Decision #92/13 - Type: Workers Compensation
Preamble
The firm is appealing the decision made by the Workers Compensation Board ("WCB") with respect to its assessment premiums. A hearing was held on July 3, 2013 to consider the matter.Issue
Whether or not the firm's assessment premiums should be based on the WCB's current rate setting model.Decision
That the firm's assessment premiums should be based on the WCB's current rate setting model.Decision: Unanimous
Background
The appellant is appealing the Assessment Rate Model used by the WCB to calculate its assessment premiums. In a submission to the WCB's Assessment Committee dated January 28, 2013, the appellant stated, in part:
"The basis of our appeal is that the current rate setting model fails to consider the growth in our total payroll year over year, and this is resulting in our firm paying cumulative premiums that exceed the actual cost of our claims experience by more than two times. We are requesting that WCB amend our assessment rating retroactively and going forward…"
On February 12, 2013, the Assessment Committee determined that the rate of assessment would remain as calculated by the assessment rate model that was adopted by the WCB. The Assessment Committee stated:
"The Assessment Rate Model is applied to all firms in a fair manner. This means that each firm's rate is calculated by the rate model given the firm's specific circumstances (industry classification, claims experience, etc.). It should be noted, that your current and previous rates of Assessment, and the resulting assessment premiums, were significantly influenced by your firm's own claims experience. Had your firm's claims experience been more favourable (fewer claims costs); it is likely that your 2013 rate of assessment and assessment premiums would be lower than what is currently in place today.
The Assessment Committee is obligated to follow legislation and policies that govern the WCB. The Assessment Committee concluded the assessment rate model was applied to your firm without influence or bias as directed in Policy 31.05.05 Rating Setting for the General Body of Employers (Employers in Class E). There is no clause in the Workers Compensation Act or the regulations and/or policies that would justify overturning the Board of Directors approval of the rate model given their jurisdiction in this matter. Consequently, it is the Assessment Committee's opinion that your firm's rate of assessment remains as calculated by the assessment rate model."
On March 25, 2013, the appellant appealed the Assessment Committee's decision to the Appeal Commission and a hearing was arranged. On June 24, 2013, the appellant provided the appeal panel with a written submission.
Reasons
Applicable Legislation and Policy
In considering appeals, the Appeal Commission and its panels are bound by The Workers Compensation Act (the "Act"), regulations and policies of the Board of Directors.
The firm is appealing the application of the WCB Assessment Model to its annual assessment. The Board of Directors enacted WCB Policy 31.05.05, Rate Setting for the General Body of Employers (Employers in Class E). The policy purpose provides that "The WCB uses a rate setting model to determine the assessment rate for each Class E employer. The purpose of the assessment rate model is to fairly apportion the revenue requirements among Class E employers. The purpose of this policy is to establish the principles and describe the features of the rate setting model when calculating the assessment rate paid by an employer in Class E annually."
Employer's Position
The employer was represented by its president who explained his concern about the manner in which the rate setting model affects the employer. In a written submission, the president advised that:
"…The basis of our appeal is that the current WCB Rate Setting Model fails to consider the exceptional growth in our total payroll, year over year, and this results in our firm paying cumulative premiums that exceed the actual costs of our claims experience by almost three times.
We are requesting that WCB amend our assessment rate retroactively and going forward. We would request a refund for excess premiums paid to date and an adjustment to the rate going forward. We understand that WCB needs to recover the costs of claims and the cost to administer claims."
The president advised that the rate setting model has unintentionally recovered from the employer excessive premiums because the employer's payroll has increased at a rate much higher than allowed for in the model. The president provided worksheets with historic assessment, payroll and claim costs, and projected future costs and assessments.
The president noted that WCB Policy 31.05.05 provides that the assessment rate model is to "Be fair" and "avoid significant financial hardship for any one employer."
The president answered questions asked by the panel.
Analysis
The issue before the panel is whether the firm's assessment premiums should be based on the WCB's current rate setting model. In dealing with this appeal, the panel notes the following provisions of the Act are applicable:
- Subsection 60(1) of the Act which provides that the board has exclusive jurisdiction in determining all matters and questions under the Part 1 of the Act. Part 1 deals with all matters related to assessment.
- Subsection 60.8(6) of the Act which states "The appeal commission is bound by the policies of the Board of Directors."
The panel notes that the Board of Directors made WCB Policy 31.05.05. This policy includes the following provisions:
"A. POLICY
1. Collective and Individual Liability
The WCB rate setting model reflects both collective liability and individual liability when setting assessment rates for Class E employers. Under collective liability, the cost of compensation is spread among a pool of employers who are jointly responsible for the costs of the compensation system. Under a system of pure collective liability, each employer in the group would pay the same assessment rate and receive no direct financial incentive to promote prevention or disability management. Under a system of pure individual liability, an employer would pay the full amount of the costs it incurs and be exposed to financial costs that might impact its ability to stay in business. The WCB rate setting model incorporates elements of both collective and individual liability. It provides financial incentives for prevention and disability management and, at the same time, provides the employer with some financial protection. It responds fairly to both collective and individual liability in setting an employer’s annual assessment rate.
2. Experience Rating
The WCB rate model fairly applies the principles of collective and individual liability and apportions the costs of the compensation system for Class E employers through experience rating. In general, an employer’s experience rating is based on:
a. The employer’s experience, which is the cost of its claims in relation to its payroll size;
b. The employer’s claims cost experience, which is its costs (expressed in dollars) to the compensation system during the assessment period; and
c. The comparison between an employer’s claims cost experience and the average an (sic) employer with like payroll size.
3. Rate Setting
The Board of Directors each year approves the average rate for the general pool of employers in Class E. The average rate is derived by dividing the projected revenue requirement by projected payroll (for all Class E employers) and multiplying the result by 100. The average assessment rate for all Class E employers is expressed as a specific dollar amount per $100 of assessable payroll.
An employer’s assessment rate will be set using the average rate plus other measures in the model. These other measures include the calculation of an employer’s target rate, the rate category assigned to a firm, the annual rate limits set for each rate category, the Cost, Price and Prediction Indices, and, where applicable, the added costs of fatalities and safety program charges. The rate setting process will include an initial restatement and a final balancing adjustment in the assessment rate of each individual employer. These measures and the rationale for their application are described below."
The employer is appealing the application of the rate setting model to its annual assessment. For the employer's appeal to be successful, the panel must find that the Appeal Commission has the jurisdiction to amend, adjust or suspend the operation of the rate setting model for individual employers.
The panel finds that it does not have jurisdiction to amend, alter or suspend the application of the rate setting model to individual employers. The panel finds that the rate setting model exists as a policy of the Board of Directors and that only the Board of Directors has jurisdiction to make adjustments to the Policy. As the Appeal Commission and its panels are bound by the policies of the Board of Directors, the panel cannot provide the relief requested by the employer.
The panel's decision does not mean that the Appeal Commission cannot deal with appeals regarding the assessment paid by individual employers. Appeals on classification of employers, payroll calculations, association of employers, etc., are all within the jurisdiction granted to the Appeal Commission. However, a request that the rate setting model itself be amended or set aside cannot be addressed by the Appeal Commission.
Panel Members
A. Scramstad, Presiding OfficerA. Finkel, Commissioner
P. Walker, Commissioner
Recording Secretary, B. Kosc
A. Scramstad - Presiding Officer
Signed at Winnipeg this 24th day of July, 2013