The Appeal CommissionThe Workers Compensation Act of Manitoba

The Workers Compensation Act and Framework

The Appeal Commission and its panels are bound by 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.

Employer’s Position

The employer’s submission noted that the parent company had been in business for over one hundred years and until 2011, none of its work was considered to be within the scope of the Act, both under the old system and then under the newer system when it changed in the 2000s. Since approximately 2005, the parent company's industry had been specifically excluded by regulation from the workers compensation system. In January 2011, the WCB corresponded with the parent company and raised the prospect that some of its operations may be part of the workers compensation system. Ultimately, the WCB determined that one sliver of the parent company's business (carried on through the appellant subsidiary firm) was covered by the Act and that its operations were assessable retroactively to 2006. The reason why it fell within coverage was because a new service was being provided and that service was not for the parent company's own members exclusively. It was stressed that this was not a case where the appellant had turned a blind eye to its obligations under the system. It was not a situation where there had been any misrepresentations or failure to participate when it obviously should have been participating.

It was submitted by legal counsel that WCB Policy 35.00, Reporting and Remittance of Assessments for the General Body of Employers (Employers in Class E) was relevant to the issue of retroactivity. Specifically, the following clause from page 5 of Policy 35.00 was highlighted:

Reconciling Employer Business and Payroll Information

From time to time the WCB will examine the records of an employer to ensure that it has provided accurate business and payroll information to the WCB. However, the WCB may obtain business and payroll information through a variety of avenues (e.g. from information received from an employer, through an audit initiated by the WCB, etc.). When the WCB determines that the business or payroll information submitted by an employer is incorrect, the WCB will adjust the employer's account accordingly for a period of up to five years (less if the employer has not been in operation for five years), except in cases of material misrepresentation, where the WCB will adjust the employer's account for a longer period, to the date of the suspected material misrepresentation. (emphasis added)

It was submitted that the words "up to five years" had to have some meaning. The clause did not require that the investigation had to go back five years in every case. In the present situation, it was not appropriate to go back five years and it would be unfair to do so. The standard set out in WCB Policy 35.30, Audits and Investigations, was to go back for two years and this was borne out in previous decisions of the Appeal Commission. It was submitted that previous decisions established that it is appropriate to go back two years in circumstances where the WCB has initiated the discussion with the employer in the context of an audit or investigation.

It was also noted that this was a situation where workers compensation coverage would be redundant and unnecessary. There were no claims during the period in question and the firm had been providing group insurance benefits for its workers. It seemed grossly unfair to charge for: "coverage you didn't want and didn't need and probably wouldn't have pursued in any event had it been told so at the time."

Overall, it was submitted that through no fault of its own the firm was not participating in the workers compensation system and had no idea that it was supposed to be participating. On a going forward basis the firm was paying for the privilege of being within the system, but it was asked that, consistent with WCB practice and past Appeal Commission decisions, the retroactive assessment be limited to two years.

Analysis

The issue before the panel is whether or not the firm should be retroactively assessed for the period 2006 through 2010 in relation to their immobilizer installation activities. In order for the employer’s appeal to be successful, the panel must find that Policy 35.00 gives the panel the discretion to limit the number of years of retroactive assessment and that the discretion ought to be exercised in this case. We are not able to make that finding.

Applicable Policy

The first matter addressed by the panel was the correct policy framework. The issue was slightly complicated by the existence of two separate policies during the relevant assessment years (2006 to 2010). WCB Policy 35.30, Audits and Investigations, outlines its effective dates as January 1, 2006 to December 31, 2009. WCB Policy 35.00 shows its effective date as January 1, 2010. Policy 35.30 was rescinded effective January 1, 2010 and incorporated into Policy 35.00.

There are several differences between the content of the two policies, but the main one for the purposes of this appeal is that Policy 35.30 indicates that the scope of a payroll audit will normally cover the two most current complete fiscal years of an employer. The employer's legal counsel relied on this clause to argue that the standard for WCB audits is to go back only two years. With respect to the clause regarding "reconciling employer business and payroll information", both policies include the language allowing for "a period of up to five years".

In order to obtain guidance on the correct policy to apply, the panel made reference to WCB Policy 21.60, Policy Application Date. Policy 21.60 provides as follows:

2(b) Where an existing assessments or administrative policy does not specify how it shall be applied, the policy will apply to and be in effect for initial decisions or actions which occur on or after the stated effective date of the policy.

…

4. Unless otherwise specified by the Board, the Appeal Commission shall apply the policy in effect on the date the administration made the decision under appeal.

If, in the opinion of the Chief Appeal Commissioner, this application would be unfair or unreasonable, the Chief Appeal Commissioner may refer the policy to the Board of Directors for a specific ruling on the application date.

In view of the foregoing, the panel finds that Policy 35.00 is the only policy in effect for the matters addressed in this appeal. On review of the WCB assessment file, it would appear that the registration process started on June 22, 2011 and the registration date is shown as September 1, 2011. As these actions all took place after Policy 35.30 was rescinded effective January 1, 2010, we find that Policy 35.00 is the only policy to be considered for the purposes of this appeal.

For the reasons that follow, however, whether the effective policy was Policy 35.00 or Policy 35.30 is not critical since the panel finds that neither of the WCB policies are applicable to the appellant's situation.

Initial assessment vs. subsequent audit

Counsel for the appellant argued that the WCB's request for information from the appellant was essentially an audit of an employer. The whole process was initiated with correspondence from the WCB to the parent company, where the WCB raised the prospect of the appellant being within the workers compensation system. The panel does not accept this submission.

A review of the Act's definition of "employer" reveals that none of the eight categories listed are applicable to the parent company. The closest category is (a)(i) which 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." The term "industry" is defined to mean all industries in Manitoba except those industries excluded by regulation under section 2.1.

As noted in the appellant's submission, the parent company's industry was specifically excluded from coverage by regulation. As a result, the panel finds that at the time the request for information was made to the parent company, the parent company was not an "employer" within the meaning of the Act. This was not an audit of an employer.

The panel notes that subsection 80(3) of the Act provides as follows:

Nature of work

80(3) Any person who, in the opinion of the board, may be an employer under Part I shall, on request of the board at any time, furnish and deliver to the board a statement signed by him giving particulars of the nature of the different classes of work carried on and such particulars as may be required by the board concerning his payroll.

In the panel's opinion, this is what occurred. The WCB requested information from a business which could potentially be an employer under the Act. It was not an audit of a business which had already been determined to be an employer within the meaning of the Act and assessed accordingly. The distinction is important as the panel is of the view that the argument put forward by legal counsel may be applicable to an existing employer who is being reassessed for previous years, but is not applicable to a new undertaking which had never been subject to assessment.

In the panel's opinion, the Act does not give any discretion to relieve an employer from the requirement to pay assessments for all years for which it should have been assessed. In our opinion, subsection 80(7) creates a compulsory obligation to pay:

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 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.