20230011 (Re) 2022 OWSIB mini 138

APPEALS RESOLUTION OFFICER DECISION

decision number:

20230011

OBJECTING PARTY:

EMPLOYER

REPRESENTED BY:

EMPLOYER REPRESENTATIVE

HEARING:

HEARING IN WRITING

HEARD BY:

DATED:

MARISA LA CIVITA, appeals resolution officer

DECEMBER 13, 2022

ISSUES

The employer (E1) is objecting to the Account Specialist’s (AS) February 4, 2022 decision, which found that the following employers are associated: E1, E2, E3 and E4. The employer also objects to the effective date of the decision.

The employer seeks that the Workplace Safety and Insurance Board (WSIB) reconsider and reverse the AS’s association decision of February 4, 2022 to find that the affiliated employers are not associated as they do not meet the test of cooperation under Policy 14-01-06, adding that, if there is a rate change to be made, the decision should be limited to January 1 of the current year.

BACKGROUND

The employer, which operates as a municipality, has by-application coverage under Schedule 1 of the Workplace Safety and Insurance Act, 1997 (WSIA).

According to audits of the employer, conducted in 2005 and 2008, the employer’s account was linked as associated with E2 under Policy 14-01-06, Associated Employers, as published on March 3, 2008, and in effect and applicable to all decisions made on after March 9, 2005 up to and including December 31, 2019.

E3 applied for coverage under Schedule 1, and was registered with the WSIB effective January 1, 2016. However, at the time of registration, the WSIB did not link the account as associated with either E1 or E2.

Effective January 1, 2020, the WSIB introduced a new classification and premium rate setting model for Schedule 1 employers, known as the rate framework. With the introduction of the rate framework came changes to many of WSIB’s policies, including changes to policy 14-01-06, Associated Employers.

The WSIB carried out a policy consultation on the core rate framework policies from August 2017 to January 2018 which led to the final approved policies that took effect on January 1, 2020.

The employer’s account records show that on October 6, 2017, the WSIB mailed the employer regarding the rate framework. The mailing indicated the WSIB was consulting with stakeholders to develop the policy associated with the rate framework. Mention was made of multi-rating criteria, which required action, by the employer, if they met the criteria.

On December 5, 2018, the WSIB mailed the employer literature with respect to rate framework which made the following specific reference to employer association:

Our new Associated Employers policy allows us to combine information (claims experience and insurable earnings) of two or more firms to set their premium rates.

Generally, businesses are considered associated if they meet the following two criteria:

1. The businesses are affiliated:

• through a family relationship

• through a related or controlling corporation (e.g. a family member(s) has control over two or more corporations)

• through a partnership where two or more partners are entitled to equal shares of the profits.

2. The related businesses are engaged in a co-operative business relationship with each other.

If you think your business may be associated, please check our website for more details and complete our online survey to confirm: www.wsib.on.ca/rateframework

The employer’s Premium Rate Summary Statement of September 24, 2019 also referred to associated organizations, and criteria outlined in Policy 14-01-06.

In March 2021, in response to E4’s registration with the WSIB, the AS identified that E1 was affiliated with E4 as well as E2 and E3, as the sole shareholder of each. At point, the AS began their investigation with respect to a possible association between the employers.

On April 28, 2021, the AS sent the employer a letter, asking the employer to complete and return an enclosed questionnaire disclosing all companies that may be affiliated, and explaining any cooperative business relationships.

On August 31, 2021, the AS held a Teams meeting (videoconference) with the CFO/Treasurer of E4, the Manager/People Talent of E1, and the Manager Legal & Clerk Services of E1. According to notes on the employer’s WSIB account, the meeting participants reviewed, in detail, the Associated Employer Questionnaire, Policy 14-01-06 for Associated Employers, and Policy 14-01-07 regarding Single and Multiple Premium Rates. The affiliated parties indicated they required additional time to complete the questionnaire.

On November 12, 2021, the AS, along with their manager, held a second Teams meeting with the same employer parties as well as with the joint CFO of E1 and E3. The Associated Employer Questionnaire was again reviewed, along with Policies 14-01-06, Associated Employers, and Policy 14-01-07, Single and Multiple Premium Rates. The AS explained that in order to make a decision, they required the Associated Questionnaire to be completed and returned, and requested it be returned in 15 days.

The AS sent the employer a follow-up letter requesting the completed Association Questionnaire, that was sent to the employer on April 28, 2021, be submitted to the WSIB by December 3, 2021. The letter advised that if the information was not received within the allotted timeframe, the businesses would be deemed to be associated, and that this could affect the employer’s classification and/or premium rate. However, following an email from the employer, the AS extended the due date for the completed questionnaire to December 20, 2021.

The completed questionnaire was received and reviewed by the AS, and in a letter dated February 4, 2022, the AS decided that the following firms were associated as they were affiliated and engaged in a cooperative business relationship: E1, E2, E3 and E4. The association was effective January 1, 2020 as per WSIB Policy 14-02-06, Employer Premium Adjustments for all entities except E4 whose WSIB account was only opened as of February 1, 2021, and therefore was only associated as of February 1, 2021.

On August 5, 2022, the employer completed and submitted an Objection Form, along with an Objection Memo, objecting to the AS’s February 4, 2022 decision. The employer requested justification and reconsideration with respect to the AS’s finding that the employers were associated, and a reduction in the retroactivity of the decision from January 1^st of the 3^rd prior year to January 1^st of the current year.

In a letter dated August 17, 2022, a WSIB Employer Services Manager reconsidered and upheld the AS’s decision of February 4, 2022. The letter acknowledged that, as discussed during a meeting of July 21, 2022, the employer had met the six month time limit to appeal, and as requested, the file would be forwarded to the Appeals Services Division (ASD) for review.

On October 14, 2022, the employer’s representative completed a Hearing Request Form requesting the issue be resolved via oral hearing on the basis that they wished to introduce witnesses to provide clarity on the relationship between the various entities. They added that the issue under appeal is akin to an independent operator and worker status issue, which warrants an oral hearing under the ASD’s practice guideline.

I denied the employer’s request for an oral hearing on October 17, 2022, noting that an employer association issue is substantively different from an independent operator and worker status issue, and is not listed under the Oral hearings criteria’ of the Appeals Services Division Practice & Procedures document. There was no substantive reason why an oral hearing was necessary to provide direct testimony versus written submissions and witness statements, and no reason to demonstrate that further submissions could not be made in writing. The employer was given 30 days to provide additional information or written submissions regarding the appeal.

The employer representative emailed a final written submission on November 18, 2022, and the appeal is now before me for review.

AUTHORITY

Legislation:

Section 118 of the Workplace Safety and Insurance Act, 1997 (WSIA)

Operational Policy Manual:

14-01-06, Associated Employers

14-01-01, The Classification Structure

14-01-07, Single and Multiple Premium Rates

14-02-06, Employer Premium Adjustments

Employer Classification Manual:

NAICS Code: 913910, Other local, municipal and regional public administration

Published:

January 2, 2020

April 9, 2021

January 2, 2020

January 2, 2020

January 1, 2020

ANALYSIS

I have carefully considered all of the available information, legislation and relevant operational policies in reaching this decision, and have denied the employer’s objection.

Subsection 118 (1) of the Workplace Safety and Insurance Act, 1997 (WSIA) gives the Workplace Safety and Insurance Board (WSIB) legislative authority and exclusive jurisdiction to examine, hear and decide all matters and questions arising under the WSIA, except where the WSIA provides otherwise. Examples of matters under the WSIB’s jurisdiction are set out under subsection 118 (2) of the WSIA, without limiting the generality of subsection 118 (1).

WSIB Policy 14-01-06, Associated Employers outlines when the WSIB will consider two or more employers associated. If two or more employers meet both the tests of affiliation and cooperation, they are considered associated by the WSIB, and their entire operations are combined for the purposes of classification and premium rate setting.

The submissions and evidence have been considered and will be addressed in my evaluation of the criteria of association, and will be set out under the following sections:

• Test of Affiliation

• Test of Cooperation

Test of Affiliation

In their submission of November 18, 2022, the employer representative acknowledges that the employers in question are “affiliated” within the meaning of Policy 14-01-06, Associated Employers as E1 owns 100% of the voting shares of each of the other entities.

Under the guidelines of Policy 14-01-06, for corporations, the test of affiliation is met when 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 both corporations, and

o the corporations are controlled by the same person or group of persons, or

o the corporations are controlled by individuals who are related to each other, or

o one corporation is controlled by an individual who is related to a member of a related group that controls the other corporation, or

o 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.

For the purposes of Policy 14-01-06, a person, group of persons, or partnership controls a corporation if enough voting shares in relation to the holdings of other shareholders are held by or for the benefit of the person, group of persons or partnership, in order to elect a relative majority of the board of directors.

In addition, Policy 14-01-06 states that an employer is affiliated with any other employers that are affiliated with each other if the employer is affiliated with any one of the other affiliated employers.

In the appeal before me, E1 is the sole shareholder of E2, E3 and E4. As E1 holds 100% of the voting shares of each of the subsidiary corporations, its control over each is established and I confirm its affiliation with each. Furthermore, as E2, E3 and E4 are all controlled by E1, they are also all affiliated with one another.

Thus, I find, as the employer representative has acknowledged in their submission of November 18, 2022, that the test of affiliation has been met in this case.

Test of Cooperation

Two or more affiliated employers are engaging in a cooperative business relationship if at least one of the following criteria is met:

• The operation of one employer is primarily ancillary to the operation of the other if both operations were carried out by a single employer.

• The employers’ business activities primarily form an integrated operation.

• If one of the employers is a temporary employment agency (TEA) and it supplies workers to any employer to whom they are affiliated. The TEA is only considered to be in a cooperative business relationship for the portion of labour they supply to an employer to whom they are affiliated.

The employer’s arguments with respect to each criteria have been outlined in their representative’s November 18, 2022 submission, and have been considered below, in no particular order.

Is one of the employers a temporary employment agency (TEA) that supplies workers to any of the affiliated employers?

The employer’s position, according to their representative’s November 18, 2022 submission is that none of the employers are a temporary employment agency, so the third criteria under the Associated Employers policy is obviously not met

I recognize and concur with the employer representative’s position that none of the affiliated employers are temporary employment agencies as there is nothing on record to say otherwise. Therefore, the third criteria of cooperation has not been met.

Are the operations of any of the employers primarily ancillary to the operations of any others if carried out by a single employer?

The employer representative states that none of the employers’ business activities are primarily ancillary to the operations of another if carried out by a single employer, adding that:

• the reconsideration decision is illogical regarding ancillary functions

• the operations of the employers are not listed as ancillary activities in Policy 14-01-01

• fees for services do not equate to ancillary services

• no ancillary activities are provided to the Town of Innisfil

• the activities are not “primarily ancillary” in any event

With respect to the first criteria under the test of cooperation, in order to determine if ancillary operations are carried out, I must reference WSIB Policy 14-01-01, The Classification Structure.

Under Policy 14-01-01, the WSIB does not separately classify operations that are ancillary, i.e. incidental to, an employer’s business activity. Such incidental activities include:

• administration related to an employer’s operations including management, payroll, human resources, information technology, training and clerical services
• design, including drafting and engineering, research, development and software development related to goods produced or services provided, or intended to be produced or provided, by the employer
• inventory control
• janitorial operations carried on by the employer at the employer’s own premises
• marketing, promotion, fundraising or communication related to goods sold or produced or services provided, or intended to be sold, produced, or provided by the employer
• maintenance or repair for the purpose of servicing or repairing the employer’s vehicles or equipment
• packaging an employer’s own goods, including the manufacturing of packaging material used
• printing or lithography directly onto, or for use on, goods produced or sold by the employer
• the production of power or heat for the employer’s use
• the maintaining of security at the employer’s premises
• the operation of any of the following carried out for the employer’s personnel: cafeterias, commissaries, parking lots, or health, recreational or day care facilities
• transportation of an employer's personnel or of goods produced or sold by the employer including transport of personnel or transportation of goods carried on by an employer before the manufacture of the product
• warehousing or distribution of goods produced or sold by the employer
• warranty repairs carried out on goods produced or sold by the employer, or
• wholesale of goods produced by the employer.

Based on the evidence and submissions before me, there is no question that the employers each engage in separate and distinct business activities, while also providing or receiving some form of ancillary service(s) to or from one or more of the affiliated employers.

E1 is the municipality and handles all aspects relating to municipal governance, including fire and rescue, and operating a public library, which are separately classified activities. In addition, it provides ancillary services to E3. in the form of legal services, information technology, procurement/purchasing, human resources, and auto maintenance or repair, as well as legal services and auto mechanic services to E2, and legal services to E4.

E1’s operations are currently classified under the following NAICS Codes:

NAICS Code 913910: Other local, municipal and regional public administration

NAICS Code 913140: Municipal fire-fighting services

NAICS Code 519121: Libraries.

E2 supplies hydro power to each of the affiliated employers, and to the townspeople and businesses of several towns. In addition, E2 provides E3 with financial services, and billing, administration, and customer service with respect to its water and wastewater operations. E2 also provides ancillary financial services to E4. E2’s activities are classified in NAICS Code 221121: Electric bulk power transmission and control.

E3 engages in the distribution of clean water, and collection and treatment of wastewater for residents and business in the town, including other municipally owned buildings. Its operations are classified in NAICS Code 221310: Water supply and irrigation systems.

E4 constructs cell towers via contracted affiliated and third party companies, provides communications hosting services to the affiliated companies, and handles the rental of sentinel lights in rural areas, cell tower rentals, and is also involved in E1’s LED streetlight conversion program. E4 is currently classified under NAICS Code 532490: Other commercial and industrial machinery and equipment rental and leasing.

The criteria for ancillary operations as they relate to the test of cooperation, is that the operation of one employer must be primarily ancillary to the operation of the other, if both operations were carried out by a single employer.

According to the WSIB’s Association questionnaire, “Primarily should be taken to mean a simple or relative majority; not necessarily an absolute majority. It does not have to be 50% or more to be considered “primarily”.”

The employer representative argues that this definition does not appear in legislation or WSIB policy; however, even if it is applied, it does not support the WSIB’s decision in this case as the revenue and time spent with respect to providing services to affiliates is minimal when compared to each employer’s total revenues and expenditures. Each affiliated employer spends the majority of its time and resources on its own business activity, not supporting (and certainly not “primarily” supporting) any of the other employers’ operations.

The employer representative submits that only 0.1% of the E1’s revenue and 0.2% of the work of E1’s full-time employees are attributable to ancillary services. Only 2.4% of E2’s revenue and 5% of its employee time is related to ancillary operations. In addition, none of E3’s or E4’s revenues are generated from ancillary services, nor is their employee time spent on such work.

I find it is impossible, for the purposes of this appeal, to rely on the percentages, as presented by the employer representative, without the benefit of source documents to corroborate the years, facts, and figures upon which these percentages are based. The employer representative indicated E1 estimates that the contracted services provided to affiliated employers equate to 850-900 hours of work per year, but has provided no proof or explanation as to how E1 arrived at this estimate. With respect to E1’s employees, I am not satisfied that sufficient records are before me to say, for certain, how much time they spend on ancillary activities.

There is no stipulation in the Associated Employer Policy 14-01-06, or any WSIB policy for that matter, that requires ancillary operations to generate revenue or expenses, or to generate a certain percentage of revenue from affiliated employers in order to be considered ‘primarily’ ancillary. If we consider an employer that exclusively engages in the wholesale of goods produced by an affiliated employer, we would likely see that more revenue would be generated, by that employer, from non-affiliated customers, than from their affiliate. Regardless, their wholesale operations would be still be primarily ancillary to the operation of the affiliated employer.

Yet, I find it notable that, although the AS found the employers were affiliated and that they provided ancillary services to one another, the employers’ accounts were not classified (i.e. did not receive the NAICS Codes) with respect to the ancillary operations they provided to affiliated employers. Based solely on the information on record, the reasoning behind this is not readily apparent to me, and admittedly, the issue of classification is not before me in this appeal. However, the classification of each account does lead me to find, on a balance of probabilities, that the ancillary services rendered by each employer were, in all likelihood, not seen to have been significant by the AS, in terms of insurable earnings, in relation to the operations each employer carried out as business activities in their own right.

In fact, as I read the February 4, 2022 decision of the AS, I find the decision was not based on the criteria of primarily ancillary operations, but rather on the second criteria of cooperation, i.e. that the employer’s businesses form an integrated operation. Therefore, I find the first criteria of cooperation, namely that the operation of one employer is primarily ancillary to the operation of the other if both operations were carried out by a single employer, has not been met.

Do the employers’ business activities primarily form an integrated operation?

The employer’s position, according their representative’s November 18, 2022 submission is that the affiliated employers’ business activities do not primarily form an integrated operation as they do not share staff, supplies, equipment or processes, and their products and services are not primarily offered together. They submit that:

• E1’s municipal services, which include parks, roads, recreation facilities, etc, are not offered to residents or businesses together with any of the affiliated employers’ services. E2, E3 and E4’s’ services are offered separately and independently from E1’s services;

• E2 distributes electricity. Its service is billed on a single bill with water and sewer services provided by E3, but without any reference to E1’s services or the services provided by E4.

• E4’s communication hosting services are aimed at businesses, not individual residents of E1. Moreover, E4’s services are not offered together with any of the affiliated employers’ services so it cannot be part of any integrated operation under this criteria.

Under policy 14-01-07, Single and Multiple Premium Rates, a business activity is considered integrated with an employer’s other operations if it meets any of the following criteria:

1. A substantial share of either staff, supplies, equipment, or processes of one business activity are combined with those of another business activity.
2. The product or service of the business activity is primarily offered to external, unaffiliated clients together with the product or service of the employer’s other operations.

The employer representative submits that E1’s municipal services, which include parks, roads, recreation facilities, etc., are not integrated, as they are not offered to residents or businesses together with any of the affiliated employers’ services. E2, E3 and E4’s services are offered separately and independently from E1’s services;

I find the responsibilities of a municipality extend beyond those listed by the employer representative. A municipality is also responsible for executive and legislative activities; planning; fiscal and related policies; the administration of the public debt; assessing, levying and collecting taxes; government relations; and administration of government programs. NAICS Code 913910, Other local, municipal and regional public administration lists a number of included examples of activities covered under this NAICS Code. However, municipalities may also engage in, or be responsible for other operations which are separately classified, including, but not limited to, fire and rescue operations, police and other protective services, courts of law, airport operations, archive or library operations, electricity generation and distribution, garbage collection and disposal, museum and art gallery operations, ambulatory health care services, residential care facilities operation, transit system operation, and water and sewer system operation.

Despite their engagement in multiple classifiable business activities, and eligibility for separate NAICS Codes, and even separate accounts, the entire operations of a municipality still remain the responsibility of the municipality, and are generally carried out, by the municipality, as an integrated unit. Of course, a municipality may outsource any number of services, over which it is responsible, to other parties. In many cases, those services are outsourced to unaffiliated parties; however, in cases such as this, where services are outsourced to affiliated municipal service corporations, WSIB policy requires decision-makers to consider whether the operations remain integrated with those of the municipality.

I reviewed and evaluated information on record with the WSIB, along with the submissions of the employer and their representative. I also, in the interest of providing a fair, reasonable, and transparent decision, reviewed public records pertaining to the affiliated employers in question, in order to have a better understanding of their operations and working relationships. I obtained Information via online sources that are cited, where applicable, in my analysis below.

E1 is a local, or lower-tier, municipality in an Ontario county (the County). According to E1’s website as on December 2, 2022, as an upper-tier municipality, the County is responsible for a range of municipal services which include social housing, land ambulance and emergency planning, environmental services (solid waste management), a County road system, Ontario Works, children’s services, homes for the aged, museum, archives, County forest management, tourism, a Geographic Information System (computer mapping), and land use policy planning.

The local, or lower-tier municipalities in the County, such as E1, are responsible for water and sewer services, local roads, public libraries, recreation services, fire and police services, land use development control, licensing, and permitting services. E3’s website confirms that E1 is responsible to provide its own water and wastewater infrastructure to it its residents. The same is not true for lower-tier municipalities in a regional system. Therefore, E1 has jurisdiction, and an obligation to provide water and wastewater services to the residents of E1.

E1’s By-Law No. 012-22, passed on August 11, 2021, sets out the town’s jurisdiction to approve rates for water and wastewater services provided by E3. It quotes the Municipal Act, 2001 with respect to the town’s authority, rights, powers and privileges regarding this matter. It notes that all water and wastewater services provided within the boundaries of E1 shall be provided solely by E3, except when such services are provided by a person on their own private property, solely for use on that property. In addition, it establishes E2 in its capacity as E3’s billing and collection agent, and that all amounts billed by the billing agent (i.e. E2), are due and payable to the billing agent. Any unpaid amounts owing to the billing agent are deemed a debt owing to E3 and E1, and shall be sold and assigned to E1 for face value, and may be collected by E1 through appropriate actions or added to the property tax account and collected in the same manner as permitted under section 398(2) of the Municipal Act.

In light of this, I find that E3 primarily provides water and wastewater services to the townspeople of E1 together with E1 and E2, with E3 holding and operating the water and wastewater assets, E1, via its Council, setting water and wastewater rates, and passing by-laws with respect to the water and wastewater services, and E2 as the official recipient of payments from customers with respect to water and wastewater services rendered.

Therefore, I find the criteria of integration has been met with respect to E1, E2 and E3, making them associated under Policy 14-01-06, Associated Employers.

Based on my review of the evidence in this case, the operations of all of the affiliated employers in question are integrated via the sharing of staff, equipment, and/or processes. I have already discussed the ancillary services the affiliated employers provide to one another. While, the ancillary operations are not the affiliated employers’ primary activities, the shared staff who provide those ancillary services still remain a consideration when evaluating the employers’ integration of staff, equipment, and processes. In addition, the affiliated employers share of a number of executive staff. .

E1’s council appoints or elects members of council, along with independent directors to the governing boards of each of the affiliated subsidiary corporations. Each governing board then hires executive staff to lead their respective corporation; however, I have found that there is a significant intermingling of directors and executive staff between the affiliated employers. Enough so, especially when also considering the shared ancillary and other staff, as to conclude that a substantial sharing of staff exists and that the affiliated employers run as an integrated operation.

E2 recruited for the position of “President & CEO” via an online job posting which opened on October 1, 2020 and closed on October 30, 2020 stating the following:

E1 is a dynamic municipality, experiencing one of the highest growth models in all of Ontario. Town Administration has undertaken an innovative approach towards a collaborative work environment called ‘One Town One Team’. This approach undertakes the goal of gleaning all available efficiencies for the benefit of tax payers and utility customers alike.

Position Summary

The position, at this time, requires the creative and innovative incumbent to be in charge of three corporations:

1. E2 (electricity distribution for several town)

2. E4 (E2s unregulated affiliate), and

3. E3 (E1’s municipal services corporation providing water and wastewater services).

Reporting directly to separate Boards of Directors, the President & CEO, will, while maintaining the organizations’ positive, creative and innovative culture, foster a collaborative relationship with its municipal partners, provide overall leadership, long range strategic planning, operations and management of all three corporations.

The websites for E1, E2 and E3 emphasize a ‘One Town, One Team’ (OTOT) approach across a group of unified organizations which include E1, E2 and E3, noting that the affiliated organizations engage cross-functionally and with a collaborative approach to service delivery, working closely together to share information, resources, and find synergies, in a cost-effective and optimized manner, with the same goal in mind – to improve the lives of E1’s residents. In addition, as explained on E3’s’ website, the staff recruitment process requires employees to participate in an onboarding program to integrate them into the organizations, their team and role, and the OTOT.

All of the affiliated subsidiary corporations shared the same Interim President and Chief Executive Officer (CEO) and also shared their Chief Operating Officer (COO) and Chief Financial Officer (CFO) until early 2021. Since then, E3 and E2 have continued to operate under the guidance of a shared President and CEO. In addition, according to Corporation Profile Reports with the Province of Ontario, the current president of E4 was concurrently a director of E3 from February 2021 until its annual return was filed on August 16, 2022.

E1, in addition to having representatives on the boards of each of the affiliated subsidiary corporations, have shared other leadership staff with them. For example, notes on E1’s WSIB employer account, dated February 2, 2022, confirm that E1 had a shared CFO with E3. On July 29, 2022, a new CFO was appointed for E3 who was also the Treasurer/CFO for E2 and E4. The Chief Administrative Officer (CAO) of E1 is also a director of E3, as confirmed on their Corporation Profile Report of August 23, 2022, and was noted as a director of E2 and E4 during the town’s Annual General Meeting of June 8, 2022. The role of Chief of Staff-Utilities, is also a shared position among E3, E2 and E4.

Therefore, I find, contrary to the employer representative’s assertion that there is no shared staff, that a sharing of staff between the employers has been proven in this case, and is substantial with respect to the employers’ business activities, rendering them integrated. There is, as I see it, a combined effort from the employers’ leadership and other staff to carry out the business activities of each employer in a cooperative manner, all while furthering E1’s planning, development, and debt management goals, which form part of the Town’s business activities as covered under NAICS Code 913910: Other local, municipal and regional public administration.

I acknowledge the employer representative’s argument with respect to the Employer Services Manager’s reconsideration decision of August 17, 2022, which discusses demonstrable dependency of staff, supplies, equipment, or processes, and recognize that the concept of demonstrable dependency is not mentioned under Policy 14-01-06, Associated Employers or Policy 14-01-07, Single and Multiple Premium Rates. However, the WSIB’s interpretation of ‘substantial’ as it pertains to integrated operations is set out in the Association Questionnaire, which was sent to the employer on April 28, 2021. It explains, “Substantial means that it does not have to be a majority; it has to be important enough that it shows demonstrable dependency of staff, equipment etc., on the integrated operation.”

The employer representative asserts that E2 distributes electricity. Its service is billed on a single bill with water and sewer services provided by E3, but without any reference to Town services or the services provided by E4.

An example of the E2 bill, as found on E2’s website under the ‘Customer Care’ page, shows that customers are, in fact, billed jointly for electricity and water/sewer charges. While the bill makes no mention of E1’s other services, I have already established that E1 is responsible for water and wastewater activities, and furthermore that the town sets the billing rates with respect to water and sewer charges. Furthermore, E1 has the jurisdictional power to name E2 as the billing agent for E3. In addition, according to information presented by E3 to E1 in their Annual General Meeting of June 8, 2022, E3’s customer service process is integrated with E2 and E1, with E2 and E1 fielding approximately 7200 calls for E3 in 2021.

There are a number of processes and equipment shared by the affiliated employers. The affiliated employers share a phone system, and WSIB employer account files show that E2, E3 and E4 all operate from the same main address. E1 developed and uses Municipal Operations and Reporting (MOAR), a series of in-house webforms, reports and interfaces that are tied into a database. The affiliated employers also have access to the MOAR data and have used the MOAR system to track work orders. In addition, E1’s website identifies E2 and E3 as partners and have links to their websites. E1’s Information Technology (IT) department works closely with E2’s IT department, and provides contracted IT services and solutions to E3, and performed a joint IT security audit with both according to E1’s 2021-2022 Budget Report.

During the Annual General Meeting of June 8, 2022, the President and CEO of E2, who is also the President and CEO of E3 identified, as part E2’s strategic plan, working under a one utility approach’ with E3 and E4, and continually working closely with E1’s growth and planning department. They identified, in that same meeting, that a climate change working group had been set up involving the three utilities (i.e. E2, E3 and E4) and E1 in order to work on their carbon footprint. It was also noted that E3’s website, which was launched in 2022, was mirrored after E2’s website in terms of look and feel so that “our other utility customers” are familiar with it and can find the information they are looking for. These examples again show an integration of staff, processes and equipment between the affiliated employers.

The employer representative submits that E4’s communication hosting services are aimed at businesses, not individual residents of E1. MoreoverE4’s services are not offered together with any of the affiliated employers’ services so it cannot be part of any integrated operation under this criteria.

However, as presented by the President of E4, to E1’s Council during their Annual General Meeting of June 8, 2022, E4’s mandate is “the development of a robust business portfolio to deliver profitable services to E1 and beyond”, and thus, its primary focus is to benefit E1 and its citizens. E4 has three missions. Mission 1 is providing services for E1 and its citizens. Mission 2 is paying the shareholder (i.e. the Town) dividend, and Mission 3 is the development of backbone infrastructure, which again benefits E1 and its citizens through connectivity, economic development and growth, and thus supports E1’s business activity as covered in NAICS Code 913910: Other local, municipal and regional public administration.

In determining whether E4 is integrated with E1, I considered E4’s current mandate and missions in relation to E1’s business activities, as well as the history of its incorporation. E4 was established to hold the debt incurred when E1 signed a contract to convert its streetlights to LED lighting. The streetlight program, according to E1’s 2021-2022 budget report, continues to be a coordinated effort between the E1 and E2. Therefore, in this arrangement, E1 is able to manage the town’s debt, all while providing services to its citizens, together with its affiliate, E2. This shows a substantial integration of the affiliated employers’ activities pertaining to processes, and equipment.

As noted on E4’s website, a municipality is limited, by provincial regulations, in terms of the amount of money it can borrow. A municipal services corporation follows different provincial rules when it comes to the implications surrounding the debt capacity. Therefore, the town’s establishment of a municipal services corporation such as E3, as well as the establishment of E4, which is a non-regulated corporation, has allowed the town to access financing tools to “help to transform E1 from a bedroom community into a more vibrant and sustainable municipality with a healthier mix of commercial, industrial, agricultural and residential taxpayers.” This further emphasizes the integration of E1s operations with those of its affiliated subsidiary employers.

Given all of the information above, I find a substantial share of staff, equipment, and/or processes of the affiliated employers are combined to carry out their business activities. The affiliated subsidiary employers ultimately align their businesses, financially and strategically, to combine with the goals and business activities of E1. Therefore, the affiliated employers’ activities primarily form an integrated operation, which fulfills the second criteria of the Test of Cooperation.

As the employers meet both the tests of affiliation and cooperation, they are considered associated by the WSIB, under Policy 14-01-06, and their entire operations are combined for the purposes of classification and premium rate setting.

Effective Date of the Decision

With respect to the effective date of the decision, Policy 14-02-06, Employer Premium Adjustments allows that the WSIB may make debit or credit premium adjustments to employer accounts back to January 1 of the third prior year in cases where there is a change in associated employer status, as is the case in this appeal. However, given that changes to Policy 14-02-06, as it pertains to associated employer status, only came into effect with the implementation of rate framework on January 1, 2020, any related employer premium adjustments cannot be made farther back than January 1, 2020.

The employer representative, in their Objection Memo of August 5, 2022 argues that WSIB Policy 14-02-06 speaks of two main retroactivity rules; one which allows the WSIB to make adjustments retroactively to January 1st of the current year, and one which allows them to be made retroactively to January 1st of the third prior year. The WSIB has taken the approach of applying retroactivity to January 1^st of the third prior year, based on the change in associated employer status, despite the fact that the decision of February 4, 2022 also had the effect of changing the affiliated employers’ eligibility for multiple premium rates, which would qualify for only one year of retroactivity. The WSIB ought to have discretion to apply either of the retroactivity rules when both may apply.

I have taken the employer’s argument into consideration, but find, based on the evidence before me, that the employer was already ineligible for multiple premium rates prior to the AS’s decision of February 4, 2022. The WSIB’s employer account file records show that, in 2020, E1 requested multiple rate groups for their account, specifically they requested a second premium rate for their library operations; however, following the WSIB’s review of information, which included a completed Multi-Rating Questionnaire, the employer’s request for multiple rate groups was denied on the basis that the employer was not eligible for more than one premium rate due to its integrated operations. The decision was communicated to the employer in a letter dated April 21, 2021.

Therefore, the AS’s decision of February 4, 2022 did not constitute a change in the employer’s eligibility for multiple premium rates, and so, employer premium adjustments are not limited to January 1^st of the current year in the employer’s case. Because of this, I confirm the change in associated employer status, remains effective as of January 1, 2020 with respect to E1, E2 and E3, and as of February 1, 2021 for E4.

CONCLUSION

The employer’s objection is, therefore, denied.

DATED December 13, 2022

M. LaCivita

Appeals Resolution Officer

Appeals Services Division