The Appeal CommissionThe Workers Compensation Act of Manitoba

Preamble

The appellant firm is appealing the decision made by the Workers Compensation Board ("WCB") that they are not entitled to reimbursement of overcharged premiums due to unfair burden pursuant to the provisions of The Workers Compensation Act and Schedule H of WCB Policy 31.05.10 Cost Relief/Cost Transfer. A videoconference hearing was held on November 22, 2022 to consider the firm's appeal.

Issue

Whether or not the firm is entitled to reimbursement of overcharged premiums due to unfair burden pursuant to the provisions of The Workers Compensation Act and Schedule H of WCB Policy 31.05.10 Cost Relief/Cost Transfer.

Decision

The firm is not entitled to reimbursement of overcharged premiums due to unfair burden pursuant to the provisions of The Workers Compensation Act and Schedule H of WCB Policy 31.05.10 Cost Relief/Cost Transfer.

Background

The firm has previously appealed a decision of the Reconsideration Committee that The Workers Compensation Act (the "Act") and WCB policies did not allow the firm's current and previous years' assessments to be recalculated based on the combined value of cost relief granted on multiple claims, and that the Act and WCB Policies did not permit the inclusion of cost relief credits from outside the experience period when calculating the firm's subsequent assessment rates. On June 9, 2022, the Appeal Commission denied the firm's appeal pursuant to Appeal Commission Decision No. 62/22.

On June 13, 2022, the firm's advocate wrote to the WCB to request "…reallocation of the claim cost experience already recognized by the WCB as an unfair burden" on the firm "from individual firm responsibility to collective responsibility". The advocate noted that cost relief had already been granted to the firm for three WCB claims, but had not been removed from the firm's rate-setting experience, and represented "….real rate increases and resulting premium overpayments." The advocate went on to note that based on the current interpretation of policy, the firm was paying additional premium costs due to circumstances the WCB had already determined was an unfair burden on the firm.

The firm's advocate also noted that the panel in Appeal Commission Decision No. 62/22 commented that the firm had argued convincingly that the operation of the WCB policies in not applying the cost relief granted to the recalculation of the firm's prior assessments where below the threshold, and excluding the cost relief granted from consideration for future assessment where outside the experience period, created an unfair burden on the firm. The advocate submitted that the panel in Decision No. 62/22 noted that Schedule H to the WCB's Cost Relief Policy offered another mechanism whereby a firm might seek reallocation of their claim cost experience from individual firm responsibility to collective responsibility where the costs were determined to unfairly burden the firm, and that the firm might wish to explore that process.

On July 4, 2022, the WCB denied the firm's request. The WCB noted that Schedule H of the Cost Relief Policy set out a series of questions to help determine if an undue burden was present. The WCB addressed each of those questions and determined that "…the facts of these claims do not warrant cost relief for undue burden…."

On July 26, 2022, the firm's advocate filed an appeal with the Appeal Commission and a videoconference hearing was arranged for November 22, 2022.

Reasons

Applicable Legislation and Policy

The Appeal Commission and its panels are bound by The Workers Compensation Act (the "Act"), regulations made under the Act, and policies established by the WCB's Board of Directors.

The Act defines "accident fund" in section 1 as "…the fund provided for the payment of compensation, outlays, and expenses, under Part I of this Act." Section 73 of the Act provides for the continuation of the accident fund and provides for the establishment of classes of employer for the purpose of assessment. Class E Employers are defined in paragraph 73(2)(e) as "Employers in all industries in Manitoba not included in the above classes and not excluded by regulation under section 2.1."

Subsection 81(1) of the Act provides for annual assessments to be made to maintain the accident fund as follows:

Annual assessment for accident fund 

81(1) For the purpose of creating and maintaining an adequate accident fund, the board shall every year assess and levy upon and collect from the employers in each class by an assessment or by assessments made from time to time rated upon the payroll, or in such other manner as the board considers advisable or necessary, sufficient funds, according to an estimate to be made by the board in each year

(a) to meet the costs for the year, including administrative expenses, the future cost of claims, and changes in liabilities, so as to prevent employers in future years from being unduly burdened with the costs arising from accidents in previous years;

(b) to provide a stabilization fund to meet the costs arising from extraordinary events that would otherwise unfairly burden the employers in a class, sub-class, group, or sub-group in the year of the events;

(c) to provide a fund to meet the part of the cost of claims of workers that, in the opinion of the board, results from

(i) pre-existing or underlying conditions,

(ii) an occupational disease where the exposure to the probable cause of the injury occurs outside Manitoba,

(iii) a loss of earnings from an employment other than that of a worker's employer at the time of the accident,

(iv) an increase in benefits under subsection 40(5), 45(3) or 45(4), or

(v) such other circumstances as the board determines would unfairly burden a particular class, sub-class, group or sub-group, or employer….

Subsection 81(3) provides that the WCB may make assessments "…in such manner and form, and by such procedure, as the board may deem adequate and expedient…."

The authority for the WCB to establish assessment rates is set out in subsection 82(1) of the Act, which reads in part as follows:

Rates for kinds of employment in same class 

82(1) The board may establish rates of assessment among sub-classes, groups or sub-groups in the same class with such differences in rates among them as the board considers fair and just….

Subsections 82(2) and (3) of the Act permit the WCB to reduce or increase the amount of any assessment made upon an employer based on the employer's record and experience. Subsection 82(4) provides for the determination of an employer's experience, as follows:

Determination of experience 

82(4) In determining the record and experience of an employer, the board may

(a) exclude the cost of compensation awarded to the workers of the employer resulting from the negligence of another employer or the workers of another employer;

(b) include the cost of compensation awarded to the workers of another employer resulting from the negligence of the employer or the workers of the employer;

(c) deem the cost of any claim in which a worker dies in an accident to be an amount determined by the Board of Directors based on actuarial principles; or 

(d) exclude that portion of the cost of compensation awarded to the workers of the employer that, in the board's opinion, would unfairly burden a particular employer.

Subsection 82(8) of the Act also provides that the WCB "…may limit the time within which an employer, in respect of determinations made in previous years, may be reclassified, reassessed or entitled to a transfer of costs from the employer's record and experience."

The WCB's Board of Directors has established Policy 31.05.10, Cost Relief/Cost Transfer – Class E (the "Cost Relief Policy"), which provides a framework for the removal of claim costs from a Class E Employer's Claim Costs Experience and assignment of those costs to a collective cost pool (Cost Relief) and for the transfer of claim costs from a Class E Employer to another employer in Classes A to E (Cost Transfer). The Cost Relief Policy provides that the goal of Cost Relief and Cost Transfer is to ensure fairness and accountability for employers, and that to achieve this goal, the WCB may re-allocate claim costs to reflect collective or individual responsibility.

The Cost Relief Policy outlines the circumstances for Cost Relief or Cost Transfer, in part, as follows:

As described in the attached Schedules, Cost Relief or Cost Transfer may be provided to Class E Employers in the following circumstances:

• A claim is either primarily caused by a pre-existing condition or significantly prolonged by the pre-existing condition. See Schedule A – Pre-Existing Conditions. 

…. 

• The costs are determined to unfairly burden a Class E Employer. See Schedule H – Unfair Burden….

The Cost Relief Policy sets out a process for addressing Cost Relief and Cost Transfer, and provides in part that:

…the basic process for Cost Relief and Cost Transfer is as follows:

• Initially, all claim costs are charged to the Claim Costs Experience of the Accident Employer. 

• Based on information provided, the WCB considers and processes Cost Relief and Cost Transfers when the Class E Employer is eligible under this policy. 

• If Cost Relief is provided, the removed costs are charged to the Cost Apportionment Fund or the Work Experience Program Fund, as applicable. 

• If Cost Transfer is provided, the removed costs are transferred from one employer to another employer. 

• If Cost Relief or Cost Transfer is provided, this alters the Claim Costs Experience used to calculate the employer's assessment rate(s). 

• When Cost Relief or Cost Transfer affects an employer's future year(s) assessment rate, the revised Claim Costs Experience is used to calculate the employer's assessment rate(s). 

• When Cost Relief or Cost Transfer affects the Claim Costs Experience used to calculate an employer's assessment rate in the current year and/or prior years, the process is subject to a threshold set out in Appendix B of this policy along with a limit to the number of years assessment rates will be retroactively recalculated. 

• If the total Cost Relief or Cost Transfer credit is less than the threshold amount, the revised Claim Costs Experience is used to calculate the employer's future year(s) assessment rate. 

• Once the total Cost Relief or Cost Transfer credit reaches or exceeds the threshold amount, the WCB applies the Cost Relief or Cost Transfer for any Rate-Setting Year within the current Experience Period. The WCB will retroactively recalculate any applicable year's assessment rate…. 

(Emphasis in original)

Schedule H to the Cost Relief Policy provides for cost relief where costs are determined to unfairly burden a Class E Employer, and reads in part as follows:

SCHEDULE H

UNFAIR BURDEN

Under paragraph 82(4)(d) of the Act, where the WCB is of the opinion that claim costs could unfairly burden a Class E Employer, it may offer Cost Relief in respect of some or all of the claim costs.

Although the WCB exercises its authority under this subsection only in extraordinary circumstances, it is prudent to express when and how the WCB will consider requests for Cost Relief on the basis of unfair burden. …. An "unfair burden" is generally understood to mean having a substantial financial impact. Recognizing that the rate-setting model imposes financial limits on employer's assessment rates, there must be other compelling reasons or unusual or extraordinary situations an employer is facing before the WCB considers applying paragraph 82(4)(d). A burden is regarded as unfair when it imposes disadvantages other employers would not face in similar circumstances or when the impact is clearly unwarranted for the situation at hand.

In determining whether an employer is unfairly burdened by compensation costs awarded to workers of the employer, the WCB may consider a number of factors including:

• What effect will this claim have on the employer's assessment rates and over what period of time? 

• Will there be any additional financial effects other than the assessment rate? 

• What is the degree or magnitude of the financial burden? 

• Could the burden threaten the employer's viability? 

• Is the impact outside the realm of what was reasonably anticipated in the design of the rate-setting model? 

• Has the employer taken all reasonable steps to control its own costs by investing in injury prevention and disability management?

Appellant Firm's Position

The appellant firm was represented by an advocate who made an oral submission at the hearing on the firm's behalf and responded to questions from the panel. The advocate provided a written copy of his submission to the panel subsequent to the hearing, as well as a written submission in response to the WCB's written submission.

The appellant's position is that the firm is entitled to reimbursement of overcharged premiums due to unfair burden pursuant to the provisions of the Act and Schedule H of the Cost Relief Policy.

The appellant's advocate submitted that the firm successfully appealed for cost relief due to errors and omissions on the part of the WCB for claim costs deemed to unfairly burden the employer, and that these costs represent real rate and premium increases to the firm The advocate submitted that the WCB does not deny the fact that the firm has been overcharged, and in fact they acknowledge that they have been overcharged in their July 4, 2022 decision where they quantify the effect of the relieved costs of the firm's 2020 assessments.

The advocate noted that the WCB has granted cost relief on three claims (two from 2016 and one from 2018) due to claim costs that it has determined unfairly burdens the employer. While the WCB has already acknowledged that an unfair burden exists by providing cost relief on these claims due to pre-existing conditions, the WCB has refused to remove the unfair burden and reimburse the employer for the substantial premium overcharges associated with these claim costs. The advocate submitted that the WCB has erred in its application or administration of the Act and policies, resulting in financial harm to the employer, and must redress their errors by reimbursement of the excess premiums that were paid.

The advocate submitted that an accident fund is set up pursuant to subsection 81(1) of the Act and exists in part to fund the portion of the cost of claims of workers that unfairly burdens an employer. The advocate argued that the WCB's decision to not reimburse the employer for cost relief already granted forces the employer to meet these costs and shoulder the unfair burden, in direct violation of the Act.

The advocate further noted that the Cost Relief Policy also provides that if cost relief is provided, the removed costs are charged to the accident fund. It was submitted that if the amount of the cost relief is charged to the accident fund as per the Cost Relief Policy, and the firm is not reimbursed for these costs, the firm is also paying for these costs along with all other Class E employers who contribute to the accident fund. The WCB is therefore charging for these claim costs twice, and the appellant firm is being further penalized for the claim costs that already unfairly burden them.

The advocate submitted that in their July 4, 2022 decision, the WCB denied their request for the removal of this unfair burden as the amount of the overpayment was "considered minor". The advocate noted that the WCB estimated the cost relief granted represented a 3.6% increase to the employer's assessment for the year 2020. The advocate submitted that this percentage was incorrect and did not recognize the effect of the unfair burden on the firm's prior and subsequent years' rates.

The advocate stated that according to their calculations, the premium overpayment amounted to nearly $60,000 from 2019 to 2022, or approximately 21% of their 2022 total assessments. The advocate submitted that they considered this to be a major overpayment that had a substantial financial impact on the employer, and this impact was clearly unwarranted for the situation at hand.

The advocate submitted that this is an unusual situation as the unfair burden on the firm is caused by claim costs already deemed to be an unfair burden by the WCB, but due to a "gap" in policy as noted by the appeal panel in Decision No. 62/22, the WCB has not reimbursed the employer. The advocate noted that the firm had been forced to appeal to the WCB for cost relief, and obtained cost relief on the three claims in question based on pre-existing conditions, these conditions and the issues of cost relief having been missed by the WCB.

The advocate further noted that the three claims for which cost relief was granted had a greater impact on the firm's rates and assessment than a single claim which met the threshold in a given prior year would have. In the latter case, the WCB would reimburse the firm for the costs that would unfairly burden the firm, but the WCB has refused to reimburse the firm for the costs in question which would amount to a greater unfair burden and have a larger financial impact on the firm. The advocate submitted that the evidence and reasons provided in favour of the removal of this unfair burden are certainly compelling.

The advocate submitted that the WCB has foisted the unfair burden on the firm by its failure to properly apply the Act and its policies in the administration of these three claims. Cost relief should have been provided in the normal course of the administration of these claims and the relieved costs should never have been applied to the firm's rate-setting experience in the first place.

In conclusion, it was noted that the previous appeal panel decided that the employer is not eligible for rate recalculations due to their interpretation of policy, but suggested the firm pursue the removal of the unfair burden as contemplated by paragraph 82(4)(d) of the Act and Schedule H of the Cost Relief Policy. The advocate submitted that Schedule H of the Cost Relief Policy is discretionary, and as such affords greater leeway in making a determination. The advocate submitted that if this is the only avenue available to recoup the overpayment, the employer must be reimbursed for the unfair burden per Schedule H, otherwise the WCB is in violation of subsection 81(1) of the Act by not meeting the costs associated with the unfair burden through the accident fund and instead forcing the employer to meet these costs.

WCB's Position

The WCB provided a written submission in advance of the hearing, but did not otherwise participate in the appeal.

The WCB's position, as set out by its Director, Legal Policy and Corporate Services, was that there is no unfair burden present within the meaning of the Act and the Cost Relief Policy, and a retroactive adjustment in rates is not available in this case.

As a preliminary matter, it was noted that the WCB objected to the characterization of the issue under appeal as relating to "overcharged" premiums, on the basis that such characterization presupposed the premiums were overcharged, which was the issue under appeal.

It was submitted that the comments by the appeal panel in Decision No. 62/22 which were relied upon by the appellant firm in advancing its appeal were made in obiter and were difficult to reconcile with the panel's findings that the WCB correctly applied the Cost Relief Policy. It was noted that these remarks appeared to suggest that the proper and legitimate application of the provisions governing retroactive adjustments in the Cost Relief Policy may have, in and of itself, created an unfair burden for the firm as that concept is described in Schedule H of that Policy.

The Director noted that the provisions in the Cost Relief Policy governing retroactive adjustments are contemplated in paragraph 81(1)(a) and subsection 82(8) of the Act. It was noted that in exercising its discretion under subsection 82(8), the WCB made a policy decision to create a threshold and limit the number of years' assessment rates that will be retroactively recalculated, and that a monetary threshold was specified in Appendix B of the Cost Relief Policy.

The Director submitted that the limitations with respect to the number of years' assessment rates that will be retroactively recalculated and the monetary threshold with respect to reassessment were established in accordance with the Act and policies, and that such limitations serve an important purpose in the workers compensation system, where they reinforce finality in assessments, such that other employers are not negatively affected by the retroactive adjustments of a single employer.

With respect to the issue of unfair burden, the WCB submitted that as specified in Schedule H, cost relief for unfair burden is only available in extraordinary circumstances. Schedule H further clarifies that a burden is regarded as unfair when it imposes disadvantages other employers would not face in similar circumstances or when the impact is clearly unwarranted for the situation at hand.

It was noted that the Schedule sets out a series of questions that assist in determining whether an unfair burden is present. The WCB addressed each of these questions and determined, as outlined in their July 4, 2022 decision, that the criteria outlined in Schedule H were not met in this case. The WCB thus noted, among other things, that their calculations indicated that if the WCB were to ignore the threshold in the Policy, there would be a 3.6% difference in the firm's assessments, which was considered a very minor impact within the rate model. The WCB further noted that the impact was well within the realm of what was reasonably anticipated in the redesign of the rate-setting model, and that the WCB treats all Class E employers in the same manner as it has the appellant firm with regard to cost relief.

In conclusion, the Director submitted that the WCB followed the Act and the policies in this matter; that there was no unfair burden present; and that a retroactive adjustment in rates or reimbursement of premiums was not available in this case.

Analysis

The issue on appeal is whether or not the firm is entitled to reimbursement of overcharged premiums due to unfair burden pursuant to the provisions of the Act and the Cost Relief Policy. For the appeal to be successful, the panel must find that the WCB did not properly apply the relevant provisions of the Act and Schedule H of the Cost Relief Policy in relation to the reimbursement of premiums due to unfair burden. The panel is unable to make that finding, for the reasons that follow.

In Decision No. 62/22, the previous appeal panel considered the provisions of the Cost Relief Policy and WCB Policy 31.05.05, Rate-Setting Model for Class E Employers (the "Rate-Setting Policy"), which established a threshold for the recalculation of current year and prior years assessment rates and the time period and claim accident year which would be included to determine rate-setting claim costs. The appeal panel found that the provisions of the two policies which were considered in that case were consistent with, and made in accordance with, the legislative authority provided to the WCB to determine its own process for assessment rates as it considers "adequate and expedient". The panel determined that the Act and WCB policies did not allow the firm's current and previous years assessments to be recalculated based on the combined value of cost relief granted on multiple claims; and the Act and WCB policies did not permit the inclusion of cost relief credits from outside the experience period when calculating the firm's subsequent assessment rates.

The previous appeal panel noted in Decision No. 62/22, that the firm had argued the effect of the decision was to render the cost relief granted to the firm with respect to the three claims meaningless to the firm and indicated that the firm might wish to further explore whether the portion of the claim costs "unfairly burdened" the firm as contemplated in paragraph 82(4)(d) of the Act and Schedule H of the Cost Relief Policy. The appellant's advocate submitted that based on these comments, they sought removal of the unfair burden under Schedule H of the Cost Relief Policy.

The appellant's advocate has argued on this appeal that there is a gap in the legislation and the Cost Relief Policy, and that the firm is entitled to reassessment in the circumstances of this case pursuant to Schedule H of the Policy.

Based on our review and consideration of all of the evidence and submissions of the parties which are before us, the panel is unable to find that the criteria under Schedule H of the cost Relief Policy have been met in the circumstances of this case.

As noted above, paragraph 82(4)(d) provides that the WCB may offer Cost Relief in respect of some or all of the claim costs where the WCB is of the opinion that claim costs would unfairly burden a Class E Employer. The Cost Relief Policy provides that the WCB may exercise its authority under paragraph 82(4)(d) of the Act in extraordinary circumstances only.

The Policy further indicates when and how the WCB will consider a request for Cost Relief on the basis of "unfair burden", and provides:

An "unfair burden" is generally understood to mean having a substantial financial impact. Recognizing that the rate-setting model imposes financial limits on employer's assessment rates, there must be other compelling reasons or unusual or extraordinary situations an employer is facing before the WCB considers applying paragraph 82(4)(d). A burden is regarded as unfair when it imposes disadvantages other employers would not face in similar circumstances or when the impact is clearly unwarranted for the situation at hand.

The panel is of the view that the language which is used in Schedule H of the Cost Relief Policy with respect to the availability of cost relief for "unfair burden" is powerful. The Policy thus speaks to the WCB exercising its authority under paragraph 82(4)(d) of the Act "only in exceptional circumstances," that there must be "compelling reasons or unusual or extraordinary situations an employer is facing" other than financial limits on the employer's assessment rate, or the impact must be "clearly unwarranted for the situation at hand."

The appellant's advocate has argued that the premium overpayment in this case amounted to nearly $60,000 from 2019 to 2022, or approximately 21% of their 2022 total assessments, and has a substantial financial impact on the appellant firm. In response to questions from the panel, the advocate acknowledged that the premium overpayment of nearly $60,000 covered a four-year period, from 2019 to 2022, and that this represented an average of roughly $15,000 per year which they were claiming as being too high. With respect to the WCB's reference to a 3.6% increase, the advocate stated that the 3.6% was accurate only for the 2020 rate year, so it was 3.6% of the employer's 2020 premiums. The advocate went on to state that "But really our point is that the percentage is only looking at one year where there was an overpayment. But if you take the – total years that were affected, it comes out to that $60,000. And if you look at the $60,000 as a percentage of 2022 total assessments, that works out to roughly 21%."

The panel is unable to find that the sum of $15,000 or 3.6% of the employer's yearly assessment would be a significant amount or have a substantial financial impact on the firm. Rather, the panel is satisfied that when viewed in context, this would represent a very small proportion of the firm's payroll in this case.

When asked whether they were of the view that the WCB had somehow treated the firm differently than they would have treated any other client in that situation, the advocate stated he could not speak to that, but he did not believe so. The advocate noted that what they were really focusing on was that cost relief was provided and the rates were not readjusted, such that the employer was still paying the full force of these costs, which they believed was unwarranted for the situation at hand, as per Schedule H of the Cost Relief Policy. The advocate noted that they were not so much relying on whether they were facing disadvantages other employers would not face in similar circumstances, but were referring more to the fact that the impact was clearly unwarranted for the situation at hand.

The panel is unable to find that the impact of the rates not being readjusted based on the cost relief awarded in the three claims in question rose to the level of being "clearly unwarranted" or an unfair burden on this particular employer within the meaning of Schedule H of the Cost Relief Policy.

The panel further notes that the WCB's authority under the Cost Relief Policy is discretionary, and is satisfied, based on the evidence, that the WCB properly exercised their discretion, and that their interpretation and application of the Policy was reasonable and appropriate and consistent with the requirements of the Act and Schedule H of the Cost Relief Policy.

In conclusion, and based on the foregoing, the panel finds that the WCB properly applied the relevant provisions of the Act and Schedule H of the Cost Relief Policy in relation to the reimbursement of premiums due to unfair burden, concluding that the facts in this case did not warrant cost relief for unfair burden. The panel therefore finds that the firm is not entitled to reimbursement of overcharged premiums due to unfair burden pursuant to the provisions of The Workers Compensation Act and Schedule H of WCB Policy 31.05.10 Cost Relief/Cost Transfer.

The firm's appeal is dismissed.

Panel Members

M. L. Harrison, Presiding Officer
J. Witiuk, Commissioner
M. Kernaghan, Commissioner

Recording Secretary, J. Lee

M. L. Harrison - Presiding Officer
(on behalf of the panel)

Signed at Winnipeg this 23rd day of January, 2023