APPEALS RESOLUTION OFFICER DECISION
DECISION NUMBER: 20220020
OBJECTING PARTY: NS
REPRESENTED BY: REPRESENTATIVE
EMPLOYER: THE COMPANY
ACCOUNT NUMBER: XXXXXX
FIRM NUMBER: YYYYYY
REPRESENTED BY: SELF
HEARING: HEARING IN WRITING
HEARD by: MARISA LA CIVITA, appeals resolution officer
DATED: February 3, 2022
ISSUES
NS objects to the Account Specialist’s (AS) decision of January 28, 2021 ruling NS an executive officer, without coverage, of the company.
NS seeks a ruling that they are a worker, and not an executive officer of the company.
BACKGROUND
The issue arose as the result of a claim filed for NS in response to a submitted Health Professional’s Report for Occupational Mental Stress, with a date of injury of June 5, 2020.
Both the Health Professional’s Report and the Worker’s Report of Injury dated August 13, 2020 and submitted on August 14, 2020, listed NS’s job title/occupation as Chief Operating Officer. Correspondence from NS further noted that NS was a 5% owner of the employing company.
In light of NS’s job title and ownership in the company, the Case Manager (CM) assigned to the claim, referred a Worker Status/Optional Insurance Enquiry Memo to the Workplace Safety and Insurance Board (WSIB) Employer Service Centre requesting they review NS’s status, and determine if NS was eligible to claim benefits.
In an internal Worker Status/Optional Insurance Response Memo, dated October 1, 2020, an AS advised the CM that NS fell under the category of ‘Sole Proprietor/Partner/Executive officer (no coverage in place)’.
In a letter to NS, dated October 6, 2020, the CM communicated that NS was not eligible to claim benefits through the WSIB as a result of the AS’s October 1, 2020 determination of status.
On November 10, 2020, NS filed an Intent to Object to the CM’s decision of October 6, 2020 but identified the issue in dispute as worker status. As the October 6, 2020 decision was pertaining to a claims issue, clarification was provided that NS was also objecting to the AS’s determination that NS was an executive officer.
In a decision letter dated January 28, 2021, the AS formally communicated that NS was an executive officer, without optional insurance coverage, and not a worker of the company.
On June 28, 2021, NS’s representative confirmed NS’s intent to appeal the AS’s January 28, 2021 decision with respect to NS’s status as an executive officer.
On August 24, 2021, NS’s representative submitted an Objection Form (Employer Account) that referenced both the claim decision of October 6, 2020 and the AS’s decision of January 28, 2021. The AS responded to the objection, upholding the executive officer status decision of January 28, 2021, and advising that the objection would be forwarded to the Appeals Services Division (ASD).
NS’s representative noted that the objection form referenced the wrong account number, and on September 24, 2021, the Objection Form was amended, and was submitted to the ASD, requesting an oral hearing.
On October 26, 2021, the objection was returned to the AS, in WSIB’s Employer Service Centre (ESC) advising that the claim issue under appeal was separate from the employer account decision under appeal and had to be removed from the Objection Form (Employer Account) and actioned separately. ESC was also instructed to take the necessary steps with respect to access and employer participation prior to returning the objection to the ASD.
The objection was returned to the ASD along with a completed Employer Participation Form, signed by HK, Chief Executive Officer of the company on November 16, 2021.
Although NS’s representative requested an oral hearing, I concluded that the case did not meet the criteria for an oral hearing as outlined in the Appeals Services Division Practices and Procedures document. Both NS and the company were given until December 17, 2021 to provide any additional information or written submissions regarding the appeal.
No new information has been provided to date, and the appeal is now before me for review.
AUTHORITY
Legislation:
Section 11 of the Workplace Safety and Insurance Act, 1997 (WSIA)
Section 12 of the Workplace Safety and Insurance Act, 1997 (WSIA)
Operational Policy Manual:
Published:
12-03-03, Who Can Obtain Optional Insurance
April 1, 2016
ANALYSIS
I have carefully considered all of the available information, legislation and relevant operational policies in reaching this decision. I find that NS is a worker, and not an executive officer, in the relationship with the company.
Section 11 of the WSIA states, in part:
Subject to sections 12 and 12.2, the insurance plan does not apply to workers who are executive officers of a corporation.
Section 12(3) of the WSIA allows that a corporation, in an industry other than construction, may apply to the WSIB for a declaration that an executive officer of the corporation is deemed to be worker, to whom the insurance plan applies. An individual, who is not automatically covered under the WSIA, but who the WSIB deems upon application to be a worker, is said to have optional insurance. However, individuals requesting optional insurance must indicate their consent by completing and signing the Optional Insurance Request/Change form.
As stipulated in Policy 12-03-03, executive officers are not covered under the Workplace Safety & Insurance Act, 1997 (WSIA), unless they apply for optional insurance or they are in the construction industry and are compulsory covered.
In this case, the company is not in the construction industry, and there are no optional insurance request forms documented in the employer account file.
Policy 12-03-03 provides the following guidelines with respect to determining whether an individual is an executive officer (EO) of a corporation:
Executive officers
To determine whether an individual is an EO of a corporation, the WSIB considers if,
the name of the individual is recorded in the employer’s minute book as an officer/director, and/or
the status of the individual can be verified in other documents that the WSIB may review including resolutions by the board of directors, corporate by-laws, or public records filed with other government authorities.
The WSIB may also determine who is an EO by examining the substance of the relationship between the individual and the employer. In such cases, the documentation listed above will be considered, but the substance of the relationship determines whether an individual is considered an EO.
The WSIB will consider a variety of factors when examining the substance of the relationship between the individual and employer, including whether the individual
has been delegated the authority to act independently on behalf of the organization
is wholly or partially responsible for the overall direction and control of the organization’s operations or financial affairs
exercises a broad scope of authority to make decisions or formulate policies for the organization as a whole, rather than authority that is strictly limited to a specific branch or division
has the ability to bind the organization.
With respect to NS’s formal titles within the corporation, NS does not dispute holding the title of Chief Operating Officer of the company. NS has identified themselves as COO both within the organization, as well as to the WSIB, as noted in both the claim and employer account files. Although no evidence was brought forth from the company minute book, the company account file includes two Province of Ontario, Ministry of Government Services, Corporation Profile Reports listing the company’s directors and executive officers. The first report was produced on January 10, 2017, and the other on October 1, 2020. Both reports identify that NS has been a Director, Chief Operating Officer (COO), and Secretary of the company since its incorporation on April 14, 2016.
Therefore, based on title alone, I find that NS could be considered an executive officer of the company. I also find it notable, that there were changes made to the executive officers of the corporation. The October 1, 2020 report shows that HK was added as Director, Chief Executive Officer (CEO), and President of the company as of September 26, 2019, replacing JK, who formerly held those positions. This signifies that the company was aware of the process for reporting executive officer changes to the government of Ontario, yet at no time, made changes with respect to NS’s positions within the company, even when a new President was introduced. Therefore, the company fully intended NS to hold those executive officer titles.
However, as already mentioned above, the WSIB may also determine who is an executive officer by examining the substance of the relationship between the individual and the employer, and in such cases, while documentation with respect to the individual’s titles is considered, it is the substance of the relationship that determines whether an individual is considered an executive officer.
On this basis, the representative for NS argues that the AS did not provide evidence regarding the substance of the relationship between the company and NS. With respect to the substance of the relationship, it is asserted that:
NS had no authority to act independently on behalf of the company. The CEO, HK, made all the decisions for the company.
NS was the bookkeeper but that was the extent of NS’s involvement with the finances of the corporation. HK was responsible for the overall direction and control of the organization’s operations and financial affairs.
NS had no authority to bind (enter into contract) the company. Only HK could bind the company.
On June 28, 2021 NS’s representative submitted a letter dated June 8, 2021 signed by JK, former owner/CEO & President of the company which stated the following:
NS performed duties as a bookkeeper and warehouse labourer
NS had not been delegated the authority to act independently on behalf of the company. The President and CEO had all of the authority.
NS was not wholly or partially responsible for the overall direction and control of the company’s operations or financial affairs. The President and CEO had all of the responsibility.
NS had no authority to make decisions or formulate policies for the organization as a whole, rather than authority that is strictly limited to a specific branch or division. The President and CEO had all authority to make decisions and policies.
NS had no authority to enter into contracts to bind the company. The President and CEO had the authority.
The relationship the company had with NS was that of an employer-worker relationship.
NS’s representative outlines NS’s working relationship with JK, explaining that NS was hired by JK, through a different legal entity, approximately 35 years ago, to work in that company’s warehouse, and later as a bookkeeper. JK owned that corporation, eventually bringing in a partner, MH, a resident of Germany, and then selling all of their shares to that same partner. As JK was leaving, and the corporation required an executive officer in Canada, NS was appointed the executive officer with 5% ownership in the company. However, it is asserted that NS was an executive officer in name only.
In NS’s statement, submitted with the Worker’s Report of Injury, on August 14, 2020, NS described becoming a 5% shareholder, Director and Chief Operating Officer of the prior company in 2010. This entailed attending all trade shows and attending all meetings with the company’s accountants and law firm. NS noted that 5% ownership did not allow them to change the course of the company’s future, but kept them involved and informed about the future of the company.
NS outlined how JK decided to retire and sell their shares to MH. The shares contractually sold from JK and EK (JK’s spouse) to MH’s ‘shell company’ on May 1, 2013. The purchase price was financed by JK, and listed the business property as collateral. NS remained the sole Canadian director and officer of that company and was expected to work with MH’s other businesses (based in Germany and China) as well as manage the bookkeeping for the prior corporation and two other Canadian companies, also owed by MH. JK was to receive instalment payments from MH, via one of these Canadian companies, for the purchase price of the shares; however, MH later defaulted on the payments and JK took legal action, foreclosing on the property.
NS maintained a relationship with JK throughout, and so it was that JK approached NS to start a new company. NS, feeling this would safeguard their job, and the job of AB, a warehouse worker, agreed to this new venture in 2016. JK promised NS exactly what they had been given in the prior corporation: a yearly salary, a yearly 5% bonus on gross profits, 6 weeks of vacation, 100% reimbursement of expenses for benefits, monthly cell phone reimbursement, and a complimentary apartment (included because of bookkeeping and landlord duties required).
As per the Corporation Profile Reports in the employer account file, the company was incorporated on April 14, 2016. The reports confirm that JK was Director, CEO and President of the company, while NS was Director, COO, and Secretary. According to NS, JK owned 95% of the shares of the company, while NS owned the remaining 5%; however, no proof was provided with respect to the shares of the company. Per NS, the company was a two-employee company consisting of NS, the full-time COO, and AB, an hourly warehouse worker.
The representative for NS cites the following decisions of the Workplace Safety and Insurance Appeals Tribunal (WSIAT):
WSIAT Decision No. 2042/13, which states that tribunal case law has consistently held that the substance of the relationship outweighs the individual’s title or designation in a corporate minute book.
WSIAT Decision No. 1830/07 and WSIAT Decision No. 1794/12 both noting that in addressing executive officer status issues, the approach which the Tribunal has historically taken is determining whether the person was a “directing mind” of the company.
I reviewed the WSIAT decisions referenced and must note there were different versions of policy 12-03-03 applicable in those cases. Furthermore, in accordance with WSIB Policy 11-01-03, the WSIB shall make its decision based upon the merits and justice of a case and is not bound by legal precedent. This means decision-makers must take into account all the facts and circumstances relating to each case, the relevant WSIB policy or policies, and the relevant provision or provisions of the WSIA. It is in doing so that WSIB decision-makers ensure that the decision-making process is fair, consistent and reliable. . Therefore, while my decision will take into consideration the substance of the relationship between NS and the company, it will be done in accordance with the version of policy 12-03-03 that was published on April 1, 2016, and in effect at the time of the decision under appeal in this case.
NS’s representative submits that NS does not have a “directing mind” in the organization. NS holds only 5% of the shares, which do not have voting rights, and is an executive officer in name only. Therefore, the substance of the relationship between the company and NS is that of employer-worker.
Although, for WSIB purposes, the ownership of shares is not a requirement of executive officer status, and thus not a determining factor in and of itself in this appeal, I do acknowledge that, as a minor, non-voting shareholder, NS does not have a significant opportunity to contribute to decisions affecting corporate assets, finances, and policy, especially when compared to a majority holder of voting shares.
NS’s statement, as submitted on August 14, 2020, notes that JK wished to remain retired and that NS would run the company solely since HK (JK’s) son was a licensed insurance broker, and unable to work at multiple companies due to restrictions. Therefore, at the onset of the organization, I find that the intention, at least on NS’s part, was for NS to be an executive officer of the company in both form and function.
I do find, however, based on the same submission, that NS’s status within the organization changed shortly after the company was formed, and more notably when HK was brought into the organization by JK. In February 2017, when AB was off work due to an injury, NS was, in addition to working in administration, required to work in the warehouse to fill in. Then, at the 2017 year end meeting with JK, NS was informed by JK that he had “decided on hiring his son HK to do marketing/internet and online sales for (the company).” It is significant that NS had no part in the decision to hire HK, but rather was informed of the decision. Additionally, although HK did not, at that time, hold an executive officer title within the company, JK offered HK a higher salary than NS was earning as COO, again without prior consultation with NS. This shows NS’s lack of involvement in decisions affecting the finances and overall direction of the company, which has been corroborated by JK’s written statement.
I note that NS continued to negotiate supplier contracts; however, NS argued that prior to HK coming into the company, NS was privy to all discussions and meetings in relation to the company, whereas after, there were secret meetings that NS was not invited to. One such meeting involved the offer to sell shares of the company to a different party, which was never discussed with NS. In addition, in August 2018, NS was informed that JK and HK purchased another company, and that NS was now also responsible for handling the workload of that company, without mention of a raise or any form of additional compensation. This again shows that NS was not a substantive decision-maker within the organization.
NS described the ongoing decisions made by HK, who was neither a shareholder nor executive officer prior to September 2019, including an incident when NS was on vacation in March 2019, and HK, unbeknownst to NS, brought in SL (HK’s girlfriend) to fill in. According to NS, NS returned to find their personal belongings removed from their desk and packed up into a box to make room for SL.
Later in 2019, HK was, by NS’s account, given JK’s shares of the company, and designated as a director and officer of the company. NS again noted that, although a 5% ownership in the company could have never changed the course of this transaction, they were not informed of this major change in the company until after it had occurred, again supporting the notion that NS had no real authority or control within the company.
I reviewed the documents available to all parties in this appeal, and find that, in a submission to the CM, HK, the President and CEO of the company, stated that NS does have the authority to bind the company, and has done so. As proof of this, HK supplied the minutes of a meeting held, on January 3, 2020, between NS, HK and JK where all three participated in discussions pertaining to the operation of a ‘Building’ company and the company. Decisions were made with respect to leases and rates for the Building company, common expenses for both companies, the implementation of bookkeeping charges from the company to the Building company, facilities maintenance, company shipper boxes/new packaging, company retailers, company products, a scheduled convention, and the need to discuss dividends/shares with the company’s accountants.
HK’s submission also included a January 6, 2020 email from NS to HK that was copied to JK, which stating the following:
“Hi HK and JK
It was a very productive meeting on Friday afternoon for both the Rental Building and (the company). But the meeting ran long and a lot of issues have yet to be resolved and discussed. I feel this warrants a second meeting.
Maybe we should have scheduled two separate meetings to keep the two entities separate…”
NS’s presence at the meeting was confirmed in their August 14, 2020 submission, when they noted that discussions were held with respect to the building, maintenance requirements, trade shows, raises and bonuses. It was at that time that NS claimed to have requested a 3% raise, reminding JK of their shareholder and employment agreement of a 5% bonus, and was told by JK that common bookkeepers only make $30,000.00 per year, and don’t receive bonuses in the company.
When considering HK’s submission, I find that although NS was present at the meeting, action points noted on the minutes show that NS was assigned activities that were minor, and thus the submission does not support HK’s claim that NS had the authority to bind the company. NS was responsible for activities such as organizing the office and assembly areas, reviewing new filings, and contacting smaller retailers, but NS would not be involved in discussions with the company’s accountants with respect to dividends and shares. That activity was to be actioned by HK.
Even when considering NS’s emailed suggestion of a follow-up meeting to discuss unresolved issues, there is no evidence to show that a meeting ever took place, and if so, what was discussed in said the meeting. In a response email from HK, dated January 10, 2020, it was noted that HK was looking into the best way to handle the dividends/bonus. It was stated that MH & JK “or whoever”, decided to give NS bonuses in lieu of dividends, but the situations and motivations were different back then. In an email to the accountant on January 11, 2020, HK requested a meeting to discuss how to handle dividends, mainly in regards to NS, and indicated a preference to meet at the accountant’s office. Finally, in an email from HK to NS on May 8, 2020, HK explained that shares in the company have nothing to do with bonus, and that bonuses are normally based on a performance measurement, are totally optional, and not tied to shares. Therefore, a bonus can be given to anyone, including AB, who worked in the warehouse. In my view, the emails further solidify that NS had minimal involvement and control with respect to the company’s finances, and thus was a worker, and not an executive officer.
NS’s representative argues that NS and JK were unaware they had to apply for optional insurance for NS because NS did not perform the duties of an executive officer. However, it was asserted that JK registered the company with the WSIB and paid premiums for NS. Premium Remittance Forms were submitted as proof of this.
I reviewed the employer account file, which shows that it was actually NS who registered the company’s account with the WSIB. NS completed the company’s online WSIB registration on January 10, 2017, identifying themselves as COO of the company, and confirming they were authorized to submit the registration on behalf of the legal entity, the company. Although, NS completed the registration, I must allow that a WSIB registration may be completed by any authorized person within, or as a representative of, an organization. Therefore, in terms of the substance of the relationship, I do not find the registration is significant in determining that NS had any ability to act independently or bind the organization, in the way that an executive officer would.
With respect to the premiums reported and remitted to the WSIB, the documents submitted by NS’s representative do not serve as proof that the company paid premiums for NS. The Premium Remittance Forms provided for the periods including January 1, 2016 up to, and including, September 30, 2016 precede the company’s registration with the WSIB and are for a different legal entity, i.e. the prior corporation owned by JK (and later MH), and thus have no relevance to the issue under appeal in this case.
Although no evidence was submitted, by either party, to show that premiums were paid by the company to the WSIB on NS’s earnings, the online WSIB registration confirms the employer as a three-person organization, and computerized notes on the employer account file from January 27, 2017 show the company was identified, by NS, as having “2 workers: one warehouse and one admin”. Given that one of the people in the organization was JK, the company President and CEO in 2017, I find it likely that the two workers were AB (warehouse) and NS (admin). Moreover, based on the amount of NS’s agreed upon salary, and the amount of annual insurable earnings reported from 2017 to 2020, I find that, on a balance of probabilities, premiums were paid on NS’s full-time earnings, and AB’s part-time earnings.
In light of the evidence before me, I find that although NS is a director and officer in title, based on the substance of the relationship, NS is worker of the company. NS was not demonstrated to have the authority to act independently on behalf of the organization nor to be wholly or partially responsible for the overall direction and control of the company’s operations or financial affairs. NS exercises a limited scope of authority within the organization and does not have the ability to legally bind the organization. Furthermore, I find that NS’s earnings were reported as insurable to the WSIB, and that JK, who established the company’s working relationship with NS, corroborates NS’s assertion that NS is a worker.
CONCLUSION
NS’s objection is, therefore, granted. NS is a worker, not an executive officer of the company.
DATED February 3, 2022
M. LaCivita
Appeals Resolution Officer
Appeals Services Division