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Comp plan worries Canada employers

Posted On: Apr. 15, 2007 12:00 AM CST

Ontario employers say proposed changes to the Canadian province's workplace safety law likely will lead to an increase in employer premiums for workers compensation coverage.

Employers are extremely concerned about proposals to increase compensation for injured workers receiving partial benefits and allow workers who are physically able to return to work to continue receiving benefits if they cannot find suitable employment.

Employers also expressed concern that the workers comp system would be taking on costs that should be borne by employment insurance, Ontario's unemployment benefit.

Canadian workers comp coverage is provided largely by provincial and territorial workers comp boards and financed by employer-paid premiums. Employers have no control over the rates set by the boards; rates for each company in a given sector reflect the loss experience of that sector, though companies that have low incident levels within a sector are eligible for individual rebates.

The Ontario government has proposed amending the province's Workplace Safety and Insurance Act to provide a 2.5% increase in compensation benefits in each of the next three years, starting July 1 for about 155,000 claimants receiving partial benefits. Government officials say the increase for injured workers receiving partial benefits is necessary, given that inflation has risen nearly 29% while benefits have increased only 2.9% during the past 12 years.

Injured workers who are 100% disabled already receive an annual cost of living increase.

The partial benefits amendment would grant government officials the authority to order future indexation increases to benefits after 2009, meaning they would be able to implement benefit increases without seeking legislative approval.

Another key proposal would require the Workplace Safety & Insurance Board--the entity that administers workers comp benefits in Ontario--to calculate benefits for injured workers re-entering the workforce based on what they are likely to earn from "suitable and available" employment. Under the current law, an injured worker's benefits can be reduced or terminated if the worker is able to return to suitable work even if such work is not available.

"That has the potential to cause some real cost problems for employers, but that depends on how it's implemented by the board," said William LeMay, a Toronto-based partner with law firm Hicks Morley Hamilton Stewart Storie L.L.P. who specializes in issues related to the Workplace Safety and Insurance Act.

This change was surprising given that WSIB officials have acknowledged that persistency of claims is a problem in managing the system, said Judith Andrew, vp, Ontario for the Canadian Federation of Independent Business, which represents about 42,000 employers in the province. "Of course, changing that kind of a rule will worsen that problem," she said, adding that employers expect the change to increase costs of the workers comp system.

Early estimates peg the costs of the proposed changes between $700 million Canadian to $750 million Canadian ($608.8 million to $652.3 million), a major concern for employers given that the provincial workers comp system already has a deficit of $6.5 billion Canadian ($5.65 billion).

Given that WSIB Chair Steve Mahoney has already reiterated the organization's commitment to eliminating the deficit by 2014, employers say a premium increase likely is forthcoming.

"We could get caught with double-digit increases," said Sherri Helmka, executive director of the Kitchener, Ontario-based Employers' Advocacy Council, which represents more than 600 employers in the province. "We don't have deep pockets."

A WSIB spokeswoman said the organization is in the process of determining preliminary rates for 2008, but believes it may be able to avert a premium increase for 2008.

A premium increase is unlikely this year because provincial elections are scheduled for November, Ms. Andrew said. "What does it mean for '09 when the elections are behind them?" she asked.

The proposed changes are particularly disturbing for employers given that they incurred double-digit premium increases from 1985 to 1991 as part of a long-term plan to stabilize the system developed when the deficit was pegged at $12 billion Canadian ($10.44 billion), Ms. Andrew said. "We don't like the government fiddling with the plan after the big increases at the front end," she said.

The government also failed to conduct proper consultations on the proposed amendments, employers say.

"We want a system that's fair, we want a system that's equitable and we want a system that's transparent, and right now we don't have a system that's transparent," Ms. Helmka said. "At the very least, they should have talked to the funders of the system."

In addition, government officials are amending Ontario's Workplace Safety and Insurance Act through the budget process rather than the normal legislative process, which will make it difficult for employers to challenge the proposed changes. Even so, employers met last week to discuss and develop a formal response.

"We don't believe we're going to be able to make changes, but we're not going to go quietly either," Ms. Helmka said.

One potentially positive amendment for both employers and workers is a proposal to give WSIB officials greater flexibility to review benefits after 72 months, Mr. LeMay said.

The current practice of automatically locking in benefits for injured workers at the six-year mark is unfair to workers, particularly those whose condition deteriorates after that date, he said. It also creates many problems for employers because injured workers who eventually return to work still receive large payouts in addition to their salaries because the benefit levels are fixed, he said. "It has the potential to be helpful for both employers and workers," Mr. LeMay said.