WORKPLACE SAFETY AND INSURANCE BOARD
APPEALS RESOLUTION OFFICER DECISION
decision number: 20100131
OBJECTION BY: Employer
REPRESENTATIVES: Employer
HEARING DATE: July 19, 2010
PARTICIPANTS: Employer, Employer Representative
ISSUE
The employer requests to have their insurable earnings classified by Employer Audit Services (EAS) under Rate Group (RG) 764-01 Homebuilding, Classification Unit (CU) 4011-099 Home Building Operations (RG 764) from January 1st, 2004 to December 31st, 2006, re-classified under RG 723-01 Industrial, Commercial, and Institutional Construction, CU 4012-000 Apartment and Condominium Construction (RG 723).
HOW THE ISSUE ARISES
A Notice of Audit was sent on December 6th, 2007 scheduling an audit for the same date.
The employer was advised they were registered with the Workplace Safety and Insurance Board (WSIB) effective January 1st, 2004.
The Auditor's memo noted that the employer also owns Streetcar Construction Ltd. As each firm is controlled by the same person the Auditor determined they were associated. The Auditor noted the employer was registered as a result of an audit on the associated firm conducted on December 6th, 2007. The Auditor determined that the employer provided administrative support to their associated companies.
The Auditor noted that the employer was first contacted on June 10th, 2005 as a result of the WSIB and Canada Revenue Agency (CRA) initiative; however, the information requested at that time was not submitted.
The Auditor noted they registered the employer, and included their gross payroll from the year 2004 to 2008, and for the first four months of 2009 as insurable in accordance with Operational Policy Manual (OPM) document 14-02-08, "Employer Premium Adjustments", under the exception of lack of full disclosure.
The Auditor classified the employer in the same RGs as the employer's associated company; RG 764 prior to January 1st, 2007, and RG 723 after January 1st, 2007.
The Auditor advised the employer of the audit findings on August 25th, 2009.
The Auditor advised the employer's representative (ER) on November 23rd, 2009 that they reconsidered their decision of August 25th, 2009, and were unable to grant their objection.
The ER submitted an Objection Form on March 18th, 2010.
The issue is now under appeal.
AUTHORITY
Operational Policy Manual (OPM) documents:
- 14-01-06 Associated Employers
- 14-02-06 Employer Premium Adjustments
ASSESSMENT OF THE EVIDENCE
Firm File Documentation
Notice of Audit dated December 6th, 2007
Auditor's correspondence to employer dated August 19th, 2009 advising firm was registered.
Auditor's memo dated June 14, 2009.
Auditor's correspondence dated August 25th, 2009 advising the employer of the audit findings.
Auditor's reconsideration dated November 23rd, 2009.
Objection Form received March 18th, 2010.
Appeals Issue Sheet dated April 28th, 2010.
Auditor's reconsideration dated April 28th, 2010.
Appropriate Policy
OPM document 14-01-06, Associated Employers states, in brief:
O. Reg. 175/98 s.11 If two or more employers are associated, and the operation of one employer would be considered ancillary to the operation of the other if both operations were carried out by a single employer, then the operations are classified as if they were carried out by a single employer. Two employers are associated if
- they are individuals who are related to each other as spouses (as defined in Part III of the Family Law Act), or as siblings, or as parents and children, or
- one employer is a corporation and another employer is
- a person who controls the corporation; or
- a member of a related group that controls the corporation; or
- an individual who is related to a person who controls the corporation, or to an individual who is related to a member of a related group that controls the corporation; or
- a partnership that controls the corporation; or
- the employers are corporations, and
- the corporations are controlled by the same person; or
- the corporations are controlled by individuals who are related to each other; or
- one corporation is controlled by an individual who is related to a member of a related group that controls the other corporation; or
- the corporations are controlled by related groups and a member of one of the related groups is related to a member of the other related group; or
- the employers are partnerships and there are persons who are general partners of both partnerships and those persons are entitled to share in at least 50 per cent of the profits of each partnership.
For the purposes of this policy
- a person or partnership controls a corporation if enough shares to elect a majority of the board of directors are held, other than as security, by or for the benefit of the person or partnership; and
- a related group is a group of individuals each of whom is related to all the other members of the group.
An employer is associated with all the members of a group of associated employers, if the employer is associated with any one member of the group.
Disclosure of association
Employers must declare associations with other employers at the time of registration. The WSIB may determine whether a firm is associated with another firm at the time of registration or upon subsequent audit and classifies the business activity accordingly.
Application of ancillary operation guidelines
All rules applying to ancillary operations apply to an associated employer considered to be ancillary.
OPM document 14-02-06 Employer Premium Adjustments states, in brief:
s.88(4)
If the Board considers that an employer has incorrectly calculated the amount of the premiums payable and, as a result, has paid an insufficient amount, the Board may require the employer to pay additional premiums in an amount sufficient to rectify the error. The Board may fix the amount of the additional premiums to be paid.
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
Definitions
"current year" is the year of the notification date.
The first "prior year" is the calendar year immediately preceding the current year. The second prior year is the calendar year immediately preceding the first prior year.
Exception rules
Lack of full disclosure
At its discretion, where the WSIB is satisfied that there has been a lack of full disclosure in an employer's account on any premium related issue requiring a correction, the WSIB may make premium debit adjustments only for up to five prior calendar years when employers
- provide incomplete or inaccurate information to the WSIB, or
- otherwise delay, withhold, or fail to fully disclose relevant information, or
- fail to act on information provided to them by the WSIB that directly affects their premium.
ER's testimony
The ER stated they had issue with the retroactive period of 2004 – 2007, and RG 764 was applied to December 6th, 2007.
The ER stated they know the employer was not registered, and by the time they were registered the correct RG was known to the Auditor and that is incorrect.
The ER states that the CRA/WSIB letter states that if you register you will not face any penalties, but will be responsible for premiums from the year 2007 to date with interest. The ER states the only reason they can think of why the Auditor went back to 2004 was that the employer was not co-operating with the WSIB. The ER stated the CRA/WSIB letter is dated September 30th, 2009.
The ER stated a mistake was made by the employer; they were classified in the wrong RG and that was corrected and by the time the employer was registered they knew the wrong RG was applied and RG 723 should have been the proper RG; the employer should not be penalized for their mistake, and the WSIB knew the RG is wrong.
The ER requests that the correct RG be applied from 2004, or from January 1st, 2007.
The ER stated that the CRA/WSIB letter explains exactly what would happen if registration was done; either they come in or the WSIB registers them and the effective date would be January 1, 2007.
Employer's testimony
The employer stated they did not know the firm was not registered nor "would they admit they knew it should be registered."
The employer stated at the time of the audit they realized they were in the wrong RG, and they asked the WSIB to re-assess them at the current RG, and they agreed to reclassify to the date of the audit.
The employer acknowledges they made a mistake, however requests that the proper RG be applied.
Analysis
The employer acknowledges they made a mistake by not registering their firm with the WSIB, but contend they should be classified under RG 723 from 2004 to 2007, the same as the firm their associated firm's classification was reclassified under 723 effective January 1st, 2007, or that they be classified under RG 764 from January 1st, 2007 only.
The employer states that the CRA/WSIB letter sent in September 2009 indicated that the effective date of their obligations to the WSIB would be January 1st, 2007 if the employer registered with the WSIB or the WSIB registers the employer as a result of the letter, and as the employer was registered by the WSIB, the premiums they are responsible for should be from January 1st, 2007.
The firm was advised they were registered involuntarily by the Auditor on August 19th, 2008 as they were found to be providing ancillary services to an associated firm. As the firm was providing ancillary services to an associated firm classified under RG 764 from their registration to December 31st, 2006, the employer was also classified under RG 764 from their registration until December 31st, 2006.
That the employer provided ancillary services to an associated company classified for the period in dispute under RG 764, is not in dispute. Although the Auditor reclassified the associated firm based on the audit findings effective January 1st, 2007, they were classified under RG 764 for the audited period, and therefore they classified the employer for the period the associated company was classified under RG 764.
Although the associated firm's classification was changed as a result of the audit effective 2007, I find the Auditor has correctly classified the employer under RG 764, for the disputed period, in accordance with OPM document 14-01-06, Associated Employers, which states, in brief: if two or more employers are associated, and the operation of one employer would be considered ancillary to the operation of the other if both operations were carried out by a single employer, then the operations are classified as if they were carried out by a single employer.
As the firm was registered in 2008 as a result of an audit of their associated firm, the premium adjustment to the employer's account was determined in accordance with OPM document 14-02-06, under the exception rule; lack of full disclosure. As the employer has been registered by the WSIB for a lack of full disclosure of the employer's account, the Auditor made a premium debit adjustment retroactive to the firm's registration date of 2004. Therefore, I find the Auditor correctly adjusted the employer's premiums in accordance with OPM documents 14-02-06.
The ER contends that the employer is eligible for the conditions specified in the CRA/WSIB form letter dated September 30th, 2009. It is unclear why the CRA/WSIB form letter was generated after the employer was involuntarily registered, however this is not uncommon and the letter includes a qualifier for such circumstances, where it states that the letter applies to employer who are not registered, and if this information is not correct then they are to call the WSIB to ensure their records are correct. As the information that generated this form letter was incorrect, had the employer called the WSIB their account would have been reviewed for correctness only.
I find the conditions specified in the CRA/WSIB form letter regarding the date the employer would be responsible for premiums if they are registered as a result of the letter applies to employers who are not yet registered. As the employer was registered prior to the issuance of this letter, I find the conditions regarding the date they are responsible for premiums do not apply as the employer was already registered with the WSIB.
In light of the above, I find the employer is not eligible for the conditions regarding registration as a result of the CRA/WSIB form letter, as they were already registered involuntarily by the WSIB.
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 find the employer has been correctly classified by the Auditor under RG 764, from January 1st, 2004 to December 31st, 2006, as they provided ancillary services to an associated firm classified under RG 764 for the period in dispute. I find the employer is not eligible for the conditions regarding their responsibility for premiums as specified in the CRA/WSIB letter dated September 30th, 2009, as the employer was registered involuntarily at the time of its issuance.
The objection is denied.
DATED: July 29, 2010
J Williamson Appeals Resolution Officer Appeals Branch