Decision #83/11 - Type: Workers Compensation

Preamble

This appeal deals with a decision made by the Assessment Committee of the Workers Compensation Board ("WCB") with respect to employer assessment rates. The firm submitted that its assessment should not be based on a transfer of employer cost experience. A hearing was held at the Appeal Commission on March 21, 2011 to hear the matter and the hearing reconvened on May 16, 2011.

Issue

Whether or not the firm's assessment should be based on a transfer of employer cost experience.

Decision

That the firm's assessment should be based on a transfer of employer cost experience.

Decision: Unanimous

Background

In March 2008, a WCB file was opened for Firm A, a sole proprietorship. The firm's representative (X) advised that she purchased the business of the predecessor. As Firm A purchased the assets of the predecessor's business, the WCB transferred the cost experience of the predecessor employer based on WCB Policy 31.05.20 Transfer of Employer Cost Experience on Change of Ownership.

On January 15, 2009, X spoke with a WCB representative to register a new business, an incorporated entity. X noted that she was the sole director of the firm and the business was not purchased or associated with any other firms. Based on the information provided by X, a new file was set up for Firm B by the WCB, on the premise that when there is not a sale, take-over or restructuring of a business, the WCB will open a new file and provide the firm with the "new firm rate."

On September 25, 2009 a WCB Collection Officer spoke with X regarding Firm A and the following was documented:

        "Called [X] on cell. Said there are no employees under this firm as it closed Jan 1, 2009. She had
         conversations about it with (two WCB representatives) of our office, and faxed the AWER to
         us some time ago. She said her other account [Firm B] does employ workers and is current. She
         said she will fax me a copy of what was previously faxed in order to close this file. Also
         mentioned that she never opened our mail, as she believed it was her firm experience statements."

X faxed the AWER to the attention of the Collection Officer on October 23, 2009. The AWER was given to a WCB representative to process the report and close the file.

On October 30, 2009, the WCB representative called X explaining that the information on the AWER was not correct in that a second industry code was written on the report by the employer and not by the WCB. X indicated that she has separate administrations for their office staff and their general labour and this was how it was reported on her other firm number (Firm B).

After review of Firm A's and Firm B's files by the WCB representative, the Firm A file was closed effective December 2008 and the costs were transferred to Firm B. The WCB representative informed X about the transfer and a letter was sent on November 3, 2009. On December 2, 2009, Firm B appealed the decision to the WCB's Assessment Committee.

On January 26, 2010, the Assessment Committee denied the appeal on the basis Firm B was only an incorporation of Firm A. It directed that the firm would carry on with the same assessment rate as Firm A and also found that the file was correctly classified under General Labour and Clerical Supply. The Assessment Committee's decision was based on the following:

  • On the registration form of Firm A, the employer indicated she purchased a business and it was not associated with any other company. However, on Firm B's registration form, the employer indicated "no" to both questions. The WCB representative did not associate Firm A with Firm B because the employer had indicated "no" to the question.

  • When X purchased the initial business in January 2008, a new registration letter was sent indicating that the transfer of costs will apply. X met with an Assessment Business Analyst from the WCB who explained how a predecessor's experience affects a firm's rate of assessment. X was advised on the WCB's process when cost experience is transferred.

  • When Firm B's file was opened, had the correct information been cross-referenced between the two files, the WCB would have applied the cost experience (rate and claims costs) of Firm A to Firm B.

On August 20, 2010, the employer appealed the Assessment Committee's decision to the Appeal Commission and a hearing was held on March 21, 2011. The hearing reconvened on May 16, 2011.

Reasons

Applicable Legislation and Policy

In considering the employer's arguments, we are obligated to apply the provisions of The Workers Compensation Act (the "Act"), supporting Regulations to the Act, and any policies passed by the WCB's Board of Directors. Various sections of the Act deal with assessment issues including:

  •  Section 79 of the Act directs the WCB to assign employers to appropriate groups or subgroups.
  •  Section 81 provides that for the purpose of creating an adequate accident fund, the board shall assess every employer and levy sufficient funds to maintain the accident fund.
  •  Section 82 deals with the determination of the record and experience of employers.
  •  Section 88 deals with changes in ownership of an undertaking.

The Board of Directors has enacted WCB Policy 31.05.20, Transfer of Employer Cost Experience on Change in Ownership. The Policy Purpose states "This 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. It is important to distinguish between when a business ceases to operate and when all or part of a business continues in substantially the same form under new ownership because the WCB sets assessment rates based, in part, on employer cost experience."

Employer's Position

The director of the employer participated in the hearing by teleconference. The director stated

        "Well, in my opinion I was given -- I was assessed a rate from -- and giving truthful
         information and then ten months later they switched the rate to almost triple the amount,
         which really impacted my business, the way we did business, and how much my business
         had grown in the year, you know. So, I went from owing an amount and then they added
         ($) to it, which they called in, which they wanted paid immediately."

She confirmed that the employer is in the business of providing general labour services. In answer to a question, the director acknowledged that in setting the rate that she charges for labour, she used the assessment rate initially provided by the WCB to Firm B which was much lower than the rate which was provided when the firm experience was transferred.

When asked whether the business was basically the same from close Friday to open Monday unincorporated to incorporated the director replied "Yes. I guess it was, yes."

Analysis

The panel finds that WCB Policy 31.05.20 is directly applicable to this appeal and is binding upon the panel. Paragraph 3 of the policy provides:

        "3.     A change in the legal status of an employer, such as the incorporation
                 of a proprietorship or partnership or a corporate reorganization, will not be considered
                 to be a change in ownership for purposes of this policy. The cost experience of
                 the predecessor entity(ies) will remain with the new legal entity."

Applying paragraph 3 to the facts of this appeal, the employer had a change in legal status, changing from a sole proprietorship to an incorporation. The nature of the business remained the same. The former sole proprietor became the director of the employer incorporation. This being the case, the cost experience of the predecessor entity should remain with the new legal entity (Firm B).

The employer's appeal is dismissed.

Panel Members

A. Scramstad, Presiding Officer
A. Finkel, Commissioner
P. Walker, Commissioner

Recording Secretary, B. Kosc

A. Scramstad - Presiding Officer

Signed at Winnipeg this 22nd day of June, 2011

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