WORKPLACE SAFETY AND INSURANCE BOARD
APPEALS RESOLUTION OFFICER DECISION
DECISION NUMBER: 20100010
OBJECTION BY: Employer
REPRESENTATIVES: Employer Representative
ISSUES
The employer’s representative requests that the Workplace Safety and Insurance Board (WSIB) prorate the employer’s common earnings as of 2008, and that the contractors determined to be workers of the employer be ruled as Independent Operators.
HOW THE ISSUES ARISES
The employer was audited on May 26th, 2008.
The employer was advised of the audit findings on December 24th, 2008, and the employer was advised that:
The common earnings for the firm’s two classifications were prorated for the audited years of 2006 and 2007; and
Two individuals who were previously ruled workers but whose status was not confirmed, and 8 individuals who had not had their worker status ruled on by the WSIB were determined to be workers of the employer.
On January 23rd, 2009 the employer’s representative (ER) objected in writing to:
The proration of common earnings for the years 2006 and 2007 on the basis that previous WSIAT decisions have found the allocation of earnings from one rate group to another to be a “classification change”.
The add back of contractor earnings, and requested clarification on whether these contractors had registered with the WSIB as employers, and had WSIB accounts.
The ER argued that the proration of the employer’s common earnings over their two rate groups was a “classification change”. And, in accordance with Operational Policy Manual (OPM) document 14-02-06, exceptions to the two year rule for premium adjustments, the ER requests that the Auditor’s determination to prorate the employer’s common earnings only be implemented as January 1st, 2008.
The Auditor reviewed their original decision, and advised the employer’s representative on April 22nd, 2009 that:
The proration of the employer’s common earnings was in accordance with OPM document 14-02-06, as the re-allocation of common earnings is an insurable earnings issue, not a classification issue. The Auditor further advised the employer that “all decision by the WSIB are based upon the merits and justice of a case” and the WSIB is not “bound by legal precedent.”
The contractor’s earnings were considered insurable as the individuals at issue either had previous worker status rulings, or did not have a verified ruling from the WSIB. The status of the individuals working relationships were assessed and the results indicated that the individuals were workers of the employer, and their earnings insurable for the following reasons: they followed instructions on how and/or when the work is to be completed; they provided labour services only; and there were no significant indicators that the contractors were carrying on a separate business from that of the principal.
The employer submitted a completed Objection Form dated June 16th, 2009.
The issues are now under appeal.
AUTHORITY
Operational Policy Manual (OPM) documents:
11-01-03 Merits and Justice
14-02-06 Employer Premium Adjustments
14-02-08 Determining Insurable Earnings
RESOLUTION METHOD & PROCESS
The ER submitted a 60-day expedited decision option form dated November 16th, 2009, which requires the Appeals Branch to make a decision based on the information on file along with any final submission/argument received.
ASSESSMENT OF THE EVIDENCE
Firm File documentation
Notice of Audit Visit dated March 25th, 2008.
Auditor’s memo dated May 26th, 2008.
Auditor’s decision letter dated December 24th, 2008.
ER’s letter of intent to object dated January 23rd, 2009.
Auditor’s letter of reconsideration dated April 22nd, 2009.
Objection Form dated June 16th, 2009.
Appeals Issue Sheet dated July 31st, 2009
Auditor’s letter of reconsideration dated October 22, 2009.
Appropriate Policy
OPM documents 11-01-03 Merits and Justice
Law
The WSIB shall make its decision based upon the merits and justice of a case and is not bound by legal precedent.
Policy
Merits and justice
Every decision made by the WSIB must be based on the merits and justice of the case, which means decision-makers must take into account
all facts and circumstances relating to the case
the relevant WSIB policy or policies, and
the relevant provision or provisions of the Workplace Safety and Insurance Act or the Workers' Compensation Act (the Act).
By applying relevant legislative and policy provisions to similar situations, decision-makers ensure that
similar cases are adjudicated in a similar manner
each participant in the system is treated fairly, and
the decision-making process is consistent and reliable.
Scope of authority
The obligation to decide each case on the basis of merits and justice does not authorize a decision-maker to disregard the relevant provisions of the Act or WSIB policies. The Act and the policies must be taken into consideration, and cannot be ignored if they apply to a particular case.
Guidelines
Facts and circumstances
Decision-makers rely on employers, workers, and health care practitioners to report relevant information, but ensure that all information necessary to make a decision is on file.
Role of the Act
The WSIB is responsible for administering and implementing the Act. If there are specific directions within the Act that are relevant to the facts and circumstances of the case, decision-makers are legally bound to follow them with no exceptions (e.g., loss of earnings is to be compensated at 85% of net average earnings for accidents on or after January 1, 1998).
Role of policy
The WSIB develops policies when the Act is silent or ambiguous, or when it permits a number of possible interpretations.
Within each policy, the WSIB creates a framework that directs the way decision-makers should act when certain facts and circumstances come before them. If such situations arise, the relevant policies must be followed unless there are exceptional circumstances as described below.
Applying policies
After gathering all the facts pertaining to each case, the decision-maker interprets the information, determines if there are any relevant provisions of the Act or policies, and weighs all of the evidence before making a decision.
To identify a relevant policy, a decision-maker must first consider whether the case falls within the application date of the policy (e.g., 17-06-05, Personal Care Allowance, applies to all decisions made on or after June 1, 2001).
The decision-maker then determines if the facts of the case fall within the framework established by the policy.
If the facts of the case pertain to one or more policies, the decision-maker must apply each of those policies when making a decision.
OPM document 14-02-06 Employer Premium Adjustments states, in brief:
Policy
The WSIB makes debit or credit premium adjustments to employer accounts
from the notification date back to January 1 of the second prior year, or
from the notification date back to the actual date that the change giving rise to the adjustment took place if the change occurred after January 1 of the second prior year
The exceptions to the two-year rule are
provisional premiums
lack of full disclosure
offences or fraud
classification changes
Classification changes
For classification changes not involving provisional premiums, lack of full disclosure, and offences 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.
When premium adjustments are made
The WSIB makes premium adjustments to an employer’s account when
an employer notifies the WSIB of a premium issue requiring an adjustment, or
the WSIB discovers the need for an adjustment.
What gets adjusted?
An adjustment to an employer’s premium is made due to a correction in
classification
insurable earnings, including
status decisions (worker or not) for executive officers
status decisions (worker or independent operator) for contractors
optional insurance
earnings of non-registered employers
interest charges
non-compliance penalties.
Premium adjustment results in a credit or a debit to an account as a consequence of applying any adjustment rule.
An adjustment to current-year reported premiums is subject to year-end reconciliation for the current year.
OPM document 14-02-08 Determining Insurable earnings states, in brief:
Determining the status of contractors
If a contractor does not employ workers and is
not registered as an employer with the WSIB
not an independent operator with a WSIB Independent Operator identification number for the contract in question and
not considered a worker by the principal to whom he or she has contracted
then the contractor and the principal are required to complete the appropriate industry-specific, or general questionnaire used by the WSIB to determine whether the person is a worker or an independent operator for WSIB purposes.
Principal responsible to report earnings
Contractors considered workers
When the principal or the WSIB considers a contractor, who works alone, to be a worker, the principal who purchases the contracted service must report and pay premiums on the worker’s earnings based on the labour portion of the contract value.
The contractor’s insurable earnings (and the premiums based on those earnings) are subject to retroactive add-back to the principal’s account according to WSIB policy 14-02-06, Employer Premium Adjustments.
Multiple classification units
General
The following guidelines apply when the employer has more than one classification unit (CU), and the employer is determining insurable earnings for calculating premiums for
monthly, quarterly, or annual premium remittances (see 14-03-09) and
the year-end reconciliation (see 14-03-12).
Employers with an account having more than one CU are required to allocate insurable earnings amounts to each CU.
NOTE
Employers must have segregated wage records in order to have multiple CUs. The Segregated Payrolls policy 14-01-03, provides the general rules for assigning separate CUs. If employers have been assigned multiple CUs and do not have segregated payrolls/wage records, they should contact the WSIB.
An employer with segregated payrolls may have workers dedicated exclusively to each CU, or workers may work in more than one CU. As long as segregated wage records are maintained for each worker, insurable earnings can be assigned to multiple CUs.
Direct earnings
Direct earnings are insurable earnings that can be assigned to a CU directly from the segregated records of the worker’s wages. The segregated wage records must clearly show the earnings based on labour time spent in each business activity. For employers whose accounts have only one CU, all earnings are direct earnings.
There are two types of direct earnings
earnings that relate only to the business activity of the CU, and
earnings that are from an ancillary operation or Optional Insurance that are segregated and can be directly assigned to a CU.
Common earnings
Common earnings are insurable earnings from an ancillary operation or Optional Insurance amounts that are not segregated and cannot be directly assigned to a CU. For example, the employer may have workers in areas such as human resources, accounting or administration, whose work duties support business activities in two or more CUs. If the employer cannot segregate the earnings of these workers by assigning labour time spent in each business activity and CU, these earnings are considered common earnings.
Common earnings must be prorated over the direct earnings of the relevant CUs. When reporting common earnings, the employer needs to determine the percentage of direct earnings for each CU from the employer’s total direct earnings payroll.
Analysis
Upon completing the audit, the Auditor determined that the employer did not correctly prorate their common earnings over their two classification rate groups, and did not report the firm’s contractor earnings for several individuals during the audited years of 2006 and 2007.
As a result of the audit findings, the Auditor corrected the proration of the employer’s common earnings over their two classification rate groups for the years 2006 and 2007; assessed the status of the contractors hired who did not have confirmed status ruling with the WSIB, and added the earnings of those determined to be workers as insurable, to the employer’s account.
The ER objects to the proration of the employer’s common earnings over the audited period of 2006 and 2007, and to the determination of the contractor’s earnings as insurable.
The ER contends that the proration of the employer’s common earnings meets the exception criterion of classification changes defined in OPM document 14-02-06, and as a classification change the retroactivity of the premium adjustment is limited to January 1, 2008. The ER referenced several WSIAT decisions in support of their position that the proration of common earnings is a classification change.
The ER notes that the Auditor’s worker status rulings of the employer’s contractors were based primarily based on the absence of WSIB worker status rulings, and requests to know if the contractors at issue are registered with the WSIB as employers, and have a WSIB account.
Are common earnings a change in the employer’s classification?
The employer was classified in Rate Group 311-01 Wooden Cabinets, CU 2542-000 Wooden Cabinet Operations (RG 311) in 2001, and Rate Group 764-04 Homebuilding, CU 4274-000 Finish Carpentry (RG 764) in 2003.
The employer has been reporting their insurable earnings in both RGs to the WSIB since May 2003.
In accordance with OPM document 14-02-08, common earnings must be prorated over the direct earnings of the relevant CUs. When reporting common earnings, the employer needs to determine the percentage of direct earnings for each CU from the employer’s total direct earnings payroll. The method for calculating common earning is communicated to employers through the OPM document 14-02-08, and in WSIB written communications to employers.
Given the evidence available, I note that the employer has been classified in multiple rate groups since 2003, and has reported earnings under each rate group since they were classified with multiple rate groups. It is not clear why the employer was reporting their common earnings incorrectly; however the WSIB provides instructions on how to report common earnings properly to this employer, like all others, in its reconciliation guides.
The ER references several WSIAT decisions in support of their argument that the proration of common earnings is a change in classification. The WSIAT decisions referenced by the ER determined that the re-allocation of insurable earnings was a classification change in the absence of a WSIB policy definition of a classification change. While I have considered these decisions the WSIB in accordance with OPM 11-01-03 Merits and Justice, makes its decision based upon the merits and justice of a case, and is not bound by legal precedent.
OPM document 14-02-06, currently includes a definition of a classification change, however the current policy only applies to adjustments where the notification date is on or after November 3rd, 2008, and the applicable date of notification in this case was March 25th, 2008. As the audit date of notification in this case was prior to the application date of OPM document 14-02-06, the policy does not apply.
I find the Auditor prorated the employer’s common earnings to correct the employer’s error in reporting their insurable earnings. The employer’s business activity was classified into multiple RGs in 2003 based on their business activities, and was required to report the insurable earnings of their workers according to the business activity they were carrying on. Noting that adjustment was applied to RGs the employer had been classified into in 2003, I find that the adjustment was not a change in the employer’s classification or a change in the classification of the activities the workers were performing but a correction in the reporting of the employer’s insurable earnings.
Are the earnings of the contractor’s hired by the employer insurable?
The Auditor determined the contractor’s worker status based on the information that was available at the time of the audit.
A review of the WSIB databases regarding individuals at issue, limited to the information on file, indicates that they were not registered as employers for the audited period.
I find the ER has not submitted sufficient evidence that would warrant an overturning of the Auditor’s determination.
CONCLUSION
I reviewed the firm file documentation in detail having regard for the submissions and arguments tendered as well as the relevant WSIB policy.
In my analysis, I concur with the Auditor’s determination to prorate the employer’s common earnings to correct the insurable earnings reported over the audited period of 2006 and 2007, and to include the earnings of contractor’s who were determined to be workers of the employer as insurable.
The objection is denied.
DATED this day, January 13th, 2010, at Toronto, Ontario
J. Williamson
Appeals Resolution Officer
Appeals Branch
Copy: to file