THE WORKPLACE SAFETY AND INSURANCE BOARD
APPEALS RESOLUTION OFFICER DECISION
DECISION NUMBER: 20090085
OBJECTION BY: EMPLOYER
REPRESENTATIVES: EMPLOYER
HEARING DATE: OCTOBER 1, 2009
ATTENDEES: EMPLOYER, EMPLOYER REPRESENTATIVE
ISSUES
Issue 1
The employer ("M”) asks the Workplace Safety and Insurance Board ("WSIB") to reverse the decision to reclassify insurable earnings for the following individuals, from classification unit (“CU”) 7711-001 (“Supply of Clerical Labour Operations”) to CU 7712‑002 (“Supply of Labour, Construction”), for the years 2005 and 2006:
Individual 1
Individual 2
Individual 3
Individual 4
Individual 5
Individual 6
Individual 7
Individual 8
Individual 9
Individual 10
The submission is that the WSIB’s retroactivity policy precludes the making of any classification changes for the years 2005 and 2006, and that any reclassification should take effect as of January 1, 2007.
Issue 2
The employer asks the WSIB to change the reclassification that was applied regarding the 10 people, such that it should be to CU 4411-000 (“Construction Project Management”) for some and CU 7711-001 (“Supply of Clerical Labour Operations”) for others, rather than CU 7712‑002 (“Supply of Labour, Construction”).
EXHIBITS
None.
HOW THE ISSUES AROSE
The employer registered with the WSIB as of October 4, 2005. Along with an Employer Registration form, M provided copies of Service Agreements with various customers.
The parts of the Service Agreements that indicate M’s business activities provide as follows:
The Agency [“M”] agrees to supply clerical and administration personnel to complete all Client’s requirements of filing, secretarial, receptionist, bookkeeping, accounts payable/accounts receivable, payroll, general accounting, client services, EDP network administration etc. in accordance with Client's requirements.
The Agency agrees to supply personnel to any industry to perform construction services to complete all Client's requirements of client services, client care, ground maintenance, handyman work, housekeeping services, clean-up services, disposal services, security & safety services, administrative duties, driving services, delivery truck services etc in accordance with the Client's requirements.
The Agency agrees to provide their personnel on a short term or long-term basis as determined by the Client requirements.
M billed its clients an hourly rate, plus an administrative service fee and mileage.
On the Employer Registration form, M indicated that it was not associated with any other employers.
Based on all of this information, the WSIB classified the firm under CU 7712-002 (“Supply of Labour, Construction”) and CU 7711-001 (“Supply of Clerical Labour Operations”).
CU 7712-001 (“Supply of Non-clerical Labour Operations”) was added effective January 6, 2006, after the firm wrote to a WSIB Customer Service Representative on February 7, 2006, advising that the company had started to supply labour doing work that included:
General cleaning – consumer, retail, property management, janitorial
General maintenance – repairs, carpentry, renovations, trades, handymen, servicemen
General grounds keeping – grass, snow, weeding, stonework, sweeping
Restaurant – busboy, servers, dishwashers
Security – retail, private, property management, consumers
Customer – retail, department store, sales, administration, etc.
On December 21, 2006, the WSIB sent a Notice of Audit Visit, indicating that an audit would start on January 15, 2007, with regard to records for 2005 and 2006. In her audit report, the auditor stated that M had a contract with only one client (“MGI”), and that the labour being supplied was for the client’s sales and marketing department, construction department, customer services, general department, land development department, general management department, finance and IT department, commercial construction and condominium department, and commercial operation department. She confirmed classification under CU 7711-001 (“Supply of Clerical Labour”) for workers of M providing bookkeeping, accounting, payroll, web development, legal, administration and general management, as well as real estate sales assistants and marketing assistants. However, she determined that the supply of workers to work in the client’s construction department – including project manager, site supervisors, project managers, excavators, site clerk, land acquisition and development services – fell within CU 7712-002 (“Supply of Labour, Construction”). The auditor reallocated payroll accordingly for audited years 2005 and 2006, and the first six months of 2007, and closed the classification category for the supply of non-clerical labour as of December 31, 2006. She advised M of her decision in a letter dated August 30, 2007.
The auditor met with the firm in November of 2007 to discuss concerns the company had about the classification of 15 specific people. She ultimately allowed five of the people to be reclassified to the Supply of Clerical Labour category, but confirmed the Supply of Construction Labour classification for the other 10.
The employer representative submits that no classification changes should have been made for 2005 and 2006. For the period commencing January 1, 2007, she originally submitted that the payroll for the 10 people in question should be classified under the category for the supply of clerical labour, rather than the one for the supply of construction labour. In the hearing, she amended the outcome being sought, such that she asked for reclassification to the CU for construction project management. However, by the end of the hearing it was submitted that the firm should retain the supply of clerical labour CU for people doing what the firm regarded as clerical work and that it should receive the construction project management CU for everyone else.
ISSUE 1 – RETROACTIVITY OF RECLASSIFICATION
Authority References
Operational Policy Manual document 14-02-06 ("Employer Premium Adjustments"), published January 3, 2007.
Operational Policy Manual document 14-02-06 ("Employer Premium Adjustments"), published November 3, 2008.
Assessment of Evidence and Submissions
The WSIB’s retroactivity policy, which is set out in Operational Policy Manual ("OPM") document 14-02-06, states the normal rule that retroactive adjustments are made for two prior years. There are four exceptions:
(1) Where provisional premiums have been charged in the absence of payroll information from the employer, the WSIB may make adjustments for any prior years.
(2) Where there has been a lack of full disclosure, the WSIB can make debit adjustments for up to five prior years.
(3) Where the employer has committed an offense or a fraudulent act, debit adjustments can be made for any prior years.
(4) Where the adjustment relates to a classification change, adjustments are limited to January 1 of the current year.
The version of OPM document 14-02-06 that is now in force provides as follows:
Classification Changes
For classification changes not involving provisional premiums, lack of full disclosure, and offenses or fraud, premium adjustments are limited to January 1 of the current year.
The WSIB considers classification change as a change to an employer's account that results in the addition or deletion of a Classification Unit (CU) unless the change falls under one of the other Exception rules.
The second quoted paragraph was added to the policy with an effective date that is after the performance of the audit in the M case; however, I understand that it represents the interpretation that at least some auditors, or the audit department itself, had been applying to the phrase “classification change” even before that.
The question in this appeal is whether that interpretation was correct and, in turn, whether the auditor’s reallocation of payroll from one existing classification to another was a "classification change." I find that it was in fact a classification change.
Where insurable earnings are moved because the decision-maker finds that they relate to a CU other than the one they have been reported under, that is in essence a classification decision. Such a decision to reallocate payroll is, after all, based on an analysis of what kind of business activity it relates to and where that activity falls within the WSIB’s classification scheme.
While this is my view, it cannot govern in a retroactivity decision made under the current version of OPM document 14-02-06 because, in revising its definition of “classification change,” the WSIB has expressed its intention that a change in classification has to involve the addition or deletion of a CU. However, for the period that is relevant in the M case, which precedes the policy redefinition of "classification change," there is no proviso as to what that phrase means, and I have the authority to apply the interpretation that I find makes sense. For the reasons I have stated in the preceding paragraph, I find that the reallocation of payroll from one existing CU to another constitutes a “classification change” where, as in the M case, the insurable earnings have been found to have been reported under the wrong CU. As a classification change, such an adjustment is to be made as of January 1 of the “current year,” which, in the case of an audit, is the year of the audit visit date indicated on the Notice of Audit Visit. In the M case, that was 2007.
As a final matter, I recognize that if a classification change involves any of the other three exceptions to the rule of two years of retroactivity, adjustments are permissible for a greater number of years. The question, then, is whether the M case involves any of those other exceptions. I find that it does not.
The first exception – provisional premiums – does not apply in the M case.
The third exception – the commission of an offence or fraudulent act – does not apply either, as there has been no finding that either of those things occurred.
I find that the second exception – lack of full disclosure – does not apply either. It is true that the employer did not advise the WSIB that it was employing people to do work of the kinds that are in question. However, there is no evidence that it reported the relevant payroll in the way it did because of deliberate misrepresentation or contrary to clear instructions from the WSIB, such that it knew or should have known that it was reporting under the wrong classification category and was trying to hide that fact from the WSIB.
Conclusion
The reallocation of payroll for 2005 and 2006 constituted a classification change, for which the effective date provided for in the relevant WSIB policy was January 1, 2007. The years in dispute – 2005 and 2006 – were outside the retroactivity period and, accordingly, the reallocations for those years are to be reversed.
The employer’s retroactivity objection is, therefore, allowed.
ISSUE 2 – CLASSIFICATION
Authority References
Employer Classification Manual document G-723-05 (“Construction Project Management”).
Employer Classification Manual document G-764-07 (“Supply of Labour, Construction”).
Employer Classification Manual document I-929-01 (“Supply of Non-clerical Labour Operations”).
Employer Classification Manual document I-956-45 (“Supply of Clerical Labour Operations”).
Operational Policy Manual document 14-01-06 (“Associated Employers”).
Assessment of Evidence and Submissions
The witness (“AA”) is the owner and president of the employer. He testified that M provides workers to clients, pays the workers and bills the clients. He confirmed the auditor's description, in a letter dated February 11, 2008, that the firm “supplies workers to a client that provides administrative services to home construction projects and commercial construction projects," but stated that, contrary to what the auditor had said, there was more than one client. AA testified that he has blanket agreements that do not specify the positions that are to be occupied by the people who are supplied; rather, on a case‑by-case basis the client advises M which position is vacant and looks to M to provide someone specifically for the position. AA testified, and the record shows, that M is not associated with its clients in the manner in which the term “associated” is defined in WSIB policy.
According to testimony, M’s clients are engaged in construction management. However, AA’s description indicates that the clients enter into contracts with construction trades and supervise the work, which suggests that the clients are in fact in construction, with the actual trade work subcontracted out. In that event, it appears that the clients might fall within classifications for construction, not project management, but that is not something that I have jurisdiction to rule on in the context of the M objection, nor is it necessary that I do so in order to resolve this appeal. The fact is, M itself does not hire construction trades; rather, it provides personnel who engage in project management. The question is, where does such a business activity fall within the WSIB’s classification system?
First, I note that the witness indicated that there are three people who perform construction work – a heavy machine operator, an excavator and a maintenance person – and speculated that they could be classified under the supply of non-clerical labour, the supply of construction, or project management. However, those three people are not among the 10 people whose classification was specified to be in dispute, so I have no jurisdiction to rule on where those three should be classified. The objection relates strictly to the 10 people named above, as the Objection Form referred specifically to them (plus an eleventh person for whom the objection was ultimately allowed by the auditor), and the representative confirmed at the start of the hearing that they were the specific people whose classification was in dispute.
In submissions, the representative stated that the firm should remain classified under CU 7711-001 (“Supply of Clerical Labour Operations”) for providing clerical people, and should receive CU 4411-000 (“Construction Project Management”) for everyone else. As I have said, my jurisdiction does not extend to the classification of the company’s entire operations but only to the classification of the 10 named individuals. Thus, my analysis consists solely of what each of those people’s jobs entailed and where the provision of their labour by M is to be classified.
First, it is significant to note that, according to the evidence, the employer’s business activity does not constitute the “supply of labour,” at least as that term is defined in the WSIB’s classification system. All of the supply of labour classifications specify that, in the supply of labour industry,
[the] workers perform a variety of functions that are normally
part of the day-to-day operations, and
usually carried out by permanent staff
of the employer to whom they are supplied.
In the case of M, the testimony indicated that the people who are provided are not fill-in help who perform work “usually carried out by permanent staff of the” client. Rather, the client hires M to provide the workers so the clients do not have to staff those positions on their own in the first place. Thus, M’s situation is not a supply of labour scenario at all. Rather, M’s business activity is the performance of a service for its clients by way of the people it provides.
The question, then, is what that service (as it relates to the 10 people) is and, consequently, where the insurable earnings of those people fall. Having reviewed the file, I find that the insurable earnings of those 10 people fall within the Construction Project Management category (CU 4411-000). The relevant part of the scope of the CU reads as follows:
Business activities include managing some or all phases of a construction project by providing field supervision and technical services on contract.
Responsibilities include ensuring that construction work is completed on schedule, within budget, and according to specifications. Also included is maintaining and amending schedules, checking shop drawings and orders, and providing cost statements and progress billings.
These employers may hire or supervise contractors or subcontractors directly or on behalf of the project owner. A significant part of their time is spent on the construction site.
Excluded from this category are construction project management services provided exclusively to a particular type of construction project, e.g., if the projects were exclusively highway construction, the construction project management operations would be classified in G-711-02, Highways, Streets, and Small Bridges.
Also excluded is the taking of contracts to provide architectural, engineering, interior design, or management consultant services.
I have reviewed information on file outlining the titles for each of the 10 people and describing what each of those positions involves. I will not detail it here as it is all on file in the form of job descriptions and information outlined in the audit report. Having reviewed that information, as well as the testimony of AA, I find that their work clearly does constitute the management of construction projects as described in CU 4411-000. In particular, the work they perform relates to matters set out in the second paragraph of the scope of the CU.
I note that, where project management is done exclusively for “a particular type of construction project,” the employer would be excluded from the Construction Project Management category and would be classified according to the relevant type of project. However, in the case of M, the testimony indicated that some of the client corporations are engaged in residential projects, some in commercial projects (such as shopping plazas), one in the leasing of commercial properties, and one in the manufacture of railings. M contracted to manage these various types of projects and, as such, is not excluded from the Construction Project Management CU. If the facts change and the company contracts exclusively for one type of project, it is required to inform the WSIB to see if it still qualifies for classification within the Construction Project Management category. However, that is not the case for the period under review in this objection.
Conclusion
The 10 people named above on page 1 of this decision do not perform fill-in or supplementary work that is normally performed by permanent employees of M’s clients. Thus, the provision of those people’s labour to clients does not constitute “supply of labour” for WSIB classification purposes. Rather, sending those people to do the work that they do constitutes the provision of a service. That service is construction project management as defined in CU 4411-000.
As the employer is asking to retain the rate for the supply of clerical labour (CU 7711‑001) for at least some of the payroll in dispute, and I have found that it all belongs in the construction project management category (CU 4411-000), this decision represents a partial allowance of the objection.
DATED December 14, 2009.
B. Patlik
Appeals Resolution Officer
Appeals Branch