The Appeal CommissionThe Workers Compensation Act of Manitoba

Preamble

The worker is appealing the decision made by the Workers Compensation Board ("WCB") that their weekly benefit rate of $941.49 effective December 17, 2023 is correct. A file review took place on September 5, 2024 to consider the worker's appeal.

Issue

Whether or not the worker’s weekly benefit rate of $941.49 effective December 17, 2023 is correct.

Decision

The worker’s weekly benefit rate of $941.49 effective December 17, 2023 is correct.

Background

The WCB accepted the worker’s claim in relation to an injury that occurred at work on September 29, 2023, when they slipped and fell, and felt a pop in their shoulder. At the time of the accident, the worker was employed by the employer and was sole proprietor of another business.

The WCB requested the employer provide wage information and on October 13, 2023, the employer provided that information to the WCB. The WCB began paying wage loss benefits to the worker based on their employment income only. The employer and the worker provided more information about the worker’s concurrent self-employment and the WCB calculated and adjusted the worker’s short term average earnings, effective November 1, 2023, based on the worker’s earnings from both the employer and the concurrent employment.

When the claim extended beyond eight weeks, the WCB advised the worker the claim was transferred to case management. Case management undertook a review of the worker’s average earnings and requested additional income information from the worker on December 17, 2023. After receiving the worker’s business income tax information for 2021 and 2022, the WCB reviewed the information on January 16, 2024. On January 18, 2024, the WCB calculated a temporary average earnings amount while awaiting further information from the worker related to their self-employment earnings. The WCB received Statements of Business Activities for 2021 and 2022 on February 20, 2024 and on March 7, 2024, the employer confirmed the income provided to the worker from September 2022 to September 2023.

On March 8, 2024, a WCB payment assessor reviewed the worker’s Statement of Business Activities for 2021 and 2022 and noted “The worker is at a net loss from self-employed income for 2021 and 2022. Therefore, there is no net income to include in the benefit rate.” A further Wageloss Calculation Report completed on March 15, 2024 indicated a weekly benefit rate of $941.49 for the worker effective December 17, 2023.

On March 15, 2024, the WCB advised the worker of their new benefit rate effective December 17, 2023. The WCB noted that under the Average Earnings Policy, Line 229 business expenses are deducted from business earnings, resulting in a net loss for 2021 and 2022 and therefore the WCB could not include the worker’s self-employment earnings when establishing their benefit rate. The WCB confirmed the worker’s benefits were based only on income from the employer.

On March 26, 2024, the worker requested Review Office reconsider the WCB’s decision, noting their self-employment income allowed them to report tax deductions that their regular employment did not and as such, they believed the self-employment income should be included in their benefit rate calculation. Review Office determined on April 16, 2024 that the weekly benefit rate of $941.49 effective December 17, 2023 was correct. Review Office found the WCB’s calculations were correct, and the weekly benefit rate established as of December 17, 2023 was correct.

The worker filed an appeal with the Appeal Commission on May 8, 2024 and a file review was arranged.

Reasons

Applicable Legislation and Policy

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

A worker is entitled to benefits under s 4(1) of the Act when it is established that a worker has been injured as a result of an accident at work. Under s 4(2), a worker who is injured in an accident is entitled to wage loss benefits for the loss of earning capacity resulting from the accident, but no wage loss benefits are payable where the injury does not result in a loss of earning capacity during any period after the day on which the accident happens.

When the WCB determines that a worker has sustained a loss of earning capacity, an impairment or requires medical aid as a result of an accident, compensation is payable under s 37 of the Act. Section 39(2) of the Act sets out that wage loss benefits are payable until the worker's loss of earning capacity ends or the worker attains the age of 65 years.

The Act outlines the method of calculation of a worker’s average pre-accident earnings in s 45, as follows:

Calculation of average earnings 

45(1) The board shall calculate a worker's average earnings before the accident on such income from employment and employment insurance benefits, and over such period of time, as the board considers fair and just, but the amount of average earnings shall not exceed the maximum annual earnings established under section 46.

Average earnings includes all employment income 

45(2) In making a calculation under subsection (1), the board shall consider any employment income the worker has at the time of the accident from which the worker sustains a loss of earnings, whether or not the employment is in an industry to which this Part applies.

WCB Policy 44.80.10.10, Average Earnings (the “Policy”) outlines how the WCB will determine a worker’s average earnings at the time of a compensable injury. The Policy sets out that the formula used is the one that “best represents the worker’s employment and earnings pattern before the accident.” The Policy describes the three formulas that the WCB uses to calculate average earnings: the regular earnings formula; the average yearly earnings formula; or the probable earnings formula. The Policy goes on to outline that when a worker has received wage loss benefits for 12 weeks, the WCB automatically conducts an Average Earnings Review, and upon completion of that review, a worker’s average earnings are adjusted, as necessary. The Policy goes on to address situations where a worker has concurrent employment at the time of their accident, noting that concurrent employment income is included in the calculation of average earnings when the worker’s ability to earn that income is affected by the compensable injury, regardless of whether the concurrent employment is in an industry with mandatory WCB coverage. To calculate a worker's average earnings from self-employment, the WCB uses the appropriate formula from the Schedules to the Policy. If the formula result is positive and the worker’s ability to earn that income is affected by the compensable injury, the concurrent income is included in average earnings, but otherwise it is not included. Schedule A outlines that the WCB uses the net business income formula to calculate actual earnings for self-employed persons, which includes net business income plus depreciation/amortization plus business use of home expenses. Schedule D to the Policy sets out that when an employee claims eligible employment expenses on Line 229 of their Income Tax Return, the earnings used to establish the worker’s pre-accident earnings exclude these probable employment expenses.

Worker’s Position

The worker represented themself in this appeal and provided a written submission for consideration of the appeal panel, by email dated August 28, 2024.

The worker’s position is that prior to the accident, they had regular income from both employment and self-employment, and they relied on this total amount of income to meet their expenses. The worker submits that the WCB erred in failing to include the self-employment income when calculating their weekly wage loss benefit. The worker also provided further information in their submission that responded to the employer’s statements in their submission.

Employer’s Position

A manager with the employer provided a brief written submission in response to the worker’s appeal. The representative of the employer responded to allegations made in the worker’s submission that do not relate to the substance of the worker’s appeal and confirmed that the worker is a sole proprietor of their business.

Analysis

This appeal considers whether the worker’s weekly wage loss benefit rate of $941.49 effective December 17, 2023 is correct. For the appeal to succeed, the panel would have to determine that the WCB did not correctly apply the provisions of the Act and Policy in calculating the worker’s weekly wage loss benefit rate. As outlined in the reasons that follow, the panel was unable to make such a finding, and therefore, the worker’s appeal is denied.

When a claim is first accepted, the Policy permits the WCB to establish a worker’s short term average earnings based on the formula that best allows for expeditious payment of benefits and most accurately approximates the worker’s average earnings at the date of accident, which may later be recalculated upon receipt of verifiable information. In this case, the file evidence documents that the worker’s short term average earnings were initially calculated based on the worker’s overall period of employment earnings in the year prior to the date of accident. This was $1620.55 per week for a weekly benefit of $1050.23. Then, the file documents that the WCB, on obtaining further information, recalculated the short term average earnings amount on November 1, 2023 to include the worker’s concurrent income, at $2,282.30 per week for a weekly net benefit rate of $1391.74, retroactive to September 30, 2023.

After the claim was active for 12 weeks, as required by the Policy, the WCB reviewed the worker’s average earnings, seeking more information about the worker’s earnings, including their 2021 and 2022 income tax returns. On receipt of this information, the WCB noted the worker’s self-employment income, which the WCB previously considered as employment income from concurrent employment and requested the worker’s 2021 and 2022 statements of business activities. In the meantime, on January 18, 2024, the WCB established the worker’s 12 month pre-accident earnings at $1440.67 per week as of January 11, 2024, resulting in a weekly benefit rate of $941.49. The worker’s 2021 and 2022 Statement of Business Activities indicated the worker claimed negative net income from self-employment activities in both 2021 and 2022. On adjusting these amounts to include depreciation and business use of home expenses as provided for in Schedule A of the Policy, the results remained negative and therefore the WCB did not include any self-employment income in calculating the worker’s weekly average earning earnings effective December 17, 2023.

The panel considered whether the WCB erred in applying the provisions of the Act and Policy in making these calculations. In establishing a worker’s wage loss benefit rate, the Act requires that the WCB calculate the worker’s average earnings before the accident, from all employment and employment insurance benefits. The Policy sets out three possible methods that the WCB will use in determining a worker's average earnings. The first relies on the worker’s actual earnings from all work impacted by their injury as of the date of accident. The second is based on the worker’s historical earnings, averaged, over any 12 month period in the 1, 2 or up to 5 years prior to the date of the accident. The third formula projects what the worker’s income would have been in the 12 months after the accident, based on their earnings at the time of the accident, and adjusted. The Policy outlines that the formula to be used it the one that “best represents the worker’s employment and earnings pattern before the accident.” When a worker’s income is irregular, the average yearly earnings formula may be used to produce “a more accurate reflection of the worker’s employment and earnings pattern before the accident.” To calculate a worker’s average earnings under average yearly earnings formula, the Policy sets out that generally the WCB will consider “any consecutive 12-month period occurring during the one or two years before the date of the accident” and that it “may choose one or more consecutive 12-month periods from any of the previous five calendar years” in appropriate circumstances. Here, the WCB used the average yearly earnings formula and the 12-month period prior to the date of the accident. The panel agrees that this is the formula that best represents the worker’s earning capacity from their employment at the time of the accident. The panel further noted that the WCB appropriately deducted the worker’s Line 229 expenses in calculating their average yearly earnings, as outlined in Schedule D of the Policy.

The panel also considered whether the WCB appropriately considered the worker’s self-employment income, in accordance with the provisions of the Policy, which includes net business income plus depreciation/amortization plus business use of home expenses. In the worker’s case, the net business income in each of the previous two tax years was negative, and even with the adjustments permitted for depreciation/amortization and business use of home expenses, the result remained negative. Therefore, according to the Policy provisions, the worker’s adjusted self-employment income, being negative, is not included in the calculation of their average yearly earnings.

The resulting weekly wage loss benefit rate, when applying the appropriate Policy provisions, includes only the worker’s average weekly employment earnings which take into account the Line 229 expenses.

Based on the evidence before the panel, and on the standard of a balance of probabilities we are satisfied that the worker’s weekly benefit rate of $941.49 effective December 17, 2023, is correct. The worker’s appeal is therefore 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 20th day of September, 2024