The Appeal CommissionThe Workers Compensation Act of Manitoba

Legislation:

Under the Act, there are a number of tests that must be met in order for an individual to receive compensation for an injury from the WCB. One of the tests – and the central issue of this appeal requires that the individual be a covered “worker” under the Act, working with an employer required to be registered under the Act (there is no dispute that the employer meets this last criterion).

The Act in force in 1989 states in subsection 1(1)(a) that a worker is a person who enters into or works under a contract of service or apprenticeship, written or oral, expressed or implied, whether by way of manual labour or otherwise, with an employer. Subsection 1(1)(g) extends this coverage to “an executive officer of a corporation whom is admitted by the board as being within the scope of Part I under subsection 74(3).” Subsection 1(3) of the Act provides additional restrictions to who may be considered to be a worker, noting that “the definition ‘worker’ in subsection (1) does not include … a director of a corporation, unless an application to have the executive officer brought within the scope of Part I is received and approved by the board.”

Analysis:

Based on the requirements of the legislation, for the appellant to succeed on his appeal, the panel would have to find that a) he was a covered worker and was not precluded from coverage under the Act (as an executive officer or director) at the time of his workplace injury, or b) if he was an executive officer or director, that there was an application made to the WCB for coverage of the applicant as a worker, as required under the Act. After reviewing the relevant legislation, the arguments advanced on behalf of the worker, and the evidence on file, the panel was not able to make either of these findings.

Was the appellant a worker, or was he an executive officer or director at the time of his workplace injury in May 1989?

The worker advisor suggests that the WCB had been receiving premiums from the employer for the appellant at the time of the May 1989 injury, and on that basis the appellant should be considered to be a covered worker, and the WCB should be precluded from denying him that status. The panel notes that this interpretation is not consistent with the provisions of the Act. Subsection 1(1) of the Act makes a clear distinction between a worker and an executive officer or director, with entirely different rules as to eligibility to benefits flowing from that distinction. Workers in covered industries are automatically covered by the Act, while executive officers or directors must have applications made on their behalf by their employer to the WCB, and the WCB must accept those applications for coverage to be provided.

The employer’s decision in 1987 as to which category the appellant should be slotted in order to access WCB coverage is not the determining factor in this case, nor is the fact that the WCB may have initially accepted a premium from the employer based on a payroll that included the appellant’s earnings. In this regard, the panel notes that subsection 60(2) of the Act clearly gives the WCB the right to inquire into whether an individual is covered by the Act, and subsection 60(3) provides that the WCB is not precluded from reconsidering “from time to time any matter that has been dealt with by it or from rescinding, altering, or amending, any decision or order previously made, or making any further or supplementary order, all of which the board may do.” The panel therefore finds that the employer’s payment of premiums on behalf of the applicant in 1989 as a worker is not determinative of the appellant’s status as a covered worker at that time, or a bar to a later reconsideration of that decision by the WCB or this panel.

The question thus turns as to the appellant’s actual status in May 1989. As noted in the background, the appellant was on the employer’s payroll at the time of the incident, and the employer had also classified the appellant as a worker for the purposes of obtaining coverage from the WCB. However, the panel notes that the assessment records and annual corporate returns of the employer also indicate that the appellant was an executive officer and director of the employer starting in 1987. This potentially brings into play the legislative restrictions which normally preclude an executive officer and director from being covered as a worker under the Act.

The worker advisor argues that events in 1988 effectively removed the appellant from his positions as an executive officer and director. In particular, the position is that the appellant had declared personal bankruptcy in early 1988, and he was thus legally precluded from acting as a director in that period of time. As well, the worker advisor notes that the last corporate annual return filed for the employer in 1988 was invalid because of the bankruptcy, and that his positions had never been restored subsequent to his discharge in mid-1988, as evidenced by the fact that subsequent corporate annual returns were not filed.

Dealing with the impact of the appellant’s bankruptcy on his status as a director, the panel notes that the employer was registered as a company under provincial legislation and was not a federally incorporated company. As such, the worker’s argument that the Bankruptcy Act precludes the appellant from holding a directorship of a federally incorporated company does not apply. The panel has reviewed a legal opinion on this point which was prepared for the WCB and placed on this file, and concurs with its rationale which supports our finding on this point. The panel notes in any event that the Bankruptcy Act only restricts bankrupt individuals from participating as directors. It would not have precluded the appellant from continuing as an executive officer of the company through and beyond the period of bankruptcy. The effect of our finding on this point is that the appellant’s bankruptcy did not void or alter his continuing status as a director or executive officer of the company.

The panel also concludes that the failure to file corporate registration documents for the period in question (1989 and beyond) does not formally change the appellant’s status with the WCB during that period, or for that matter, with the employer. The evidence on file discloses that the appellant was discharged from his bankruptcy in June 1988, almost a year before his injury. The panel notes that there is no evidence anywhere on file, or argument advanced, suggesting that the appellant’s role or responsibilities with the firm had in any way changed from when he was first registered by the employer as an executive officer and director in 1987, through his period of bankruptcy in 1988, through the time frame of his heart attack in 1989, and up to the date he had finally been terminated from benefits in 1990. Similarly, there is no evidence before the panel of any other individual assuming any responsibilities as a director, or president, or secretary during that period of time or subsequent to those events. Indeed, a letter from the appellant’s legal counsel in August 1990 confirms that the appellant “acted as a director of this corporation in trust for [name] even throughout his bankruptcy solely in order to comply with the Trust Declaration…”.

On the basis of these findings, the panel concludes that the appellant was, on a balance of probabilities, a director and an executive officer of the employer at the time of his injury in 1989. As such, even though he was being paid a salary by the employer, the panel finds that the appellant is precluded from coverage as a “worker” under the Act.

The question then turns to whether the appellant should be deemed to be a worker at the time of his workplace injury.

As noted earlier, subsections 1(1), 1(3), and 74 of the Act in force in 1989 allows for directors or executive officers to be covered as workers under limited circumstances. In particular, an employer must apply for benefits for that individual to be covered.

The panel notes that this application process for what has been traditionally described as “voluntary coverage” is not an insignificant act; individuals in this category do not have the arm’s length employer-employee contracted relationship which can be used to establish a worker’s wages and thus an employer’s premium. Instead, the applications for these individuals must deem an annual wage level for each individual which must be above a prescribed minimum level and which does not need to correlate with actual salary. Premiums (and potential wage loss benefits in the event of injury) are paid on the basis of the deemed wage levels, if accepted by the WCB.

Given the panel’s earlier finding that the appellant was both an executive officer and director, the panel reviewed the file for evidence of the legislatively required application by the employer for voluntary coverage for the appellant under either category. The panel notes that the firm had never applied for voluntary coverage for the appellant. The panel further finds that the WCB’s earlier acceptance of premiums paid by the employer on the basis that the appellant was a worker cannot be considered as a substitute for the unique application processes set out in the Act for executive officers and directors. Accordingly, the panel also finds, on a balance of probabilities, that the appellant is not a deemed worker under subsections 1(3) or 74 of the Act.