The Appeal CommissionThe Workers Compensation Act of Manitoba

Preamble

The firm is appealing the decision made by the Workers Compensation Board ("WCB") that the firm operates in a mandatory industry requiring registration with the WCB. A videoconference hearing was held January 19, 2023 to consider the firm's appeal.

Issue

Whether or not the firm operates in a mandatory industry requiring registration with the WCB.

Decision

The firm operates in a mandatory industry requiring registration with the WCB.

Background

On October 7, 2021, the WCB wrote to the firm to advise that they understood the firm was employing workers in their business operations which fell within the scope of The Workers Compensation Act (the "Act"), and that they were required to register with the WCB. On November 2, 2021, the firm advised the WCB they were gathering further information, but believed they were operating in an excluded industry under the Act.

On November 3, 2021, the firm contacted the WCB to provide further information. The firm noted their services revolved around software services, including software development and consulting, and that they believed their operations fell under "Computer Services", an excluded industry under the WCB legislation and policies.

On November 19, 2021, the WCB noted effective April 1, 2021 the firm had purchased the assets of another firm which was registered under the industry designation of "Designing, Decorating and Drafting". In a memo to file dated November 22, 2021, it was noted that the firm was "Running as the same type of business with same customer base", and the assessment experience from the purchased firm was being transferred to the firm. On November 22, 2021, the WCB's Assessment Services advised the firm that they had registered their account under the industry description "Designing, Decorating & Drafting", and provided them with information on the assigned WCB assessment rates.

On December 1, 2021, the firm's legal representative provided the WCB with the job descriptions for the firm's employees in Manitoba. The representative submitted that the job descriptions indicated the firm's operations were more aligned with "Computer Services" as noted in the WCB's policies and legislation, and asked that the WCB reconsider the earlier industry classification. On the same day, the WCB advised the firm's representative there would be no change to the assigned classification and provided information with respect to the WCB's reconsideration process.

On December 29, 2021, the firm's legal representative requested that Review Office reconsider the WCB's decision. The representative submitted that the operations of the firm included creating computer software and providing computer processing services, and did not involve designing or detailing. It was submitted that the services the firm provided were therefore "fundamentally distinct" from those provided by the firm they purchased in April 2021, and the firm should not be classified under the same category as that other firm.

On March 4, 2022, the firm's classification was reviewed by the WCB's Director, Assessment Services, who confirmed that "Designing, decorating & drafting" was the best fit for the type of work the business performed, and the firm was advised that their request for reconsideration would be forwarded to the Reconsideration Committee for review.

On March 22, 2022, the WCB's Reconsideration Committee determined that the firm was operating in a mandatory industry and was therefore required to be registered with the WCB. The Committee found that a review of the firm's website, together with information provided by the firm, indicated the firm's predominant business operation in Manitoba was providing digital 3D modeling to aid other companies in their work of constructing buildings, and as such, fell within the classification of "Designing, Decorating & Drafting". The Reconsideration Committee further considered the firm's argument their operations fell within an excluded industry of "Computer Services", but found the firm "…does not provide consulting advice to its clients on computer processing services, computer systems or computer equipment" and did not meet the definition of that classification.

On July 18, 2022, the firm filed an appeal with the Appeal Commission and an oral hearing was arranged.

Reasons

Applicable Legislation and Policy

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

Section 2 of the Act provides that Part 1 of the Act applies to all employers and all workers in all industries in Manitoba except for those excluded by regulation. Part 1 of the Act establishes the compensation system and the rights of workers and employers under the system.

Manitoba Regulation 196/2005, Excluded Industries, Employers and Workers Regulation (the "Regulation"), provides that the industries, employers and workers listed in Schedule A to that regulation are excluded from being within the scope of Part 1 of the Act. Paragraph 10 of Schedule A, dealing with computer services, provides as follows:

Computer services 

10 Provision of computer programming and consulting services, including computer processing services, systems and equipment.

The WCB's Board of Directors has established Policy 35.20.10, Placement of Employers into Industry Classifications (the "Policy"), which provides principles for employer classification. The Policy provides, in part, that:

An employer's Industry Classification is determined by the employer's predominant business operation. It is not affected by the legal structure of the business or the various occupations within the employer's operation. The placement into an Industry Classification within the WCB's classification system follows a process which takes into account factors such as:

• The employer's business activity; 

• Operational and production processes; 

• Use of similar equipment; 

• End products or services; 

• Customer base; 

• Competitors.

Where there is no clear fit or similar Industry Classification, the WCB will use its judgment to classify the employer into the Industry Classification that has the best fit…

Administrative Guidelines to the Policy set out the process involved in establishing and modifying an employer's industry classification. Step 2 of the Administrative Guidelines deals with determining mandatory or optional industry classification, and reads, in part, as follows:

1. If the activity is not listed (sic) the regulation, their operations are likely mandatory and the employer is required to register.

2. If it is listed in the Regulation, coverage may not be required. 

o Consider if their business activities are "stand-alone" as one of those listed in the Regulation, or if the activity they perform is dependent on a business relationship they have with an employer in a mandatory industry…

Appellant Firm's Position

The firm was represented by legal counsel and by its president. Legal counsel provided a written submission in advance of the hearing, and made an oral submission to the panel. Legal counsel and the firm's president responded to questions from the panel.

The firm's position was that it is falls within an excluded industry under the legislation and is not required to be registered with the WCB.

It was submitted that the firm's primary business activity is best reflected by the excluded classification of "Computer Services" which includes computer programming and consulting services. It was submitted that their primary activity is creating 3D digital models using a particular type of program and developing software to improve the speed in which models and construction schedules can be produced to the client.

Counsel submitted that the firm does not fit within the classification of "Designing, Decorating & Drafting" as they do not provide engineering or drafting services, and the 3D models the firm creates cannot be considered technical drawings or plans. Some of the firm's employees may have an engineering background but they do not prepare drawings in their capacity as employees for the firm. It was further noted that the firm's employees spend their entire workday in offices behind computers, and never visit client worksites, so there is a very low risk of any accidents to the employees.

Counsel noted that the 3D models are used to assist customers and clients in preparing estimates and proposals for their projects. After the 3D models are created, architects and engineers, who are not employed by the firm but by third party corporations or clients, can use the models to create drawings and technical plans, but the models themselves are not drawings or technical plans. Counsel noted that the firm also sells its proprietary software to other companies, who can then perform their own design work more efficiently.

It was further submitted that the WCB erred by basing their decision, at least in part, on the fact that the firm had purchased some assets from another firm which was registered with the WCB and was classified under "Design, Decorating & Drafting". It was noted that the firm does not work for any of the other firm's customers and the services they provide are completely different.

Analysis

The issue before the panel is whether or not the firm operates in a mandatory industry requiring registration with the WCB. For the appeal to be successful, the panel must find, on a balance of probabilities, that the firm falls within an exception to the requirement for registration under the Act. The panel is unable to make that finding, for the reasons that follow.

Section 2 of the Act provides that Part 1 of the Act applies to all employers except those excluded by regulation. Registration with the WCB is therefore mandatory, unless specifically excluded.

The firm has argued that they fall within the exclusionary classification of "Computer Services" under the Regulation and are therefore not required to register with the WCB. The panel is unable to accept that argument.

Information on file shows that the employer has 12 employees: 8 project managers, an assistant estimating manager, 2 pre-construction modelers, and an administration manager.

The panel questioned the president at length with respect to the activities and services provided by the firm. The president stated that the firm provides mostly software and consulting services in Manitoba. They develop 3D models for estimate purposes, and provide estimates to customers, but not the actual 3D model. In certain situations they will give the customers reports, material lists, and things like that, so that they can quote the projects. After that, they develop software in-house that helps automate processes. They build plug-ins or apps that get installed within the software program's structure, and allow for data to be manipulated or extrapolated.

The president said that they also provide consulting services to guide clients on the best practices for their project, and how to go about fabricating, erecting, designing, things like that. He noted that the project managers "oversee the project…they're providing consulting services to a variety of different contractors to help guide them through the – basically the scope of their project."

Step 2 of the Administrative Guidelines to the Policy indicates that in considering whether coverage is required, consideration should be given to whether the business activities are "stand-alone" as one of those listed in the Regulation, or if the activity they perform is dependent on a business relationship they have with an employer in a mandatory industry.

In considering whether the business activities in this case are "stand-alone" as one of the exclusions listed in the Regulation, the panel notes that while the firm provides computer services, these are very specific services which are provided for a very specific purpose, and are closely tied to a mandatory industry of construction under the Act. The software and services are geared primarily, if not exclusively, towards construction projects. The consulting services which the firm provides are similarly tied to or dependent on that industry, and the president confirmed at the hearing that they only provide services in connection with or to the construction industry.

The panel recognizes that the technology the firm is utilizing is new/developing within the construction industry and notes that the president stated at the hearing that the WCB classifications are probably antiquated and need to be reviewed. In any event, the panel is unable to find that the firm falls within the exception for "Computer Services" under the Regulation in the circumstances of this case.

Based on the foregoing, the panel finds, on a balance of probabilities, that the firm does not fall within an exception to the requirement for registration under the Act. The panel therefore finds that the firm operates in a mandatory industry requiring registration with the WCB.

The firm's appeal is denied.

Panel Members

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

Recording Secretary, J. Lee

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

Signed at Winnipeg this 20th day of March, 2023