Authority for that proposition, if any is required, is found in the Moncur and ING Insurance Company of Canada case. The issue on appeal was how to calculate the PEC of an insured person who, prior to the accident, was a supply teacher with good prospects of becoming a full-time teacher. The question was whether the conversion formula set out in section 86 could be interpreted to take into consideration the fact that a full-time school teacher does not work 52 weeks a year. If it could not, the insured person’s PEC would be calculated by multiplying a weekly income times 52 weeks, resulting in a gross annual income substantially higher than the income of a full-time school teacher. The arbitrator adopted an interpretation of section 86 which would have avoided this result but his decision was overturned on appeal. Director's Delegate Makepeace wrote:

Section 86 of the SABS-1996 is not silent on the issue in dispute. It requires the conversion to be based on a 52-week year. Reading it carefully, and in the context of the scheme as a whole, I conclude the legislature intended this rough justice measure to err on the side of over-compensation rather than under-compensation. If I am wrong in this, it may be that s. 86, as drafted, fails to achieve the legislature's objective ... In any event, I am not persuaded the Arbitrator had authority to disregard the words of the regulation to achieve what he considered a fairer result. In disregarding the formula set out in s. 86, he erred in law.¹²

In upholding the Director's Delegate's decision on an application for judicial review, the Divisional Court wrote the following endorsement on April 26, 2005 (unreported):

Bill 164 substituted the right to sue for economic loss with a statutory scheme of compensation. Sec. 86 of the Statutory Accident Benefit Schedule (SABS) sets out the formula to convert part time income to full time income for the purposes of determining compensation. The Director’s Delegate correctly applied the formula.

In short, while there may be fairness arguments on both sides of the issue in the present case, my primary responsibility is to give effect to the test of eligibility, as established by the Schedule, and to respect the structure and purpose of the LECBs, as revealed by their legislative design.

The test of eligibility

From this perspective, one of Allstate's arguments can immediately be rejected, or perhaps more accurately, re-rejected. Mr. Kirby again submitted that the accident did not result in any loss in Mr. Cole's ability to earn income. He maintained that this loss, if any, was the result of the fact that Mr. Cole's job at Nortel was eliminated and he was laid off. If his post-accident earnings were lower, this was because he started his new job at Meritor with zero seniority, not with the fifteen years seniority he had accumulated at Nortel. Since this would have been the case with or without the happening of the accident, Mr. Cole’s losses, if any, were attributable to his layoff, not his accident.

In addition to ignoring Arbitrator Palmer’s finding that Mr. Cole re-entered the labour market with reduced capabilities, this argument failed to appreciate the significance of her statement that his entitlement to IRBs fell to be determined in accordance with the test of eligibility stipulated by Schedule. While it was implicit, the significance of that statement was that Mr. Cole’s layoff from Nortel was irrelevant in determining his entitlement to IRBs. It is equally irrelevant in determining his entitlement to LECBs. This was confirmed by Directors Delegate Naylor in the Williams and General Accident Assurance Company of Canada decision when she wrote: "As with weekly benefits, access to LECBs is based not on proof of loss but on meeting qualifying conditions."¹³ It was also confirmed in Hodgson v. Walsh where, referring specifically to LECBs, Justice Thomson wrote: "proof of loss is not a prerequisite under the SABS. Rather, the legislature has enacted a comprehensive scheme for all persons injured in motor vehicle accidents based on entitlement."¹⁴

Mr. Kirby’s other submission was that Mr. Cole’s REC must exceed his PEC because his post-accident employment earnings, as reported in his income as tax returns, exceed his pre-accident earnings. There may, of course, be a direct relationship between a person’s earning capacity and his/her actual income. This relationship is often likened to the relationship between a tree and the fruit it produces. But whereas one might measure the fruit-producing capacity of a tree by counting the number of pieces of fruit it produces, this method of measuring an insured person’s earning capacity is only authorized under section 29(1) when determining his/her PEC. Section 30(1), on the other hand, states that an insured person’s REC is deemed to be the net weekly income he/she "could earn from the type of employment that best satisfies the criteria set out in subsection (2)." To pursue the metaphor, this is not a measurement which can be made by counting pieces of fruit because, at the time of the measurement, there may, or may not, be pieces of fruit to count.

It follows that Mr. Cole's entitlement to LECBs cannot be properly determined by simply comparing his pre-accident and post-accident earnings. That is not the test of eligibility established by the Schedule. Mr. Cole's PEC should have been calculated in accordance with section 29(1), that is, by reference to his actual pre-accident earnings with indexation as required by section 79. His REC must be determined in accordance with the net weekly income he could earn from the type of employment which the parties have agreed satisfies the criteria of section 30(2), that is, the type of employment he currently has. This brings us to what I consider to be the real question in this case: what is the income that Mr. Cole could earn from the type of employment he currently has?

Structure and Purpose of LECBs

Mr. Levy argued that the words "could earn" in section 30(1) mean that the drafters of the provision intended to focus not on the insured person’s actual income but on the potential income the insured person could earn from the type of employment that best satisfies the criteria of section 30(2). In support of this position, he stressed the fact that section 30(1) "deems" the insured person to be earning this income, whether or not he/she actually is earning this income. He further noted that the Schedule does not require post-accident earnings to be deducted from LECBs the way section 10(3) requires that they be deducted from IRBs. This, he submitted, was further evidence of the drafters intention to make actual post-accident income irrelevant in the determination of entitlement to LECBs.

As previously mentioned, Mr. Levy also argued that in order to ensure consistent treatment of all insured persons, whether employed with overtime earnings at the time of their REC assessments or not, section 30(1) must be interpreted to include only full-time earnings. He maintained that just as section 86 provides guidance on how to convert part-time earnings to full-time earnings, it also provides guidance on how to calculate Mr. Cole’s full-time income, exclusive of overtime earnings.

I am perplexed as to how Mr. Levy was able to argue, on the one hand, that actual post-accident income is irrelevant in the determination of an insured person’s REC and, on the other, that Mr. Cole’s REC could be determined by applying the formula set out in section 86 to his actual post-accident income in order to arrive at his full-time earnings, exclusive of overtime earnings. I am also unable to see how the formula set out in section 86 can be used for this purpose when it was clearly intended to be used for a different purpose, namely, to convert part-time income to full-time income.

In any event, the case law does not support the submission that the words "could earn" in section 30(1), or "could have earned" in sections 29(2) and (3), mean that actual earnings have no place in determining an insured person's earning capacity. In interpreting section 29(2) in the Desroches and Economical Mutual Insurance Company case, Director’s Delegate McMahon observed: "If the insured has a significant work history, care must be taken before assigning a PEC that exceeds the insured’s historical earnings."¹⁵ I acknowledge that this comment was made in connection with pre-accident earnings but, as was observed by Director’s Delegate Naylor in the Williams case: "The parties assume, I think rightly, that an offer (and any subsequent assessment of residual earning capacity by a RECDAC) relates to the situation at that time, not at 104 weeks, now long-gone."¹⁶ If, by the time of the REC assessment, the insured person has returned to work and if, as in this case, it is found or agreed that the employment satisfies the criteria set out in section 30(2), there is no reason why the parties should not be permitted to consider income-related information about that employment.

However, I accept the submission that the only relevant income-related information will be the net weekly income that the insured person could earn from working at that type of employment on a full-time basis. I acknowledge that the language of section 30 does not explicitly impose that restriction. A person like Mr. Cole who works overtime thereby demonstrates that he/she "could earn" more than a full-time income from that employment. Nevertheless, as indicated at the outset, the LECB provisions "must all be read together to sensibly interpret any particular part." In my opinion, overtime earnings should not be taken into consideration in determining an insured person's REC if that would conflict with the structure and the purpose of LECBs as revealed by their legislative design.

The structure and purpose of LECBs were described by Director’s Delegate Naylor in the Williams decision in the following terms:

LECBs are payable during the insured's lifetime. The amount is based on the difference between the person’s pre-accident earning capacity and post-accident earning capacity, as defined. The amount is subject to mandatory review twice — three years and eight years after LECBs are first paid. The benefit can be adjusted at that time if the applicant’s circumstances have changed. Outside of this, insurers cannot rely on improvements in the applicant’s condition to reduce benefits. Applicants are protected, however, as the benefit can be reviewed if there is permanent deterioration in impairment. These provisions are intended to provide those with long-term disability some measure of security and stability.¹⁷

Arbitrator McMahon put it more succinctly in Smith and Allstate Insurance Company of Canada: "Once a determination is made concerning the amount of the insured person’s LECB, the amount is locked in until the time of a mandatory review undertaken after three years."¹⁸

Bearing these comments, and the LECB provisions themselves, in mind, I see the following ways in which taking Mr. Cole's overtime earnings into consideration in determining his REC would conflict with the structure and the purpose of LECBs.

First, the evidence was that Mr. Cole’s overtime hours were not only voluntary, they also varied from week to week and were not offered every week. In my opinion, LECBs were not intended to take into consideration at the outset, or structured to be subsequently adjusted in accordance with, fluctuating earnings of this kind. LECBs can only provide "security and stability" if the REC is based on a secure and stable source of income, or at least as secure and stable as possible.

Second, if Mr. Cole's LECBs are reduced or eliminated by the inclusion of his overtime earnings in his REC, he would only be able to maintain his pre-accident earning capacity, as determined under section 29(1), by continuing to work overtime. This would necessarily leave him to fear the loss of the opportunity to work overtime and hence undermine the "security and stability" LECBs were intended to provide. In fact, if the inclusion of his overtime earnings in his REC eliminated his right to LECBs, Mr. Cole would not be able to force Allstate to review his LECB entitlement even if soon after his LECB entitlement was determined to be zero, his employer ceased to offer him the opportunity to work overtime hours. This is because section 33 only makes reviews mandatory three years and eight years "after loss of earning capacity benefits are first paid to the person." Having never paid Mr. Cole LECBs, Allstate would never have to review his entitlement to LECBs under section 33 despite his loss of overtime earnings.

Third, section 30(2) states that one of the criteria to be considered in determining the type of employment is whether the "employment exists in the area in which the person lives and is accessible to the person." This language leaves open the possibility that the insured person lives in an area where more than one accessible employer offers the type of employment in question. In that situation, section 30 does not require that the determination of the income attributable to that employment be made by exclusive reference to the income that could be earned by working for the particular employer where the insured person happens to have found that type of employment by the time of the assessment. The incomes that could be earned from that type of employment by working for other employers in the area might also be relevant, assuming those employers were accessible to the insured person. However, some of those employers might offer no overtime, others might offer voluntary overtime and still others might make overtime mandatory in certain circumstances. None of the employers might be able to reliably predict the number of overtime hours to be offered or required on a go-forward basis. In my opinion, section 30(1) should not be interpreted to mandate an enquiry into this array of possibilities and unknowables. It should be interpreted to require only an enquiry into the full-time income that could be earned from the otherwise appropriate type of employment that "exists in the area in which the person lives and is accessible to the person." This interpretation also best protects the security and stability of the insured person's income in the event that he/she changes employers.

Fourth, the LECB provisions openly recognize the possibility that an insured person’s actual income might, for any unspecified reason or period, exceed the income used to determine his/her REC. Indeed, this possibility is a direct function of the deeming approach adopted by section 30(1). As observed in the fourth edition of Sullivan and Driedger on the Construction of Statutes, the deeming approach is intended "to create a legal fiction by declaring that something exists or has occurred regardless of the truth of the matter."¹⁹ The possibility is recognized in two additional ways: explicitly, through the limit on the amount of the LECB supplement in section 32 and, implicitly, through the absence of any requirement to deduct higher-than-REC income from LECBs.

Fifth, while section 86 provides a specific method for converting part-time earnings into full-time earnings, I do not regard it as significant that the Schedule provides no specific method for excluding overtime earnings in order to arrive at full-time earnings. The drafters of the LECB provisions may well have thought, as I do, that no employer would have any difficulty answering the following question: what is the gross annual income you pay, or paid at the time of the assessment, for this type of full-time employment, exclusive of overtime? There was no indication that Ms. Katherine Calder, the Human Resources Manager at Meritor, would have had any problem answering that question. She testified that Mr. Cole’s "base job, excluding overtime" involved working 40 hours a week, five shifts a week, with hourly rates varying slightly according to the shift worked in a three-shifts-a-day schedule.

Finally, I was not referred to, and was unable to find, a case in which the REC assessment determined anything other than the insured person's ability to perform and earn income from full-time or, in one case, part-time employment.²⁰ The REC assessment conducted in this case concluded that "Mr. Cole is currently able to work in a full time manner" and it also determined his income on a full-time basis, exclusive of overtime earnings.²¹ There was also no evidence that the wage tables authorized by the REC DAC assessment guidelines include overtime earnings.

For these reasons, in my opinion, Mr. Cole’s REC should be based on the gross annual income he could earn from full-time employment of the type he currently has. Accordingly, I conclude that Mr. Cole’s overtime earnings are not relevant in the calculation of his REC.

The calculation of Mr. Cole’s exact REC

This decision may be sufficient to allow the parties to settle any remaining differences about how to calculate Mr. Cole's exact REC.

However, as previously mentioned, it is not clear that either party is obliged to accept a REC based only on the full-time income that could be earned from this type of employment by working for Mr. Cole’s current employer or for any other single employer. Mr. Cole may live in an area where more than one accessible employer offers the type of employment agreed to be appropriate, but at different rates of remuneration. If that is the situation, the parties might still disagree about the income attributable to that type of employment due to the different rates of remuneration paid by different employers.

When I raised this question at the hearing, neither party seemed to have considered how such a dispute would be resolved or, in the event that further evidence was required, who would have the onus of proof.²² They may, therefore, want to resume the pre-hearing to discuss these issues. If the parties are unable to resolve this or any other dispute about how to calculate Mr. Cole’s exact REC, either of them may request a resumption of this hearing. However, the request must be made within three months of the date of this decision.

EXPENSES:

If the parties cannot agree on expenses, they will follow the procedure set out Rule 79 of the Dispute Resolution Practice Code, 4th Edition.

November 23, 2005

David Leitch Arbitrator

Date