The Appeal CommissionThe Workers Compensation Act of Manitoba

Preamble

The employer is appealing decisions made by the Workers Compensation Board ("WCB") that it violated Section 15 of The Workers Compensation Act (the "Act") and that the overpayment made on the worker's claim was not recoverable. A hearing was held on June 11, 2013 to consider these matters.

Issue

Whether or not there has been a violation of section 15 of the Act; and

Whether or not the overpayment of $1,785.22 is recoverable.

Decision

That there has not been a violation of section 15 of the Act; and

That the overpayment of $1,785.22 is not recoverable.

Decision: Unanimous

Background

The worker has an accepted claim with the WCB for a back injury that he sustained in the workplace on August 20, 2009. Wage loss benefits were paid to the worker via an "Employer Pay Account" which meant that during the period of work-related disability, the employer directly paid the worker all wages due to him and then the employer requested reimbursement from the WCB for the legislated portion under the Act.

On March 9, 2010, the WCB's Review Office considered an appeal submission made by the employer as to the worker's entitlement to wage loss benefits for the period August 22 to September 12, 2009 and November 9 to November 23, 2009. On March 9, 2010, Review Office determined that the worker's absence from work was not caused by his compensable injury and therefore he was not entitled to wage loss benefits from August 31 to September 12, 2009 and for the November time period. As a result of the decision, it was determined by the WCB that the worker had been overpaid benefits in the amount of $1,785.22.

On July 7, 2010, the employer was advised that based on WCB Policy 35.40.50, Overpayment of Benefits, no collection efforts would be made to collect the $1,785.22 overpayment as the overpayment resulted from an adjudicative reversal.

File records showed that when Review Office determined the worker's absence was not attributable to his work injury, the employer deducted sick days from the worker for the days he missed from work related to the overpayment period. The WCB viewed this action as being outside of WCB Policy 35.40.50, Overpayment of Benefits, and determined that the employer violated Section 15 of the Act. The decision was appealed by the employer to the WCB's Assessment Committee.

On March 23, 2011, the Assessment Committee determined that: "…if by June 30, 2011, [the employer] can demonstrate they have reinstated the claimants net workers earnings equal to the WCB's wage loss entitlement level (90% of net) and has repaid to the Workers Compensation Board of Manitoba the total overpayment of $1,785.22 less the amount reimbursed to the claimant, the application of Section 15 of the act will not be administered."

The Assessment Committee stated that a worker cannot suffer financial hardship due to an overpayment based on WCB Policy 35.40.50. The employer's decision to apply sick leave credits against the worker at 75% of gross for the overpayment period constituted financial hardship. By reinstating the worker's employment earnings equal to that of WCB wage loss benefit levels and repaying the balance of the total overpayment, no financial hardship would exist as the employer would not be deducting from the worker's wages and section 15 of the Act would not apply.

On June 22, 2011, the employer appealed the Assessment Committee's decision to the Appeal Commission and a hearing was held on November 15, 2011. The hearing was adjourned as the employer raised an issue that had not been previously considered by Review Office, i.e. the WCB decision of July 7, 2010 that no collection efforts of the overpayment would be made. There was also confusion at the hearing as to the effect of reducing the worker's vacation time versus reduction of the worker's sick leave credits. The Appeal Commission asked the WCB's legal services branch to clarify its position on this issue. On November 29, 2011, legal services clarified that the issue of sick leave versus vacation time made no difference to the WCB's position. Both were considered earned benefits and both were part of the remuneration package given by the employer to the employee. It was the WCB's position that sick leave equally fell within the meaning of the term "wages."

On January 18, 2012, the employer appealed the adjudicative decision of July 7, 2010 and submitted that WCB policy 35.40.50 allowed the collection of the overpayment under section 4 (ii) of the Overpayment Recovery Criteria and Appendix "A" Policy Terminology. The submission stated:

[The worker] is a union member…The collective agreement entitles their member to paid sick leave. The sick leave is accumulated as per years of service and covers wage loss for non occupational illness. Upon receipt of the decision from the WCB Review Office dated March 31, 2012, (sic) [the employer] transferred the benefits to his sick leave as per the terms of the collective agreement.

We submit that the worker is in receipt of duplication of benefits as per Board policy. We request that the decision to not pursue the overpayment be reversed. If successful in our appeal, the employer is prepared to forward a cheque in the amount of $1,785.22 to cover the total of the overpayment.

After considering the employer's submission, on May 4, 2012 the WCB case manager determined that the use of sick or vacation credits would be considered as "wages" and as such the exception to the overpayment recovery criteria contained in section 4 (ii) noted above would not apply. Based on these findings, the case manager indicated that no change would be made to the previous decision of July 7, 2010.

On August 13, 2012, the employer appealed the May 4, 2012 decision to Review Office. The employer referred to Section 15 of the Act and stated:

From the decision, it flowed that the Collective Agreement covered the terms of the worker's ability to receive benefits from the accumulated "sick leave" bank as per the ordinary words of the collective agreement. The sick leave credits form a part of the employer's disability insurance program. As such we submit that as insurance type benefits, section 4 of the Overpayment Recovery Criteria applies. We submit that the Board should not suspend an overpayment of benefits as per the decision dated July 7, 2010.

On October 24, 2012 Review Office decided that the overpayment to the worker in the amount of $1,785.22 was not recoverable. Review Office felt that the employer was attempting to circumvent the process established in WCB policy, which indicated that overpayments arising from an adjudicative process reversal or reconsideration will not be pursued for recovery. In allowing the employer to make compensation payments to their workers on behalf of the WCB as an Employer Pay Account, the board intended for their workers to be treated like any other workers who receive direct payment from the WCB. In Review Office's opinion, the worker's overpayment did not represent a duplication of benefits paid from another source, as had been suggested by the employer. In November 2012, the employer appealed Review Office's decision to the Appeal Commission and the November 2011 hearing was reconvened to consider this issue as well as the employer's earlier appeal. The two appeals were heard on June 11, 2013.

Reasons

Applicable Legislation and Policy

The Appeal Commission and its panels are bound by the Act, regulations and policies of the Board of Directors.

Section 15 of the Act provides as follows:

15 No deduction from wages by employer, or contribution by workers

Except as provided in this Act, an employer shall not, either directly or indirectly, deduct from the wages of his worker any part of any sum that the employer is or may become liable to pay into the accident fund or otherwise under this Part, or require or permit any of his workers to contribute in any manner towards indemnifying the employer against any liability that he has incurred or may incur under this Part.

WCB Policy 35.40.50, Overpayments of Benefits, (the "Overpayments Policy") describes the principles that the Board of Directors has established to guide the WCB in its recovery of overpayments to claimants. The principles attempt to strike a fair balance between the WCB's fiscal responsibilities and the interests of injured workers.

The relevant portions of the Overpayments Policy are as follows:

Overpayment Recovery Criteria

3. All overpayments receivable will be pursued for recovery, unless:

(i) they resulted from an adjudicative reversal or a reconsideration decision by the WCB, or from a decision of the Appeal Commission;

…

4. 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.

Analysis

There are two issues before the panel in this appeal. Both issues concern the question of whether or not the employer can adjust the record so that the days for which the worker's entitlement to WCB benefits were reversed (August 31 to September 12, 2009 and November 9 to 23, 2009) are charged against the worker's accumulated sick leave credits.

The reconvened hearing was held on June 11, 2013. Appearing on behalf of the employer were two representatives who participated by teleconference. Although the worker appeared at the first hearing convened on November 15, 2011, he did not participate in the June 2013 proceeding.

At the hearing, the employer's representative very helpfully outlined the course of events in simple terms, which may be summarized as follows:

• The worker suffered an injury in August of 2009. By August 28, 2009, his chiropractic caregiver provided clearance for him to return to his regular duties.
• On August 31, 2009, the worker advised he had a relapse due to some activity at home. He was again absent from work until his chiropractor cleared him to return to his regular duties on September 12, 2009.
• In November of 2009, the worker indicated he had lower back pain. He was off work again from November 9 to 23, 2009.
• The worker was paid WCB benefits for all of these absences from work.
• The employer appealed the worker's entitlement to WCB benefits and the decision was reversed so that entitlement was not allowed for the period August 31 to September 12, 2009 and November 9 to 23, 2009.
• In the meantime, the employer paid the worker 100 percent of his wages for both periods of time. The employer paid the worker 90 percent of his net wages, as per the Act, and 10 percent top-up, as per the collective bargaining agreement.
• The employer paid the 90 percent as agent of the WCB. In turn, the employer then sent a statement to the WCB to set out the amounts which were paid to the worker and the WCB reimbursed the employer for these amounts.
• When the Review Office determined that the worker was not entitled to WCB benefits, the employer retroactively adjusted the worker's payroll as follows:
• The employer deducted the WCB entitlement of $1,785.22 from the worker's paycheque;
• In the same pay period, the employer paid the worker $1,609.03, which represented the sick leave benefits he was entitled to under the collective bargaining agreement for non-occupational disability;
• The employer deducted the time absent from work from the worker's accumulated sick leave credits.
• The employer had received reimbursement from the WCB in the amount of $1,785.22. The employer sought to return the reimbursement to the WCB but the WCB refused to take the money back.

We will address each appealed issue separately in the order they were addressed at the hearing.

1. Whether or not the overpayment of $1,785.22 is recoverable.

Determination of this issue requires the panel to interpret the provisions of the Overpayments Policy. In order for the employer's appeal to succeed, we must find that the terms of the Overpayments Policy permit the overpayment to be collected from the worker based on the specific facts of this case. We are not able to make that finding.

The employer's position was that section 4(ii) of the Overpayments Policy applied to the present case. It was submitted that the worker was in receipt of duplicate benefits. By not allowing the employer to recover the sick credits, the worker would end up with additional sick credits that he would be able to take at another time. The sick credits were benefits that the worker would still be able to receive.

The employer referred to Appendix A of the Overpayments Policy which clarified policy terminology and provided as follows:

Duplicate benefits from another source for the same injury may include payments from sources such as:

· Employment insurance,

· CPP disability benefits,

· Employer or personal disability insurance plans.

The key concept to be considered is the WCB's goal to avoid layering workers' compensation benefits on top of other benefits to create a situation where the worker is receiving cumulative benefits greater than the amount of the financial loss incurred as a result of the compensable injury.

The employer submitted that the sick credits were benefits provided to the worker under an employer disability insurance plan, within the meaning of Appendix A of the Overpayments Policy. The sick credits were not part of a remuneration package from the employer as there was no cash value to the sick credits. They could only be "cashable" if the worker suffered a non-work related injury. The sick credits did not have any independent monetary value. They were an insurance product available to the worker. Upon the end of the employment, the collective bargaining agreement provided that all sick leave would be cancelled and no payment due therefore. The employer disagreed with the WCB's position that the sick credits were to be treated the same as vacation pay. Unlike with vacation credits, a worker could not request that money be paid out in lieu of taking the sick time. The sick credits could not be requested.

If the worker was allowed to retain his sick credits, as well as the WCB benefits, it was submitted that there would be a duplication of benefits, contrary to the intent of the Overpayments Policy. Therefore, the employer's position was that the overpayment amount should be recoverable, as per the terms of the policy.

The panel does not accept the employer's proposed interpretation of section 4(ii) of the Overpayments Policy. Section 4(ii) refers to duplication of benefits paid from another source for the same injury. In our opinion, the fact that the worker retained his sick leave credits does not constitute payment of duplicate benefits. The worker never received the sick leave pay ($1,609.03) and WCB benefits ($1,785.22) at the same time. If he was paid both, the panel may well have reached a different conclusion, but on the specific facts of this case, the worker was never in possession of both amounts at the same time.

We do not consider having the WCB overpayment of $1,785.22 and unclaimed sick leave credits at the same time to be a duplication of benefits. The employer's own submission was that the sick leave credits had no monetary value on their own. If the worker's employment ended, he could not cash in the credits nor take the credits with him. He could potentially use the sick leave credits at a future date, but even if the credits were utilized in this manner, they would not be a benefit paid for the same injury, as is required by the Overpayments Policy. They would be paid in respect of a different injury and therefore would not fall within the terms of section 4(ii).

As we have determined that section 4(ii) exception does not apply, we are left with section 3(i) which provides that overpayments resulting from an adjudicative reversal or reconsideration decision by the WCB will not be pursued for recovery. There is no other exception contained in the Overpayments Policy which would cause us to vary from the terms of section 3(i). Accordingly, we find that the overpayment of $1,785.22 is not recoverable. The employer's appeal on this issue is dismissed.

2. Whether or not there has been a violation of section 15 of The Workers Compensation Act.

This issue concerns whether the employer's actions in deducting the overpayment of $1,785.22 from the worker's paycheque and paying the worker $1,609.03 from his sick leave credits constitutes an offence under section 15 of the Act.

Prior to the first hearing scheduled in November 2011, the WCB provided the panel with a position paper on this issue. Initially, the position paper erroneously referred to "vacation time." WCB legal counsel clarified that she had intended to refer to sick time and not vacation time and that there was no difference to the WCB's position, which was stated as follows:

• Employers such as [the accident employer] are agents of the WCB with respect to the payment of compensation to injured workers. As such, the Overpayments Policy applies equally to situations where the WCB is paying the injured worker directly and when an employer is paying benefits to the injured worker on behalf of the WCB. The reference to "the WCB" in the Policy includes agents of the WCB.
• Reducing the worker's sick time to recoup an overpayment is contrary to section 15 of the Act. The word "wages" would include any part of the remuneration package given by the employer to the employee, and would include vacation pay or credits. Similarly, the phrase "any sum that the employer is or may become liable to pay into the accident fund" should be interpreted to include any costs of compensation which would have the possibility of affecting the employer's assessment. By reducing a worker's sick pay to recoup the cost of compensation paid to him, it was the WCB's position that the employer was deducting from the worker's wages part of the sum which the employer may be liable to pay to the WCB.

The employer's position was that there had not been a contravention of section 15 of the Act because the sick leave credits did not form part of the worker's wages. Sick leave was not included in the definition of "wages" under The Employment Standards Code of Manitoba, the Act or WCB Policy. It was particularly noted that sick credits were not included as average earnings under the Act or WCB Policy 44.80.10.10, Average Earnings. Sick credits were a benefit under the employer's disability insurance plan which had no monetary value. Payment of sick leave was for the sole purpose of protecting the employee against loss of income for absences from regularly scheduled hours of work. Sick leave credits did not become an entitlement or a right until an employee was absent from work due to a legitimate illness.

The overpayment which was paid to the worker is an amount which was removed from the employer's cost experience record, regardless of the eventual disposition of the overpayment. The cost was written off and was shared collectively by all employers in Class E. It was therefore submitted that there was no direct relationship between the overpayment and the employer's liability. The employer was not charged with the costs of the workplace accident. The conclusion was that the employer did not deduct any wages from the worker to meet any of its responsibilities under the Act to pay into the Accident Fund.

After carefully considering the facts and the wording of section 15 of the Act, the panel finds that there has not been a contravention of section 15. While the employer's submission addressed the issue of whether or not sick credits form part of the wages of a worker, the panel feels that the problem was not solely the fact that the sick credits were used, but rather the problem arose when the employer unilaterally decided to deduct the $1,785.22 from the worker's paycheque.

In making our decision, the panel focused on the wording of section 15 which refers to deduction of "any part of any sum that the employer is or may become liable to pay into the accident fund or otherwise under this Part." We find that the $1,785.22 which the employer deducted from the worker's wages had no significant relationship to the employer's liability to pay under the Act. The employer's experience rating was not affected by the worker's claim, as section 13 of the Overpayments Policy provides that for the general body of Class "E" employers (of which the employer is a member), overpayments are removed from an employer's cost experience record, regardless of the eventual disposition of the overpayment. The cost of the written-off unrecovered overpayment is shared collectively by all employers in Class "E". While it could be argued that there would be some residual liability on the employer as a contributing member of Class "E", the panel feels that this would be as small and indirect as to be almost negligible. We do not feel that the overpayment resulted in the employer incurring any significant liability to pay the WCB in the way of assessments, fines and/or penalties, such as would invoke the provisions of section 15. The panel therefore does not feel that there has been a violation of the provisions of section 15.

This is not to say that the panel is not critical of the manner in which the employer has conducted itself. In our opinion, the employer has acted outside of its authority as an agent of the WCB and has completely ignored the express direction of its principal (i.e. the WCB) to pay the money entrusted to them in the manner directed. The WCB's instructions to the employer were to pay the 90% to the worker for the August 31 to September 12, 2009 and November 9 to November 23, 2009 pay periods. The WCB never directed the employer to retract these amounts after the Review Office reversed the adjudication and made a retrospective determination of non-occupational injury. The collective bargaining agreement may have required the employer to charge these time periods to the worker's sick credits and pay the worker according to his accumulated sick leave entitlement, but that would be an obligation outside of the Act. The requirements under the collective bargaining agreement certainly would not vest the employer with the authority to deduct the $1,785.22 pursuant to its agency with the WCB. Section 14 of the Act specifically forbids a worker to agree with an employer to contract out of benefits under the Act and every agreement to that end is void. The collective bargaining agreement cannot be relied upon by the employer as authority to make such a deduction.

For the foregoing reasons, the panel determines that there has not been a violation of section 15 of the Act. The employer's appeal on this issue is allowed.

Panel Members

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

Recording Secretary, B. Kosc

L. Choy - Presiding Officer

Signed at Winnipeg this 8th day of August, 2013