The Appeal CommissionThe Workers Compensation Act of Manitoba

Introduction

As stated in the preamble, this is a subsection 68(4) application. Subsection 68(4) essentially provides that upon application of a party to an action against an employer with respect of an injury, the Appeal Commission has jurisdiction to adjudicate and determine whether that right of action is removed by the Act.

The purpose of a subsection 68(4) application is essentially to ensure that the substantive issues of the action brought by the worker are not covered by the Act. If the substantive issues are covered by the Act, that action is stayed. Indeed, subsection 13(1) of the Act defines the statutory bars against legal actions and provides that the right to compensation under the Act is in lieu of all rights and rights of action, statutory or otherwise, to which a worker is or may be entitled against the employer or a director of the corporation that is the employer, for or by reason of personal injury to the worker occasioned by any accident which happens to her arising out of, and in the course of her employment and no action in any court of law lies against the employer or a director of the corporation that is the employer. “Employer” is, by virtue of subsection 9(7) of the Act, construed as an employer in a section 73 industry - that is, an employer insured under the Act; these employers are also exempt from civil suit if the accident happens within the conduct of the operations usual in, or incidental to, its industry. As stated in many workers compensation cases and in particular Pasiechnyk v. Saskatchewan (Workers’ Compensation Board), [1997] 2 S.C.R. 890, this bar against suing an employer is part of the so-called historic trade-off between secure no-fault compensation and fault-based recovery in the courts. Stated simply, a covered worker who suffers a workplace injury is barred from taking legal action against a covered employer for the consequences of that injury.

In determining whether an action should be stayed, the Appeal Commission must examine four issues:

i) is the plaintiff a worker within the meaning of the Act;

ii) did the worker suffer personal injury arising out of and in the course of her employment;

iii) is the defendant an employer within the meaning of the Act; and

iv) did the incident happen within the conduct of the operations usual in, or incidental to, the industry carried on by the employer.

In the case before us, the parties all agree that the plaintiff was a worker within the meaning of the Act and that she suffered personal injury arising out of and in the course of her employment. We find that these agreed facts are consistent with the evidence on file. We also find the incident happened within the conduct of the operations usual in, or incidental to, the industry carried on by the defendant. The sole issue for determination is whether the defendant is an employer within the meaning of the Act and thus entitled to the protection afforded to covered employers under the Act, namely protection from legal action.

Background

To determine whether the company that owns the apartment block is an employer under the Act, it is important to understand its corporate organization and history, the accounting practices between the various entities and the registration with the WCB.

The Corporate Organization and History

In the 1960s, two individuals - M and his business partner L - formed a corporation whose object was to construct buildings. Once the buildings were constructed, other companies were formed with the sole purpose of holding them. Another corporation was created with the purpose of managing and operating the buildings.

The individuals and corporations involved in this set up are many. The relevant ones for the purpose of this hearing are as follows:

• Corporation A: It owns the apartment block where the worker was injured. It is the defendant named in the action brought by the worker. It is a holding company owned by Corporation B at the relevant time. It did not have registration with the WCB under its own name at the time of the incident;

• Corporation B: It is the sole shareholder of Corporation A at the relevant time. It is owned by an individual, M. The evidence before the panel is that Corporation B is increasingly managed by N.

• Business C: Business C is the business name of Corporation D.

• Corporation D: It operates under the name of Business C. Corporation D is ultimately owned by N, M’s daughter. Corporation D manages a large number of apartment blocks in which M and L and their families have an ownership interest. The apartment block owned by Corporation A where the injury took place, is one of the apartment blocks managed by Corporation D. Corporation D is a registered employer with the WCB under the name of Business C.

• M: M is an individual who is the sole owner of Corporation B, and indirectly Corporation A, which owns the apartment block in question.

• N: N is an individual. She is M’s daughter. She is ultimately the sole owner of Corporation D which provides management services to Corporation A in the apartment block where the injury took place.

The Accounting Practices

The apartment blocks which are held by Corporation A are managed by Business C (Corporation D). Corporation A employs individuals to work in the apartment blocks. The costs associated with the operation of the apartment blocks, including WCB premiums, are then charged back to the apartment block. All T4s are issued by the apartment block for Business C employees assigned to work there. Business C also charges a 5% property management fee to pay its overhead expenses. Business C only manages properties in which M, N or L and his family have an ownership interest.

The WCB Registration

In the 1960s, Business C voluntarily registered with the WCB. Premiums are calculated on the basis of the operations in each apartment block, including the apartment block at issue.

In 2002 an audit was carried out by the WCB on Corporation B and Corporation D/Business C. A March 22, 2002 memorandum to file by the auditor notes that Business C was acting on behalf of several associated corporations that own 22 rental projects. It is noteworthy that the apartment block, Corporation A, corporations in which L’s family are interested, Corporation B, Corporation D and N’s corporation are all identified by the auditor as associated corporations.

A July 15, 2002 WCB memorandum notes that Corporation B and Corporation D, operating as Business C were reporting for various apartment blocks.

Positions of the Parties

Counsel for Corporation A says that it is a covered employer under the Act and cannot be sued. It says that Corporation A is part of a group of inter-related corporations that are operated by common directing minds and that it has paid premiums to the WCB since its inception and received protection under the Act.

Counsel for the worker says that Corporation A is not covered by the Act. It is a separate legal entity from the other corporations notwithstanding their working relationships and there is no indication to pierce the corporate veil. He also says that Corporation A is not registered with the WCB and that such registration cannot be inferred from the registration of another separate legal entity.

The advocate for the employer says that the action against Corporation A is barred, as under the Act and WCB Policy 35.20.10, the individuals who own the companies are family members; thus Corporation A is considered an associated employer of Corporation D. Therefore it is covered under the Act.

Analysis

To accept the application and bar the worker’s action against Corporation A, we must find on a balance of probabilities that Corporation A is a covered employer within the meaning of the Act. We are able to make that finding.

Subsection 1(1) of the Act defines which persons are included as an employer under the Act. Part of this definition includes a person who has in service under a contract for hiring or apprenticeship, written or oral, expressed or implied, a person engaged in work in or about an industry. As mentioned earlier, this definition includes persons who pay into the accident fund as described in particular by section 73(2).

WCB Policy 35.20.10 also examines who is an employer for the purposes of assessment and coverage under the Act. The following excerpt is relevant:

“IV. ASSOCIATED EMPLOYERS

2. Two or more employers will be considered "associated" in any of the following circumstances:

a) one employer owns controlling interest (more than 50%) in the other employer; or

b) the employers are controlled by the same person or group of persons; or

c) the employers are controlled by individuals who are members of a family as defined under the Workers Compensation Act; or

d) the employers are controlled by groups of people that are members of the same family as defined under the Workers Compensation Act.”

“Members of the family” is defined in section 1(1) notably as a spouse, parent or child.

It is clear from our reading of this Policy that corporate veils will be readily pierced by the WCB, for the limited purpose of association of employer registration, where certain criteria are met.