Decision #104/22 - Type: Workers Compensation
Preamble
The employer is appealing the decision made by the Workers Compensation Board ("WCB") that the employer was not entitled to relief of the penalty imposed for the late reporting of payroll information. A file review was held on September 14, 2022 to consider the employer's appeal.
Issue
Whether or not the firm is entitled to relief of the penalty imposed for the late reporting of payroll information.
Decision
The firm is not entitled to relief of the penalty imposed for the late reporting of payroll information.
Background
On March 3, 2022, WCB’s Assessment Services provided the firm with a notice that their annual payroll information due on February 28, 2022 had not been received, and therefore the account was in default and a penalty would be assessed. The firm submitted the requested information to the WCB on March 28, 2022 and the WCB assessed a late filing penalty pursuant to the provisions of The Workers Compensation Act (the “Act”).
On April 13, 2022, the firm contacted the WCB requesting waiver of the late penalty fee assessed as the firm had staffing changes within their accounting team that prevented the filing of the annual payroll information on time.
The WCB's Assessment Services advised the firm on May 13, 2022 that a review of their account had been undertaken and it had determined the firm was not entitled to relief from the late filing penalty as they did not meet the requirements under the WCB's policy. The firm’s explanation provided for the late filing did not meet the definition of "beyond the employer's control" as required for 100% relief of the penalty, and further, the firm did not meet the criteria for 50% relief as they had been penalized previously for filing their annual payroll information late.
The firm filed an Employer Request for Reconsideration with the WCB on May 16, 2022. In their request, the firm noted a change in staff had resulted in the late filing of the annual returns and noted that with new personnel in place, it would not happen again.
On June 1, 2022, the Reconsideration Committee met and determined the firm was not entitled to relief of the penalty imposed for the late reporting of payroll information. The Committee noted it was bound by WCB legislation, polices and administrative guidelines and found that the firm had not provided evidence to support the late filing of the payroll information was due to reasons beyond their control. Further, the Committee noted the firm had been noted in default in the previous year due to late filing and as such, did not meet the criteria for 50% penalty relief.
The firm filed an appeal with the Appeal Commission on June 3, 2022 and a file review was arranged.
Reasons
Applicable Legislation and Policy
The Appeal Commission and this panel are bound by the Act, regulations made under that Act and the policies established by the Workers Compensation Board of Directors.
Section 80 of the Act requires employers covered by the Act to furnish the WCB with an estimate of their payroll for the following year and at the close of the year furnish certified copies of the payroll, as well as providing for penalties where employers fail to do so, as follows:
Payroll estimates and certified copies of payroll
80(1) Within 30 days after becoming an employer, and on or before the last day of February in each year after that, an employer must provide the board with
(a) a certified copy of the employer's payroll for the preceding year, if any, for each undertaking in an industry to which this Part applies; and
(b) the employer's estimate of the amount of the payroll for the current year for each undertaking in an industry to which this Part applies, along with any other information the board requires for
(i) assigning the employer or undertaking to a class, sub-class, group or sub-group, and
(ii) making an assessment under this Act.
Late filing penalty
80(1.1) An employer who fails to comply with subsection (1) is liable to pay a penalty equal to the following percentage of the employer's assessment for that year (determined without reference to this penalty):
(a) 5%, if the failure continues for a period of 61 days or less;
(b) 10%, if the failure continues for a period of more than 61 days.
Notice and payment of penalty
80(1.2) The board may notify the employer of the penalty in the notice of assessment provided to the employer under section 81. The penalty is due and payable at the time set out in the notice of assessment for the payment of the assessment.
Waiver of penalty
80(1.3) The board may reduce or waive, in accordance with its policies, any penalty imposed by subsection (1.1).
The WCB has established Policy 35.05.10, Reporting and Verifying Payroll (the “Policy”) to describe the process for employers to follow when reporting payroll and the consequences of late reporting, failing to report, and inaccurate reporting of payroll. The Policy provides as follows for how and when penalties are assessed against employers for late reporting of workers’ payroll:
Employers in mandatory industries are required to advise the WCB when they begin employing workers. If they do not advise the WCB within the prescribed time, a late reporting penalty will be applied to their account for each calendar year workers were employed. Employers in mandatory industries as well as employers in optional industries who have elected optional coverage are required to report workers' payroll annually. If they do not provide their payroll information by the prescribed date, a late reporting penalty will be applied to their account.
Late reporting penalty amounts are based on the employer's premium and are prescribed by Regulation. Penalties will not be adjusted for subsequent variations to the employer's payroll.
The Administrative Guidelines to the Policy outline a process for employers to obtain relief from such penalties, as follows:
Relief of Late/Non Reporting/Filing Penalties
New or reactivated Assessment Accounts will only be eligible for relief if the WCB made an administrative error that was the direct result of them not having registered within the prescribed timeline.
For existing Assessment Accounts, the WCB will reverse 50% of the employer's late/non reporting/filing penalty if the employer meets all three of the following criteria:
1. The employer submitted their payroll information within 60 calendar days of the due date.
2. The employer does not have a prior history of default.
• Assessment Accounts with any late/non reporting/filing penalty or late payment interest charged to their Assessment Account in the two prior calendar years are considered to have a history of default. If any of these penalties or interest were reversed entirely, they should not be considered part of the history of default.
3. The employer has cooperated fully with the WCB.
• The Assessment Account is in good standing with the WCB at the time of the request for reconsideration.
• If this is the only criteria the Assessment Account has failed to meet to obtain 50% relief of their late/non reporting/filing penalty, the employer may have their request for reconsideration reviewed once their Assessment Account is in good standing.
If 50% relief is provided and the remaining late/non reporting/filing penalty is less than $5.00, the entire penalty will be reversed.
For existing Assessment Accounts, the WCB will waive 100% of the employer's late/non reporting/filing penalty if the employer meets both of the following criteria:
1. The employer submitted their payroll information within 60 calendar days of the due date.
2. The cause or reason for the delay was beyond the control of the employer. This would include:
• The death or serious illness of an employee, an owner, or a family member of the owner(s) of the business.
• A natural disaster (e.g., flood or fire), where the employer has been directly impacted.
• A technical problem encountered when submitting the APF, provided the employer can provide proof (e.g., fax confirmation, copy of email, etc.) that their submission was made on or before the deadline.
Appellant’s Position
The appellant firm’s position is outlined in the Appeal of Employer Account Decision Form provided to the Appeal Commission, dated June 3, 2022 which states that the late filing penalty should be waived as the appellant firm was in the midst of a staffing change at the time the payroll information was to have been submitted to the WCB. The employer set out that there was
“…a gap in transition when the old staff left & the new staff arrived. Resulting in delays in fulfilling our filing & payment requirements….COVID significantly impacted replacing the staff that left with the new staff that took over this. It took about 2-3 months to get the replacements. Also, the new staff had to learn & understand where to gather the data for WCB since there wasn’t a proper handover prior to taking up the positions.”
The position of the appellant firm is further set out in the Employer Request for Reconsideration, submitted to the WCB on May 16, 2022. In that Request, the firm’s representative set out that:
“We sent a letter dated APR 13/22 inquiring that the Annual Payroll Late Filing Penalty charge of $606.00 be waived. We experienced a turnover in staff so filing the annual returns on time was unfortunately neglected. Since I am now overseeing this task, going forward this will not happen again.”
For these reasons, the appellant firm submits that the appeal should be granted, and the firm should be entitled to relief of the penalty imposed for the late reporting of payroll information.
Analysis
The employer firm has appealed the WCB’s determination that they are required to pay a late filing penalty in respect of reporting the employer’s 2021 actual and 2022 anticipated payroll amounts. For the appeal to succeed the panel would have to determine that the WCB erred in finding that the firm was not entitled to relief from the penalty assessed against the employer firm contrary to the provisions of the Act, regulations and WCB Policy. As outlined in the reasons that follow, the panel was not to make such a finding and the appeal is therefore denied.
The Act clearly sets out the requirement that employers provide the WCB with the required payroll information within 30 days after becoming an employer, and on or before the last day of February in each year after that. Where an employer fails to comply with this requirement, a penalty is imposed as outlined in s 80(1.1) of the Act.
The Policy explains that the reason why employers are required to report their payroll information to the WCB for the calculation of premiums for coverage for workplace injuries and illnesses is that the sound financial management of the workers compensation system depends on employers submitting accurate business and payroll information to the WCB.
Section 80(1.3) of the Act permits but does not require the WCB to relieve or waive any administrative penalty imposed for late reporting by an employer of their required payroll information. As outlined above, the Policy outlines the process for employers to follow when reporting payroll and the consequences of late reporting, failing to report, and inaccurate reporting of payroll. The panel is satisfied that the Policy provisions are consistent with the legislative provisions of s 80(1.3) of the Act which outlines that the WCB “may reduce or waive, in accordance with its policies, any penalty imposed” under s 80(1.1). The Act does not provide any guidance in terms of when such reductions or waivers may be applied but authorizes the WCB to take such action in accordance with its policies. The question before the panel therefore is whether the WCB has determined the employer firm’s request for a waiver or reduction in penalty in accordance with the applicable Policy.
Although not binding upon the panel, the panel considered that the WCB has also established Administrative Guidelines to the Policy setting out the specific circumstances when a penalty ought to be waived or relieved. These Administrative Guidelines are described as being “intended to provide clarity and direction to ensure consistent administrative application of the” Policy and as such, the panel considered whether the WCB applied the Policy in a manner consistent with the Administrative Guidelines.
The undisputed evidence before the panel indicates that for 2022, the employer firm was required to submit its payroll information to the WCB by no later than February 28, 2022, and that on March 3, 2022, WCB’s Assessment Services provided the firm with a notice that their annual payroll information due on February 28, 2022 had not been received, and therefore the account was in default and a penalty would be assessed. The evidence before the panel confirms that the employer firm provided the required payroll information to the WCB on March 28, 2022 at which time a penalty was assessed against the firm. On April 21, 2022 the employer requested that the WCB waive the late filing penalty and the WCB subsequently initiated a review of the firm’s eligibility for a waiver of the penalty. On May 12, 2022 the WCB determined the employer firm was not eligible for a reversal of the penalty as the employer received a late payment interest fee on April 9, 2021 which is within 24 months of the date of the assessment of the late filing penalty.
The appellant firm takes the position that the penalty should be waived, or relief provided as the firm’s lack of compliance with the statutory filing requirement was due to a turnover in staffing which resulted in the short term, in the absence of any staff person responsible for these duties, and the resulting neglect of the employer’s obligation to provide the payroll information required by February 28, 2022. The panel therefore considered whether the appellant firm’s explanation for the delay in providing its payroll information meets the criteria for waiver of a penalty as set forth in the Administrative Guidelines to the Policy.
For a complete waiver of penalty, the Administrative Guidelines set out that the information must be submitted within 60 calendar days of the due date, and that the cause or reason for the delay was beyond the control of the employer, with specific examples provided as including death or serious illness of an employee, an owner, or a family member of the owner of the business, a natural disaster that has directly impacted the employer firm or a technical problem encountered upon submission made on or before the deadline. While the evidence supports that the employer firm rectified its non-compliance within 60 days of the due date, the panel does not find that the cause or reason for the delay was “beyond the control of the employer” as required by the Guidelines. We do not find a staffing turnover in a firm to be an out of the ordinary kind of event in the life of a business, such as in the examples of a cause or reason for delay that is beyond the control of the employer, as outlined in the Administrative Guidelines. We find that staffing levels, even during a global pandemic, are within the control of an employer. Where there are vacancies, the employer has the option to reassign certain duties to other staff members or take such other steps as are necessary to ensure that the firm meets its statutory obligations.
The panel also considered whether the employer firm is eligible for 50% relief from the penalty assessed. For such relief to be provided, the Administrative Guidelines set out three criteria that must be satisfied. First, the employer must have submitted their payroll information within 60 calendar days of the due date. Second, the employer cannot have a prior history of default which is defined as “any late/non reporting/filing penalty or late payment interest charged to their Assessment Account in the two prior calendar years”. Thirdly, the employer must have cooperated fully with the WCB. In the case before us, the panel is satisfied that the evidence confirms the employer has met the first and third criteria; however, the evidence also confirms that the employer had a prior history of default. Specifically, the file evidence confirms that the employer firm was late in filing an account payment in 2021 and that a penalty was assessed against the employer in this regard as of April 21, 2021. As such, the panel finds the second criterion is not met. Therefore, under the provisions of the Administrative Guidelines to the Policy, the employer is not entitled to partial relief from the late filing penalty assessed.
On reviewing the evidence contained in the appellant firm’s WCB account file, the panel is satisfied that in this case, the WCB did not err in applying the Policy and did so in a manner consistent with the Administrative Guidelines and in compliance with the Act. We find no reason to depart from the WCB’s interpretation and application of the Policy in respect of the provisions of the Act permitting the WCB to “reduce or waive, in accordance with its policies, any penalty imposed”. Therefore, on the basis of the evidence before us and on the standard of a balance of probability, the panel is satisfied that the firm is not entitled to relief of the penalty imposed for the late reporting of payroll information. The employer firm’s appeal is denied.
Panel Members
K. Dyck, Presiding Officer
J. Peterson, Commissioner
M. Kernaghan, Commissioner
Recording Secretary, J. Lee
K. Dyck - Presiding Officer
(on behalf of the panel)
Signed at Winnipeg this 7th day of October, 2022