THE WORKPLACE SAFETY AND INSURANCE BOARD
APPEALS RESOLUTION OFFICER DECISION
DECISION NUMBER: 20150016
DECISION DATE: April 16, 2015
OBJECTING PARTY: Employer "S"
REPRESENTED by: Employer Representative
HEARING: Hearing in Writing
HEARD by: B. Patlik, Appeals Resolution Officer
ISSUES
The employer representative is requesting:
reversal of the decision that earnings paid to executive officer "NS" in 2013 were insurable to employer "S";
in the alternative, classification of NS's earnings under rate group 755 rather than rate group 751.
ISSUE 1 – INSURABILITY OF NS'S EARNINGS
Background
S has been registered with the WSIB since 2001, under rate group 751, classification unit ("CU") 4232-000 ("Siding Work"). The employer installs architectural panels (metal cladding) for commercial and institutional buildings.
The Workplace Safety and Insurance Board ("WSIB") commenced an audit on May 1, 2014, covering the period back to January 1, 2013. In the course of her review, the Auditor noted that NS was an executive officer of S and he was not operating any tools. As such, he qualified to apply to be exempted from compulsory coverage under Bill 119 (also referred to as "mandatory coverage"). However, he had not applied for exemption.
NS filled out an exemption form during the audit, which the Auditor accepted as exempting NS from compulsory coverage as of that date (May 1, 2014). As a consequence, the Auditor considered NS's earnings during 2013 to be insurable. The employer representative submits that NS's earnings should be exempted from coverage and the audit adjustment should be reversed. The issue involves only 2013, since NS had no earnings in 2014 up to the date of the audit.
Authority
Operational Policy Manual document 11-01-03 ("Merits and Justice")
Operational Policy Manual document 12-01-06 ("Expanded Compulsory Coverage in Construction")
Operational Policy Manual document 14-02-06 ("Employer Premium Adjustments")
Analysis
Having reviewed the file and taken into consideration the submissions, I confirm that NS was properly subject to compulsory coverage and that the Auditor's decision that his earnings were insurable going back to January 1, 2013 should be confirmed.
Prior to 2013, executive officers were not covered and their earnings were not insurable, unless they obtained optional insurance with the WSIB. As of January 1, 2013, the law was changed by way of Bill 119. For employers in Class G construction businesses, other than those engaged exclusively in home renovation work, the choice of buying optional insurance or remaining outside the workplace safety and insurance system was removed. Under the new rules, one executive officer in a corporate entity, who does not perform any construction work, is eligible to be excluded from the new compulsory coverage program.
In order to be exempted, the individual has to complete a form that includes a "Declaration for Exemption from Compulsory Coverage in Construction." The declaration sets out the terms of the exemption, which include that the individual knows and understands that they are waiving what would otherwise be a statutory right to the protection of the Workplace Safety and Insurance Act ("the WSIA"). The declaration also states that "The exemption takes effect the day this declaration is received by the WSIB."
The need to sign a form, and the fact that it does not take effect retroactively, are not just bureaucratic requirements. Rather, they are dictated by the nature of what the exemption means.
The question of whether someone is covered under the WSIA is significant, as it establishes what rights and responsibilities exist for the individual, the WSIB and various other parties.
If coverage exists, there is a right on the part of the person – and a responsibility on the part of the WSIB – for the WSIB to administer claims, pay benefits, cover health care costs, provide retraining if appropriate, etc.
At the same time, the employer has the obligation to report and pay premiums on the person's insurable earnings.
Clearance certificate requirements are also affected by whether there are reporting and payment obligations and whether they have been met for all of the people who are supposed to be covered. As a result, the question of who is and is not covered can have an impact on clearance certificate eligibility.
In addition, if a worker of a Schedule 1 employer (one that is covered compulsorily or by choice) causes an injury to a worker of another Schedule 1 employer, no lawsuit can be brought. Instead, the accident has to be handled within the WSIB's no-fault system. As a result, other people's rights to sue are affected by whether an individual is covered or not.
For these reasons, the question of whether someone is compulsorily covered cannot be treated lightly, and the processes for entering or leaving coverage have to be followed seriously and carefully. In my view, considering all the impacts of whether or not a person is covered, it is essential that, if they are to leave coverage that is otherwise compulsory, they have to (a) consciously and deliberately choose to leave; (b) acknowledge that they are aware of how their leaving would affect their rights; and (c) declare that they want to leave anyway.
There are a few reasons this should not be done on a retroactive basis, as S wishes. First of all, it is unjust for third parties' rights to be affected retroactively. Secondly, if someone in NS's situation had a claim between January 1, 2013 and the time they completed an exemption form, it is highly unlikely they would ask for the exemption to take effect retroactively to January 1, 2013. It would be wrong for the question of whether someone is covered to possibly hinge on whether or not the person later developed a vested interest in the existence of coverage. It would also be inconsistent with the way all insurance systems work, whether with the WSIB or private insurers – coverage is not cancelled and premiums are not refunded after the fact just because the person has not made a claim. For all of these reasons, it is important for changes in coverage status to take effect as of when they are applied for.
In light of the above, it was consistent with WSIB policy, Bill 119 and the reasons behind the policy and legislation, for NS's exemption to take effect as of the date he submitted the exemption application and not retroactive to January 1, 2013.
As with all policies, the one relating to compulsory coverage in the construction industry is subject to consideration of the merits and justice of the case. The WSIB's Merits and Justice policy recognizes that "there may be rare cases where the application of a relevant policy would lead to an absurd or unfair result that the WSIB never intended." As a consequence, it gives decision-makers the authority to "depart from a policy if it can be shown that the case has exceptional circumstances that justify doing so."
The "case" is the particular employer's objection, not a review of or judgment about the policy itself. Therefore, while I may not create a blanket suspension of the policy on compulsory coverage, I can waive the application of that policy if the particular case – here, the case of S and NS – has "exceptional circumstances." In other words, there must be something unique about this specific case, as compared with other employers and executive officers in Class G, such that the application of the policy would lead to an outcome that is unfair or absurd and is not what the WSIB expected or wanted to happen. I do not find that S or NS are in any special situation that makes it unfair or absurd, and against the WSIB's intentions, to hold them to the normal exemption requirements.
The position taken by the employer and its representative is that S should not be subject to premiums for compulsory coverage for NS for the following reasons:
NS did not realize he had to fill out a form in order to be exempted;
he did not request exemption earlier because he did not realize that the installation of office furniture fell into a construction rate group;
there was no financial benefit to the employer in not submitting a declaration of exemption;
the fact that the employer did not apply for exemption earlier did not cause any financial loss to the WSIB;
the implementation of Bill 119 was not meant to be punitive;
the WSIB is inconsistent, in that it sometimes has and sometimes has not allowed an exemption retroactive to January 1, 2013;
the inconsistency demonstrates that the WSIB has discretion in this matter; and
the employer is small and unsophisticated.
With regard to the claim that NS was not aware he had to fill out a form or that the compulsory coverage program applied to his firm, a couple of things are relevant to note.
First of all, according to information on the employer file, including the audit report, S is not merely a furniture installation company (although that particular business activity is a Class G construction activity). Rather, as noted by the Auditor, the company installs metal cladding for commercial and institutional buildings. The classification unit under which it has been classified since its account was opened in 2001 is called "Siding Work." That category falls within Class G.
As a Class G construction firm, S was sent targeted mailings about the compulsory coverage program, in advance of the program's coming into effect. In addition, the WSIB carried out an extensive media campaign, starting in 2012, to inform people about the upcoming changes to coverage requirements. It sent mailings to all employers in construction rate groups, which included the "Siding Work" category. To capture the attention of all parties, including those with active accounts, those who had accounts that were no longer open and those who were now going to have coverage obligations for the first time, the WSIB also advertised in a number of ways, including at industry trade shows, at some government agencies, in certain construction-related retail locations, in newspapers, trade publications, radio commercials, on its website and on some other websites it established to deal specifically with the new mandatory coverage program.
In addition, in her audit report the Auditor said S knew about Bill 119 and the requirement to get clearance certificates from its subcontractors.
Considering all of these things, I do not find it likely that S as a company, and specifically NS as its executive officer, had no awareness of Bill 119 and its applicability to their situation.
With regard to the need for an exemption form, the targeted communications to S and the media campaign specifically pointed out that executive officers were now going to be compulsorily covered but could be exempted. A letter that was sent out in November of 2012 specifically said, "The partnership or corporation must apply to have a partner or executive officer exempt; it is not automatic." The letter then directed the reader to the WSIB's website to get the required form. The form, in turn, contains the declaration that sets out the terms of the exemption, including that, "the exemption takes effect the day this declaration is received by the WSIB." Therefore, if NS was unaware of the fact that he was covered unless and until he submitted an exemption form, I do not find that that was reasonable and that it is a basis for waiving the normal requirements that apply to the rest of the employer community.
Even if it was a reasonable error for NS to have not filled out an exemption form before the audit, it was proper for the WSIB to have gone back to the beginning of the previous year to charge premiums. The way the WSIB's retroactivity policy is written, honest error by an employer or the WSIB results in up to two years of retroactivity. Where there has been some kind of intentional wrongdoing by an employer, the WSIB can go back even further to make a debit adjustment. Where there has been no such wrongdoing, that triggers the normal rule that adjustments are made for up to two prior years. To go back to January 1, 2013, which is when compulsory coverage for executive officers in construction came into effect, is well within the normal retroactivity period.
The employer representative also submits that there was no financial benefit in not submitting a declaration of exemption. However, NS did have a potential benefit: in not being exempted, he came under the protection of the WSIA and therefore, if he had been injured, he would have been eligible for benefits, retraining, medical care, protection against lawsuit, etc. that I have referred to above on pages 2 and 3 of this decision. These are reasons why a person might deliberately choose not to seek exemption. Since NS had coverage, even if he did not actually use the coverage, I do not find it is unfair to ask his company to pay for it.
Another argument made by the employer representative is that the fact that NS did not apply for exemption earlier did not cause any financial loss to the WSIB. With respect, I do not see that this is relevant to the question of coverage and liability for premiums. The fact that someone is compulsorily covered means exactly that: they are required, by law, to participate in the workplace safety and insurance system and they are subject to the responsibilities which that system provides for. As I have said earlier, the fact that NS did not actually use the coverage does not mean it is unfair to charge his company for it. After all, insurance systems do not refund "unused" premiums back to the people who paid them. In all fairness, if someone who wanted coverage and paid for it but did not use it cannot have their premiums refunded after the fact, it would be inequitable to say that someone who did not exempt themselves and did not use their coverage should be excused from paying for it.
In any event, premiums for compulsory coverage are mandatory contributions to the accident fund, not a profit to the WSIB. If employers who are supposed to make those contributions do not do so, that constitutes a loss to the accident fund, which is a loss to the employer community, not to the WSIB.
The employer and its representative also point out that the implementation of Bill 119 is not meant to be punitive. I agree, but I find it is not punitive to hold S and NS to the normal rules for exemption from coverage. Had NS had an accident between January 1, 2013 and May 1, 2014, he would have benefitted, not been punished, by not being exempted. The expectation that S is to pay for that coverage, regardless of the fact that NS did not end up using it, is an expectation of fair contribution, not a punishment. In being charged premiums for NS's coverage, S is not being charged anything over and above what anyone else who did not obtain exemption would have been charged for the same coverage under rate group 751. In fact, since S was not paying premiums on NS's coverage prior to the audit, the company had the advantage of not being charged those premiums until about a year-and-a-half after that compulsory coverage began. I do not see anything punitive in this.
In his written submissions, the employer representative included copies of letters in four other cases, to demonstrate that there is inconsistency in how the WSIB treats this issue and that the WSIB has discretion to come to different results in different cases. I agree that the WSIB has discretion, but it is supposed to be exercised based on merits and justice principles. If the decision-makers in those other cases did not confine themselves to merits and justice principles, that would not make it fair or permissible for me to make the same error. I am not saying the decision-makers in those other cases did not do the right thing, because I do not know what those decisions were based on. What I am saying is that each case has to be examined to see whether its own facts would make it unfair or absurd, and against the WSIB's intentions, to apply the normal rules. In other words, the exercise of discretion is a case-by-case thing, and that is what my analysis of the merits and justice of the S case is about – it is an effort to see whether discretion should be exercised in S's favour, and I find that it should not.
In any event, I do not find that the four decisions submitted by the employer representative make the case for S. In the first decision, exemption was allowed only as of January 9, 2014, when the exemption form was submitted to the Auditor. In the second decision, exemption was applied retroactively, but the letter does not give any rationale, so I cannot comment on whether there were principles that should apply to the case of S. The third decision deals with the classification of executive officers' earnings retroactive to January 1, 2013, which implies that the earnings were considered insurable back to January 1, 2013. In the fourth decision, the person was exempted as of January 1, 2014. So, in three of the four cases, the people were not exempted retroactively as S's representative is requesting for NS. In one case there was a retroactive exemption, but the facts on which that was based are unknown to me; there might have been some exceptional circumstance or the decision-maker could have gone beyond the scope of their authority under the merits and justice policy. In any event, I do not find that these cases justify exempting NS from compulsory coverage for the period before he submitted an exemption form.
Finally, in a telephone conversation the employer representative asked me to consider that the firm is a small employer and is unsophisticated. However, the letter and other communications explaining the upcoming mandatory coverage system before it came into effect do not seem unusually complex. In addition, those communications put a lot of emphasis on the resources available, including contacting the WSIB directly, if people needed help or wanted more information. There is no indication that NS or anyone else at S sought help or information, or that they did not in fact understand the new rules.
While a person can feel for an employer, particularly in challenging economic times, as stated by the Workplace Safety and Insurance Appeals Tribunal ("WSIAT") Vice-Chair in Decision No. 2377/10, "deciding cases based upon the merits and justice of them does not mean that sympathy becomes the basis for a decision." Therefore, being small and allegedly not understanding the rules are not in themselves reasons for allowing an objection.
Conclusion
The charging of premiums on NS's earnings as of January 1, 2013 was consistent with WSIB policy and the law. No merits and justice basis has been shown for waiving the normal rules by which the compulsory coverage program operates.
The objection is denied.
ISSUE 2 – CLASSIFICATION
Background
In the audit performed on May 1, 2014, the Auditor classified NS's 2013 earnings under rate group 751, CU 4232-000 ("Siding Work"). The employer representative submits that, if NS's 2013 earnings are confirmed as insurable, they should be classified under rate group 755, ("Non-Exempt Partners and Executive Officers in Construction").
Authority
Operational Policy Manual document 11-01-03 ("Merits and Justice").
Operational Policy Manual document 14-02-06 ("Employer Premium Adjustments").
Employer Classification Manual document G-755-11 ("Non-Exempt Partners and Executive Officers in Rate Group 751").
Analysis
One of the rules of the compulsory coverage program for the construction industry is that the insurable earnings of any partners and executive officers who are not exempted may be classified under rate group 755. That rate group was set up specifically to cover people in that situation. However, in order to qualify for that rate group, an employer has to apply. The application form, titled "Request for Rate Group 755, Non-Exempt Partner and Executive Officer in Construction," says, in the instruction portion, that "Upon request and approval by WSIB, the partnership or corporation may report the insurable earnings of non-exempt partners or non-exempt executive officers, who do not perform any construction work, under the separate construction rate group 755."
The request portion of the form sets out the terms, which include that, "The effective date of this rate group 755 on the account is the date the first partner or executive officer is eligible (eligibility date) or January 1 of the year WSIB receives this request (if eligibility date is earlier)." S has never provided the WSIB with a completed form. It has never been asked to do so, either, most likely because S was charged premiums on NS's earnings for only 2013 and, based on the terms of the application form, a request submitted after 2013 would not affect 2013.
Under section 118 of the WSIA, the WSIB has the authority to determine classification of "an industry or a part, branch or department of an industry." In exercising that authority, the WSIB decided to set up rate group 755 to cover partners and executive officers in Class G construction categories who were not exempt from coverage. The WSIB has the right to attach terms to the use of a classification, and it determined that the use of rate group 755 would require an application. It also decided that an application would be effective as of the date the first partner or executive officer is eligible to apply for the rate or January 1 of the year the WSIB receives a completed form if the eligibility date is earlier. The phrase "if the eligibility date is earlier," means the WSIB will take whichever of the two possible dates is later.
In the case now under appeal, the eligibility date would have been January 1, 2013. However, no application form was ever received. Even if one were to use the date that rate group 755 was first asked for (which would not be the correct thing to do), that occurred in an August 26, 2014 letter from the representative, not an application form signed by S. In that case, the date to apply rate group 755 would be January 1, 2014. That is after the time period in dispute, which involves only 2013.
The need for an application in order to be classified under rate group 755, and the rules regarding the effective date, are not specifically set out in any WSIB policy. However, the WSIB has the right under section 118 of the WSIA to put those rules and requirements in place, and it clearly did intend to do so. Those rules and requirements are specifically stated on the form itself, and are central to the practices of the WSIB in administering the use of rate group 755. Decision-makers in specific cases, including Appeals Resolution Officers, have no authority to make a blanket finding that those rules and requirements are not valid or should not be enforced. To do so would be to undermine a whole coverage program that the WSIB established intentionally, with processes and procedures that it set up deliberately. As an expression of the intent of the WSIB, the program and its procedural requirements are beyond the scope of what decision-makers can overturn under the merits and justice policy.
As well, if the addition of rate group 755 is regarded as a classification change, the WSIB's retroactivity policy says classification changes take effect as of January 1 of "the current year." Since the audit and the request to add rate group 755 did not occur until 2014, the retroactivity policy would call for the classification to be added no earlier than January 1, 2014. Even at that, though, since S has never done an application form to receive rate group 755, one could say S still would not qualify to have the rate at all.
Finally, of the four decision letters submitted by the employer representative, all were issued in 2014 and three allowed rate group 755 back to January 1, 2013. However, none of the three give enough information to show what those decisions were based on. The first one mentions that the exemption form was received during an audit and took effect on January 9, 2014, which suggests that the audit was done within the first nine days of 2014, at the latest. Since that was on the cusp of the change from 2013 to 2014, it is possible the Auditor in that case extended some leniency in allowing rate group 755 back to the beginning of 2013. That kind of reasoning could not apply to S, since it was audited on May 1, 2014. In the other two decisions where rate group 755 was given retroactive to January 1, 2013, no facts are given as to when the reviews were conducted, when the application forms were received or whether there were exceptional circumstances that led to the applications being given retroactive effect. Accordingly, I cannot comment on them at all. What I can do is judge the case of S on its own merits. I see no exceptional circumstances that make it unfair or absurd and against the WSIB's intentions to apply the normal application requirements to S.
Conclusion
There is no basis for granting reclassification of NS's earnings during 2013 from rate group 751 to rate group 755.
The objection is denied.
DATED April 16, 2015.
B. Patlik
Appeals Resolution Officer
Appeals Services Division