Decision #25/11 - Type: Workers Compensation

Preamble

The new owners of a firm are disagreeing with the decision made by the Assessment Committee of the Workers Compensation Board ("WCB") that the outstanding assessment debt and penalties of that firm for prior years must be paid by the new owners. A hearing was held on January 20, 2011 to consider the matter.

Issue

Whether or not the firm is required to pay the WCB prior year assessments commencing in 2006.

Decision

That the firm is required to pay the WCB prior year assessments commencing in 2006.

Decision: Unanimous

Background

On August 25, 2009, a worker from the appellant firm filed a claim alleging she sustained an injury at work. The firm was not registered with the WCB.

The WCB then contacted the firm to obtain workers' earnings information. Despite numerous calls, the firm did not provide the payroll information to the WCB. The firm was therefore arbitrarily assessed for the years 2006, 2007 and 2008 with a letter dated September 4, 2009 then sent to the firm advising it of this decision. The Assessment Levy for the years 2006 to 2009 amounted to $5,370.00 and a 5% late filing penalty was also applied in the amount of $268.50.

In November, 2009 the previous owners of the firm ceased operating the business and sold all of the corporate shares of the firm to the new owners. Although the trade style name of the business was changed, the existing corporation (a numbered company) remained the same.

The WCB continued to assess the new business and owners under the same existing file and firm number.

In a letter to the WCB's Collection Department dated February 11, 2010, the firm stated:

I am writing this letter to request readjusting the payment amount of $5776.01. I am assuming this amount has been calculated based on the period 2006 to 2009, December. However, [former business name] was only operated from September 18, 2006 to November 15, 2009 because it was sold to new owner, who is now operating the restaurant after November 15, 2009. Please let us know the correct amount of payment and if you have any further questions, do not hesitate to contact us at [number].

In e-mail correspondence to the firm dated February 12, 2010, a WCB collection officer indicated that the WCB worked on gross wages per calendar year from January to December. The firm was asked to provide the WCB with specific information so that the WCB could make adjustments to the account.

On February 23, 2010, the new owner advised the WCB that they purchased the shares of the firm on January 21, 2010. The owner asked that a new account be opened.

In a memo to file dated February 24, 2010, a WCB assessment account representative called the firm. The memo stated:

Called cell number and spoke with [name]. He confirmed that he purchased the shares of [numbered company] Manitoba Inc. He purchased the building, contents and its operation. He was able to get into the building in mid November and they did renovations to the location and reopened end of December. The restaurant is under a new name, [business]. He was not aware of any debts and admitted the lawyer did not think of checking with the WCB regarding the purchase. He advised that the name on the account [name] is a former manager of the restaurant. [New owners] family, who he says are legal director of the corporation now, are managing the restaurant. The corporation stopped employing in mid November as it closed under old owners and stated employing workers as of January 1, 2010. At end of December and off and on during some of the renovations, the directors of the firm ran the restaurant as needed (end of December). [New owner] was driving at time of call so he was only able to provide limited information. He can only give us w/e info for 2010 and that must be obtained by faxing a form to his current manager, [name]. [New owner] indicated that he owns another restaurant but did not confirm which one. He was driving at time and had no further time to speak…"

By letter dated March 26, 2010, the firm submitted an appeal to the WCB's Collection Unit.

The firm's appeal was denied based on the decision that the firm purchased the shares of the business.

The Minutes of the Assessment Committee dated April 13, 2010 showed that a review of the file was undertaken and the following facts were outlined:

  • The corporation did not register with the WCB until an accident happened in August 2009.
  • The firm had been employing workers since October 2006.
  • The corporation did not report the actual payroll and therefore had been arbitrarily assessed for the years 2006 to 2009. The debt owing was not necessarily the correct amount owing, subject to the correct payroll information being received.
  • The new owner bought the shares of the corporation in November 2009 and started to employ in January 2010.
  • The rates assigned to the firm from 2006 to 2010 are all new firm rates. The claim which was reported in August 2009 was not accepted, once the WCB was informed the injury did not happen at work. Therefore there are no actual claim costs against the employer.

The Assessment Committee offered the firm two options. The first option was to provide the actual workers' earnings for the years 2006, 2007, 2008 and 2009. If these earnings were provided to the WCB by May 30, all late filing and late payment penalties would be reversed. Once the earnings were received, an adjustment to the file would be made and the new amount owing would be due by May 30, 2010.

The second option was offered in the event that the employer could not provide the actual workers' earnings for the years 2006 to 2009; that the total outstanding balance must be paid by May 30; however, only the late payment penalties would be reversed. If the actual earnings were not provided to the WCB and the balance owing was not paid, the file would remain as is. All penalties would remain and collection action would be taken.

The Assessment Committee determined that assessing the firm for prior year's earnings information was consistent with all employers based on WCB Policy 35.30 Audit & Investigations. The Assessment Committee also found that transferring the debt to the new owner was based on WCB Policy 31.05.20 Transfer of Employer Cost Experience on Change of Ownership. The change in ownership did not absolve the new owner from the debt. On October 27, 2010, the firm appealed this decision to the Appeal Commission and a hearing was arranged.

Reasons

Applicable Legislation and Policy

The Appeal Commission and its panels are bound by The Workers Compensation Act (the “Act”), regulations and policies of the Board of Directors.

Part I of the Act establishes the compensation system and the rights of workers and employers under the system. Section 2 of the Act provides that Part I applies to all employers and all workers in all industries in Manitoba except for those excluded by regulation. Thus the Act operates under an exclusionary coverage model which means that WCB coverage is mandatory, unless specifically excluded.

The following sections of the Act are relevant to the payment of assessments by employers:

Payroll estimates and certified copies

80(1) An employer shall, on becoming an

employer and at such other times as the board may

require, furnish to the board an estimate of the amount

of the payroll of each undertaking in an industry for the

following year, with such other information required by

the board for the purpose of

(a) assigning the employer or undertaking of the

employer to a class, sub-class, group or sub-group;

and

(b) making assessments under this Act;

and the employer shall, at the close of each year, and at

such other times as the board may require, furnish

certified copies of the payroll.

Continuing liability of employer

80(7) Where, for any reason, an employer liable

to assessment is not assessed in any year, he is

nevertheless liable to pay to the board the amount for

which he should have been assessed; and payment of

that amount may be enforced in the same manner as the

payment of an assessment may be enforced.

WCB Policy 31.05.20 Transfer of Employer Cost Experience on Change of Ownership (the "Change of Ownership Policy") establishes criteria for when an employer's cost experience will follow the business on a change in ownership and be used to determine assessment rates for the new employer. The Change of Ownership Policy states, in part:

As a general principle, the cost experience will follow the business where all or part of a business changes ownership. The cost experience of the predecessor employer will be transferred to the successor employer and will be used to determine the assessment rate of the successor employer.

The Employer's Position (The Firm with its New Owners)

The new owners of the firm submitted that the notion of "extenuation" should apply to their circumstances. Three main points were made. The first point was that the new owners have always paid what they are required to pay. The new owners also operated another business and always paid their assessed amounts in relation to that business. As a second point, they questioned why the WCB neglected to collect the assessments from the former owners during the four years they had operated the business. Finally, it was noted that the business was "very bumpy" right now and it was very difficult for the new owners to have to pay the debts of the former owners. Although the new owners loved the business and wanted to carry it on, it seemed unfair that it should have to be responsible for the debts of the former owners.

Analysis

The issue before the panel is whether or not the firm should be required to pay the WCB prior year assessments which accrued while the former owners operated the business of the firm. In considering this appeal, the panel reviewed the provisions of the Act and WCB policies. The panel notes that subsection 80(7) of the Act compels employers to pay all amounts for which the employer should have been assessed, regardless of whether or not the assessment was issued in a given year. The Act and the WCB policies do not give either the WCB or the Appeal Commission the discretion or capacity to provide relief to an employer from its obligation to pay assessments.

In the present case, the employer is the firm. Although the owners of the firm have changed through the purchase and sale of shares, the corporate entity remains the same. The numbered company remains intact and is still assigned the same firm number and file. The appeal panel has no ability to relieve the firm, as an employer, of its obligation to pay prior years' assessments.

We note that both the Assessment Committee and the new owners made reference to the Change of Ownership Policy. In our opinion, that Policy does not directly apply to this situation as the Policy is more concerned with the transfer of cost experience (the financial consequences of previous WCB claims and the appropriate assessment rates) than with liability for payment of assessments. We therefore find that the Policy is not relevant to this appeal.

The new owners have argued that it is totally unfair that they have to pay WCB premiums for a period of time when they did not own the shares, operate the business, or control the company. We agree with this submission, but we are not able to help them. The panel notes that the existence of the outstanding WCB assessment debt and penalties is a matter which should have been fully investigated and addressed by legal counsel at the time of the share purchase by the new owners and the new owners may be entitled to remedy in another forum. The Appeal Commission, however, is unable to grant them the relief they seek.

The employer's appeal is therefore dismissed.

Panel Members

L. Choy, Presiding Officer
A. Finkel, Commissioner
P. Walker, Commissioner

Recording Secretary, B. Kosc

L. Choy - Presiding Officer

Signed at Winnipeg this 24th day of February, 2011

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