The Appeal CommissionThe Workers Compensation Act of Manitoba

Preamble

An Appeal Panel hearing was held on April 17, 2002, at the employer's request. The Panel discussed this appeal on April 17, 2002 and again on June 19, 2002.

Issue

Whether or not the Workers Compensation Board (WCB) should charge the employer additional premiums for the years 1998 and 1999.

Decision

That the Workers Compensation Board (WCB) should not charge the employer additional premiums for the years 1998 and 1999.

Decision: Unanimous

Background

In 2001, Employer Services at the Workers Compensation Board (WCB) audited the employer for the calendar years 1998 and 1999. As a result of the audit, the employer's account was adjusted to reflect additional assessments of $18,361.18 and $7,776.68 for 1998 and 1999. In a letter dated June 5, 2001, Employer Services confirmed the audit findings to the employer.

On August 27, 2001, the employer appealed the above decision to the Assessment Committee. On November 7, 2001, following review of the employer's file, the Assessment Committee denied the appeal.

In brief, the Assessment Committee noted that 1991 audit findings did not identify 'issues' regarding the pro-ration of earnings for workers engaged in both industry classifications. The audit resulted in minor adjustments being made to the employer's account. The discrepancies resulted because the employer misreported casual labor. This suggested that the WCB did not identify any problems associated with the manner in which the employer was reporting earnings to the WCB up to the time of this audit.

The Assessment Committee was unable to find any evidence to determine what information, if any, was provided to the employer in regards to the pro-ration of workers earnings between the industry classifications. In addition, the employer did not provide any evidence to support its case. The Assessment Committee believed that the in absence of proof, the appeal must be rejected in order to ensure compliance with WCB policies and regulations.

On April 17, 2002, an Appeal Panel hearing was held at the Appeal Commission as the employer disagreed with the Assessment Committee's decision of November 7, 2001. Following the hearing and discussion of the case, the Appeal Panel requested that additional information be obtained from Employer Services prior to discussing the case further. On May 29, 2002, Employer Services answered the Appeal Panel's queries and the May 29th memo was forwarded to the employer for comment. On June 19, 2002, the Panel met to render its final decision on the issue under appeal.

Reasons

This case involves an employer, which was assessed additional premiums, following an audit. The employer appealed this additional assessment, which appeal was denied by the Assessment Committee. That decision was appealed to this Commission.

At issue in this case was the method of reporting earnings for employees engaged in different types of work. This employer is involved in a business that incorporates significantly different types of industry; and, thus, is classified into more than one sub-group for WCB-assessment purposes.

For the appeal to succeed, the Panel would have to determine that - on a balance of probabilities - the additional assessment was not justified. We have so determined.

In coming to this conclusion, we made the following findings of fact:

• For a number of years, the employer had reported the earnings of certain employees on an "activity-basis". On this basis, an employee engaged in work that crossed the employer's sub-groups had his or her time pro-rated between these sub-groups.
  
  
• From (at least) 1986 until 2000, the board accepted this method of reporting.
  
  
• An audit of the employer's reporting process, conducted in 1991, found no issues with this method of reporting.
  
  
• In response to a query from the employer, in 1995, a board official noted in a memo on file: "Confirmed he could report appropriate % for workers working under both classifications."
  
  
• In a letter dated September 13, 2000, the board informed the employer that its practice of "activity-based" reporting was incorrect. The correct method is "industry-based", i.e., not based on the activity of the worker, but on the industry as determined by the contract with the customer.
  
  
• The board audited the employer's books for the years 1998 & 1999 on this basis; and assessed significantly increased premiums.
  
  
• The file notes that this employer is always cooperative with the board; pays assessments without question; and, with minor exceptions, pays on time.
  
  
• The employer has not objected to the requirement to change his method of reporting for the year 2000 and onward.

In our consideration, we looked to board policy, which allows the board to audit the previous five years of a company's reporting, but which notes that normal practice is to go back two years only.

Mindful of our obligation to comply with board policy, we note that the authority to backdate an audit is not compulsory. We also note that subsection 60(4) of The Workers Compensation Act states that decisions are to "be given upon the real merits and justice of the case."

We are of the unanimous position that this is a case where the merits and justice of the case warrant allowing the employer's appeal.

For fourteen years, the board - either knowingly or, at least, without objection - allowed the employer to report certain employees' earnings on an activity basis. As noted above, a 1991 audit found no problem with this procedure. And, in 1995, a board employee re-confirmed for the employer its correctness.

Subsequent to our hearing, we solicited further information from the board in respect of this matter. In response to a question about audits, the board wrote to us:

"The WCB views audits as a basis to verify the correct earnings have been reported for assessment purposes. If it is later found that an error was made that adversely effects the employer, the employer is often put on notice on a prospective basis to report correctly." [Our emphasis.]

We are of the view that this is a case where the requirement to change the method of reporting should have been implemented on a prospective basis.

Accordingly, the appeal is allowed.

Panel Members

T. Sargeant, Presiding Officer
A. Finkel, Commissioner
M. Day, Commissioner

Recording Secretary, B. Miller

T. Sargeant - Presiding Officer
(on behalf of the panel)

Signed at Winnipeg this 15th day of July, 2002