Decision #128/08 - Type: Workers Compensation

Preamble

The worker has a compensable claim with the Workers Compensation Board (“WCB”) for injuries he sustained in a work related accident in 1996. The worker is presently appealing decisions that were made by primary adjudication and confirmed by Review Office which deal with an overpayment of wage loss benefits and responsibility for a prescription. At the worker’s request, a hearing was held on July 15, 2008 to consider the two issues.

Issue

Whether or not the worker is responsible for the overpayment of $8974.50; and

Whether or not only limited responsibility should be accepted for the medication Coumadin.

Decision

That the worker is responsible for the overpayment to the extent that any remains after reassessment by the WCB of the overpayment amount owing based on 50% worker ownership of the business enterprise; and

That only limited responsibility should be accepted for the medication Coumadin as identified by WCB medical advisor.

Decision: Unanimous

Background

On November 29, 1996, the worker suffered from sulphuric acid burns to his back, shoulders, legs and eyes as a result of a work related accident. A corneal transplant in his right eye was required. The WCB accepted the claim for compensation and various types of benefits and services were provided to the worker.

As the worker was unable to resume his pre-accident employment, a vocational rehabilitation plan was developed. The worker was assisted by the WCB in commencing a self-employed venture in partnership with his brother-in-law. Financial assistance and business advisory services were provided.

On September 4, 2006, the worker ceased work in his self-employed business venture as he was experiencing further difficulties with his vision. With respect to his entitlement to wage loss benefits, the worker was advised in a letter dated October 5, 2006 that WCB Policy 44.80.10.10, Average Earnings, would be used to determine his loss of earning capacity. The letter stated,

“When an injured worker has a recurrence (the effects of their injury preclude them from working medically), and is self employed, WCB wage loss benefits will be paid for the first 12 weeks (with supporting medical) based on either the worker’s average earnings initially established on the claim or their actual earnings at the time of the recurrence. The higher value is used. In your case, the average earnings established based on your wages from [accident employer] are higher than the earnings you were making from your business. We have therefore used this value to establish wage loss benefits and have implemented benefits beginning September 4/06 (the first business day after we met and you advised me you could not work.)

Effective week 13 (from the date of the recurrence – November 27/06), and if benefits continue to be authorized, the WCB will use financial statements from the business to help in determining your loss of earning capacity and what your wage loss benefit rate will be. I have explained that we require the business financial statements as soon as possible so that this review can take place prior to week 13.”

Subsequent file records showed that the worker did not provide the WCB with the financial information that was required to determine his wage loss benefits yet he was still paid full wage loss benefits from September 4, 2006 through to May 13, 2007 while he underwent eye surgery and recovered from same. In other words, effective week 13, his wage loss benefits were not adjusted to reflect his self-employed income. According to WCB policy, after week 12, post-accident business income of a self-employed worker should be deducted from the wage loss benefits. This resulted in the worker being overpaid benefits in the amount of $8,974.50. On July 13, 2007, the worker was advised that the overpayment amount was being deducted from his business support payment.

In a WCB decision dated September 13, 2007, the worker was advised that his use and need for the medication Coumadin was necessary due to a non-compensable pre-existing condition and could not be directly related to the effects of his 1996 injury. The worker was advised, however, that the WCB would consider temporary and short term coverage for the drug if the worker was at an increased risk for a clot in a situation where treatment or activity was related to his claim.

In a submission to Review Office dated March 1, 2008, the worker outlined his position that the WCB should pay him full wage loss benefits while he was off work as he was not drawing a wage from his company. The worker also argued that since the WCB had covered the drug Coumadin previously, the WCB should continue to cover the cost of the medication.

On March 27, 2008, Review Office confirmed that the worker was responsible for the overpayment of $8,974.50. Review Office referred to WCB Policy 35.40.50, Overpayment of Benefits (the Overpayment Policy) in its decision. It stated that the worker was advised verbally and in writing that further financial information was required to determine his wage loss benefits effective November 27, 2006. It stated that the worker’s vocational rehabilitation consultant continued to authorize wage loss benefits beyond November 27, 2006 as he did not want to stop the worker’s benefits given that he was recovering from surgery. It did not consider the continuation of wage loss benefits beyond November 27, 2006 to be a WCB administrative error. Thus, the overpayment should be recovered as relevant information was not provided to the WCB and it resulted in an overpayment of more than $5.00.

Review Office also confirmed that only limited responsibility could be accepted for the drug Coumadin. Review Office noted that the worker developed deep vein thrombosis in 1996. It was later determined that the worker had Factor V Leiden which was a hereditary moderate risk factor for venous thromboembolism. It noted that the worker may at times become immobilized due to his compensable injuries and that the immobilization may aggravate the worker’s pre-existing condition. It concurred that responsibility should be accepted for these aggravations if they are the result of the compensable injuries. When the effects of the aggravation resolved, Review Office felt the need for Coumadin would be solely related to the worker’s pre-existing condition and therefore was not the responsibility of the WCB. On May 6, 2008, the worker appealed the decisions rendered by Review Office and a hearing was held on July 15, 2008.

Following the hearing, the appeal panel requested that the worker provide them with a signed copy of the May 1, 2004 “Operational Agreement” (and later amendments, if any) between the worker and his business partner with respect to their business. This information was later received and was considered by the appeal panel when they met on September 12, 2008 to further discuss the case.

Reasons

Applicable Legislation

When a worker suffers personal injury by accident arising out of and in the course of employment, compensation is payable to the worker pursuant to subsection 4(1) of The Workers Compensation Act (the “Act”).

Under subsection 4(2) of the Act, a worker who is injured in an accident is entitled to wage loss benefits for the loss of earning capacity resulting from the accident. Subsection 40(1) of the Act defines loss of earning capacity as the difference between the worker’s net average earnings before the accident and the net average amount that the WCB determines the worker is capable of earning after the accident.

Medical aid payments for expenses such as medication are payable in accordance with subsection 27(1) of the Act. The WCB makes these payments where it determines that the medical aid is necessary to cure and provide relief from an injury resulting from an accident.

The Overpayment Policy deals with recovery of overpayments of benefits. The purpose of this policy is to describe the principles that the WCB Board of Directors has established to guide the WCB in its recovery of overpayments. The principles attempt to strike a fair balance between the WCB’s fiscal responsibilities and the interests of injured workers. Part 3 of the Overpayment Policy provides that while the general policy is that all overpayments receivable will be pursued for recovery, there are some limited circumstances where overpayments will not be pursued. One such circumstance is when the overpayment resulted from an administrative error by the WCB. Part 4 of the Overpayment Policy then provides:

Despite the provisions in Part 3, overpayments will be pursued for recovery where the following circumstances apply:

(i) there was fraud, deliberate misrepresentation or withholding of key information affecting benefits entitlement; or

(ii) the overpayment represents a duplication of benefits paid from another source for the same injury, for example Long Term Disability or CPP Disability benefits.

WCB Board Policy 44.80.10.10 (the “Average Earnings Policy”) sets out guidelines for determining a worker’s average earnings. Schedule “A” deals with calculating earnings for self-employed workers. Schedule “A” provides that for the first 12 weeks (or until the end of the claim if the claim lasts less than 12 weeks), initial benefits are paid without considering post-accident business income, as long as a total loss of earning capacity is authorized by the WCB. Effective at week 13, the WCB will do an average earnings review and any post-accident income will be deducted from the wage loss benefits.

According to Schedule “A”, when a self-employed worker operates through a corporation, if the worker is a director with 50% ownership who controls decisions for the corporation, the average earnings are calculated by combining the T4 income, plus the shareholding percentage of net business income, plus non-cash expenses such as depreciation, amortization or other special deductions.

Worker’s Position

In his Request for Appeal, the worker submits as follows:

  • I was told that my wages would be covered until I was able to go back to work;
  • I am joint owner of (the business venture). The decisions and income aren’t mine alone. I have documentation that (my partner) is joint owner of this business.
  • Coumadin to date has been covered since my accident in 1996 and should continue.

At the hearing, the worker was assisted by his mother in making a presentation. It was submitted that an error was made in not acknowledging that the business has two owners. Although the worker holds 100 percent of the shares in the corporation, the business had to be set up that way because the worker owns the land and the buildings on the property. It was a zoning requirement of the municipality that he be registered as 100% owner, in order to operate the business on his property. The worker and his business partner draw equal wages from the corporation and the balance of the income goes to pay expenses.

On the second issue regarding the Coumadin, this medication had been prescribed and covered since the accident in 1996. The worker was not on this medication or any other medication before the accident. It was submitted that this drug should be covered by the WCB.

Analysis

There are two issues before the panel. Each issue will be addressed in order.

1. Whether or not the worker is responsible for the overpayment of $8,974.50

The Appeal Commission and its panels are bound by the policies of the WCB Board of Directors. As outlined above, the Overpayment Policy sets out limited circumstances where an overpayment will not be pursued. In the panel’s opinion, none of the limited circumstances apply and therefore we find that the worker is responsible for any overpayment.

There is, however, an issue with respect to the manner in which the overpayment was calculated. The worker argues that he is really only a half owner of the business venture, and therefore only half of the business income should be attributed to him. This is relevant because after 12 weeks of benefits following his recurrence, the worker’s wage loss benefits were reduced by the amount of his self-employed income. When calculating the amount of the worker’s self-employed income, the WCB attributed 100% of the corporation’s net business income to the worker, since he is the sole shareholder of his corporation.

At the hearing, the worker provided evidence as to the manner in which his company was organized. Originally, it was the business partner who approached the worker with the business opportunity. At that time, the worker was working on a vocational rehabilitation plan and the WCB was supportive of the worker pursuing this opportunity in partnership. They needed a place to build the business and the worker already owned some land. Due to local zoning regulations, any home based business had to be owned entirely by the land owner. It was for that reason that the corporation was set up with the worker being the sole shareholder. There was also a side agreement (the “Operating Agreement”) signed between the worker and his business partner which set out their respective rights as equal partners. The worker’s evidence was that without the business partner, he would not be able to run the business as the partner is the one who had the working experience in the industry. They both signed as guarantors on bank loans, they drew equal wages from the corporation (when the worker was able to work) and if they were to close shop, the assets of the corporation would be divided equally. The worker testified that they have not yet been in a position where there has been additional profit at year end to be distributed.

The intent of Schedule “A” of the Average Earnings Policy is to ensure that all income earned by a self-employed worker is fairly accounted for in calculating the worker’s average earnings for the purposes of establishing the amount of wage loss benefits. In this case, although the arrangements between the worker and his business partner are such that they are equal owners, the shareholdings in the company do not reflect this. At the request of the panel, the worker provided a copy of a signed Operating Agreement between himself and his business partner. This agreement was drawn up by a lawyer, and was effective as of May 1, 2004. This document was not part of the file or the decision-making process in earlier levels of adjudication of this matter. The terms of the Operating Agreement provide as follows:

  • 100 common shares have been issued to (worker) … 100 common shares would also have been issued to (business partner) if the Local Zoning permitted this;

  • (Worker and business partner) hereby confirm and agree that, in determining such salaries, management bonuses, repayment of related party loans, dividends or other forms of compensation, it is their intention that each of them receives the same aggregate compensation so long as each of them makes an equal contribution to the Corporation’s business operations; and

  • In the event that (business partner) is not a shareholder of the Corporation as of the date of his death, (worker) will purchase all of (business partner’s) entitlement to become a shareholder … for a purchase price equal to 50% of the book value of (worker’s) shares as of the date of death, as determined by the Corporation’s accountants.

The panel is satisfied that the true business arrangements between the worker and his business partner are such that although the worker has 100% legal ownership of the corporation, he is beneficial owner of only 50%. As such, we are of the view that the worker’s wage loss benefits for week 13 onwards should be recalculated based on the worker being a director with 50% ownership who controls decisions for the corporation. To the extent that an overpayment still results after such recalculation, we find that the worker is responsible for repayment of this amount. We do not find that the worker would qualify under the limited circumstances in the Overpayment Policy for relief from the requirement to repay these amounts.

2. Whether or not only limited responsibility should be accepted for the medication Coumadin

The panel agrees with the decision of Review Office that only limited responsibility should be accepted for the drug Coumadin. The medical report of a treating hematologist dated March 25, 1998 indicated: “(The worker’s) mother had developed a DVT within the last year and was investigated elsewhere and found to have the Factor V Leiden mutation which is a hereditary moderate risk factor for venous thromboembolism. Accordingly, we tested (the worker) and found that he also has the Factor V Leiden trait … Although the Factor V Leiden predisposes to thrombosis, patients with it are still most likely to have thrombotic events in the setting of predisposing factor and I think that one can attribute his clot to the immobilization and inflammatory acute phase response to his burns.” A medical opinion provided by a WCB medical advisor on April 24, 2007 stated: “The Coumadin has been prescribed for his pre-x condition of the antiphosphate lipid disorder and would only be WCB responsibility if he were at increased risk for a clot in a situation that was related to his claim.”

Subsection 27(1) of the Act provides for payment of medical aid costs where it is necessary to cure and provide relief from an injury resulting from an accident. While generally speaking, the WCB would not be responsible for treatment of the worker’s hereditary pre-existing blood clot condition, the panel agrees that to the extent that the worker may be immobilized as a result of treatment related to his compensable injuries, coverage for Coumadin medication should be provided.

The worker’s appeal is allowed in part.

Panel Members

L. Choy, Presiding Officer
A. Finkel, Commissioner
M. Day, Commissioner

Recording Secretary, B. Kosc

L. Choy - Presiding Officer

Signed at Winnipeg this 15th day of October, 2008

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