Royal Commission on Workers' Compensation in BC
March 2 Morning Session
Names: Joe Pinto & Keith Sullivan
Title: Director, Central Services & Senior Advisor, Policy & Practice
Affiliation: Workers' Compensation Board
Staff Present: TR, GG, OE, GS, SN, PL
Notetaker: Steven Noble
Date: Monday, March 2, 1998
GENERAL COMMENTS
COMPENSATION AND BENEFIT LEVELS
Calculation of Average Earnings
Stacking and Integration
Gross vs. Net
Waiting Period
Overpayments
Retroactivity of Benefits (widows, etc.)
Application of Section 33
Are revisions to Section 33 necessary
Necessity/timing of rate review
Is a waiting period (or additional waiting period) necessary-Section 5(2)
Should benefits be paid on net as opposed to gross earnings?
Stacking vs. integration of other benefits/income
Retroactivity/overpayments – Q and A only
Ron Buchhorn, Heather Greene, Janice Woodland, Maryanne Schulz
PRESENTATION
Before I begin to present to you on this topic I'd like to introduce my colleagues who are here to assist and answer any questions this morning. [See names listed above in general comments above].
Without further ado we'll launch into the topic of Compensation benefits levels. The level of benefits and in particular how earnings are to be calculated are topics that generate considerable debate and generated considerable debate at the inception of workers' compensation legislation in Canada. That debate has continued through the decades whereas the first 6 – 7 decades saw governance and compensation boards respond to increased pressures or pressures for increased benefits – the last decade and a half have seen reversals of this trend in several provinces. In BC the key issues that you have identified are as follows:
The application of Section 33 – both the Board's policy – interpretation of Section 33 and its application in individual cases has been questioned from time to time. There is the question of Section 33, itself; whether it is still is useful in its current format; whether perhaps revisions are necessary.
The question of late reviews and whether they are necessary and if so what timing should be applied to them.
Now those three topics relate to average earnings and earnings capacity and my colleague Keith Sullivan will be presenting on those three this morning shortly after I introduce the rest of the issues.
The other topics that you've asked us to speak to is the question of a waiting period or some might argue an additional waiting necessary. As you may know Section 5.2 of our legislation requires that legislation begin on the first working day after the date of injury. And so, therefore in BC there is no requirement for the Board or the employer to pay for the date of injury and if the worker has received pay for the date of injury it is because the employer has chosen to not because of a mandatory requirement. We've been requested to also speak to this is should be compensation benefits be paid on net as opposed to gross earnings. The BC model is currently gross and we'll take a look at comparisons to other provinces and what they've got in this arena.
There is also the question about stacking versus integration of other benefits and income and I won't speak anymore about this topic right now; we'll get to it later on this morning.
You also on your list of questions you sent us identified retroactivity and over payments and you weren't clear as to what aspects of those you wanted to discuss but they are in a sense unrelated to benefit levels so given the time we've been allocated we decided to defer those to questions and answers and not make formal presentations on them.
The 70,000 – to keep it in a little bit of context – the 70,000 short term disability claims last year and about that – between 70-80,000 over the last several years – these are short term disability claims first paid. The issue of benefit levels is of course of critical importance to each of these claims and to the employers that pay for those claims. The issue of how the Board sets average earnings is as I was saying critically important to workers – how much a worker gets in terms of short term disability will depend on the interpretation that the Board gives that policy to Section 33 and it also depends on the application of those policies by individual adjudicators on individual claims.
The Board has been paying out as you can see about $250 million a year in short term disability over the last several years. And from an employer perspective the issue of average issues and rate setting and the rate of compensation are also all of equal importance because this is one of the biggest chunks of benefits payments within the Workers' Compensation system. Now for those workers and the number is much smaller who go on to long term disability –a higher rate is determined – the compensation rate or average earnings is also of critical importance. Just to explain the slide and all the different colours – until 1991 the purple bars – the Board lumped all of its long-term disability benefits together. In 1992 in accordance with the requirements of the association of Workers' Compensation Board's we split the yellow which is the long-term disability benefits from the survivor benefits – so the purple bars represent both; these bars separate them.
Now again the setting of the rate – the setting of the average earnings is of critical importance to individual workers– whether they get a pension or particularly if they get a loss of earnings pension – is dependent on the rate that the Board sets. But also it affects their entitlement for vocational rehabilitation and the Board may or may not provide vocational rehabilitation if the rate on a claim is relatively low. So it is critically important to workers individually and to employers as a whole again this is the other big chunk of cost of the compensation system. Average earnings doesn't dictate all of temporary disability costs or permanent disability costs but it can influence total costs in the system. Finally just to put into perspective the volumes that the Board – I picked 1996 to give you a sense of the number rates or the estimated number of rates that adjudication staff set. We start off with 70,000 claims as I was pointing out earlier. So every one of those 70,000 claims requires an adjudication staff person to set a rate. What we call set a rate. That's the initial rate. If the claims go on 8 weeks or more – and about 15% do – then there is a second rate review required. Or what we call a rate review. So roughly that works out to about 10,500 on the basis of 70,000 in 1996. And then if the claim goes on to permanent disability – and more claims go on to permanent disability than I show here but according to the information we have from our folks in disability awards we have about 1 in 5 get a comprehensive second look so that's where we came up with 2100 from. So in total there's potential appealable decisions just on rate issues alone. That is about 80,000+ a year. And that number would be relatively consistent over the last 4 or 5 years. This is separate from appealable issues on whether the claims have been accepted and how long the claim should have gone for, whether a pension was given, etc. I think Mr. Buchhorn alluded to a sort of large volume of potential appealable decisions in the system. Now when my colleague Keith Sullivan presented me with these numbers we were interested in giving you a sense of the number of appeals that there are around average earnings. We sent Mr. Sullivan back two or three times to check this out because I guess intuitively we all sensed that there are more disputes – more appeals files around average earnings. This isn't the appeals filed in 1996 - what this is is the findings issued by the Review Board in 1997 – you might note that the Review Board runs somewhere between 6 months to a year behind. So we are using this as a proxy of the findings that might have emanated from 1996 – but we don't purport this to be an accurate proxy and I am sure the Royal Commission will be doing its own research and speaking to the folks at the Review Board. These numbers simply come out of the data we enter into our system when the file is returned from the Review Board. But the numbers, in total, are very small relative to the potential volume of decisions that the Board makes – 270 – yet we hear a lot about concerns about the way the Board sets rates. The explanation could be several-fold – I guess a possible of explanations that there are many workers dissatisfied with their rates and actually go on to appeal; another possible explanation is that the Review Board in this particular year only produced a few decisions that involved rates. A possibility that in fact this is more or less the volume of decisions that the Review Board produces on an annual basis and there is a host of others but I guess all of the people who have seen this number are surprised at its relative small size. What we do see from this small size though is that there are proportionately more dissatisfaction relative to that total and again proportionately more dissatisfaction of the permanent rate setting relative to that total – but again very very small numbers. This is also interesting –now out of these what was the percentage of decisions that the Review Board upheld. You recall from presentations that you saw in week one that the Board has normally upheld it about 65% of the time. But you'll notice that in each of these areas we run about 57-58%. So we are not upheld as often even though the numbers are relatively small at the Review Board. And the differences could be the Review Board's disagreement with the general policy approach of the Board or it could be its disagreement with the individual application of a case.
So with those opening comments I'm going to ask Mr. Keith Sullivan to take you through briefly average earnings – probably 10 minutes or so – and then I'll go back to talk about some of the other legislative topics that you've asked us to speak about.
KEITH SULLIVAN
I've been asked to speak on the subject of Average Earnings this morning. I have about 10 minutes so I'll try and put it into some perspective – it is a subject that we spend at least 4 days in our initial training period with our claims adjudicators. Going through the ins and outs of rate setting. I didn't provide a copy of Section 33 on an overhead – but it is probably the longest sentence in the Act in itself. It contains the word "or" on 13 different occasions. So it was too long to put on one or even two overheads so what I did was provided you with a copy earlier this morning on your desks.
Subsection 1 contains reference to the words "average earnings" and "capacity" – and requires the Board to best represent the actual loss of earnings.
Subsection 1 as I mentioned contains thirteen "ors" providing a lot of discretion for adjudicators to make decisions on these.
And subsections 2 and 3 deals specifically – deals with specific types of cases – two of them being volunteer fire firefighters and volunteer ambulance drivers and how to set wage rates for them. Subsection 3 deals with the situation with where a worker's earnings are reduced by reason of their age or by learning trades.
Chapter 9 in the Rehabilitation Services and Claims Manual and item 35.24 in Chapter 5 deal with the Board's policies with respect to setting wage rates. The introduction to Chapter 9 which I also handed out earlier this morning outlines the chapter as a framework of principles but ensures and makes it very clear that adjudicators are trained in basic discretion granted under section 33.1. Just reading a couple of quotes from that introduction which 65.00 in the manual. It states "it obliges the Board to select for each claim and method which most accurately represents the actual loss of earnings by reason of the injury. This does not mean that the claims adjudicators have complete freedom of choice in respect to each individual claim. The Board must ensure that the applications of section 33 is consistent between different clients."
Chapter 9, itself, has been under formal review since 1991. At that time there was a Governors' subcommittee struck and working committee formed to look at the chapter and the issues as they affected the claims adjudicators' and constituents.
The working group did develop a paper – sent it out for discussion and for feedback and the public consultation process did produce differences of opinion from many of the different stakeholders involved. Although there has been some activity in respect to average earnings since then and I'll mention to you in a few minutes basically the issue is still outstanding. As well there are no procedures in our claims adjudication handbook – the handbook was being developed at the same time as chapter nine in the manual was being reviewed. As a result it was decided to wait until the review was completed before entering anything into a handbook. So currently what our adjudicators are using to guide them is the Act, the manual and the training material as provided in that training period that I mentioned to you earlier.
Some of the average earnings issues and there are many and I suspect that there'll be many raised this morning as well – the first one I refer to is the earning capacity concept which uses past history versus forward looking. If you read through the manual especially in the 8-week rate change and the initial wage rate setting change – it refers mainly to using the past history in setting wage rates. And there is a feeling that perhaps we should be looking at earning capacity. The manual does require that the adjudication staff consider what the worker would have done if not for the injury – and the other quote I'd like to make is out of 65.20 of the manual which refers to the 8 week rate change. It's mainly for that particular section of the manual which spends a lot of time talking about the past working history, whether we should be using 1 year, 3 years, 3 months earnings prior to the injury – it does conclude by saying the claims adjudicator will also consider the probability of the worker continuing in the injury occupation. For this purpose the adjudicator will contact the employer to inquire whether the injured worker could reasonably be expected to continue in the job. The adjudicator will also question the worker as to future intentions with regard to this job and examine the previous employment history.
So the adjudicator is required to look into that aspect of setting wage rates. And there is no doubt that looking at earning history is a lot easier for adjudication staff to do than try to establish what earning capacity or forward looking into the future might be.
Another issue is income replacement benefits, for example, Unemployment Insurance Commission - we do not include Employment Insurance benefits as average earnings. Nor do we deduct the time period when people were on Employment Insurance from the timeframe we are looking at when we calculate average earnings. Fringe benefits is another issue. We do not include fringe benefits in average earnings. There was a policy change in 1996 to fringe benefits –that's item 7120 of our current manual.
There was a number of conflicting Appeal Division decisions that came out about fringe benefits –so the Panel of Administrators decided to issue a policy statement which basically clarified the definition of fringe benefits. It didn't really change existing practice at the time but it clarified the issue.
Of course rate changes and specifically 8-week rate changes is another issue in average earnings that is of considerable interest. Just to quickly explain the 8 week rate change concept that I thought I'd just go over – wage rate setting for three specific types of workers – there can be other types of workers but these are the three general types of workers: Regular, Seasonal and Casual.
A casual worker – I'll start at the bottom – a casual worker is obviously one that has no regular attachment to the work force – could work for a number of employers during the year at different rates of pay – or could work for one employer during the year, however, have different time of employment – employed for three months; off for two months; employed again, etc. They basically have a casual attachment to the workforce so we treat them as casual workers. With those types of workers we set their rate typically on the long-term attachment to the workforce right from the day one. In other words we look at the one or three years' earnings, etc. and set the rate for those workers on that rate from the date of injury forward. We do normally have to do a wage rate change with casual workers.
Seasonal workers are those types of workers that are obviously involved in a season – seasonal employment. Berry pickers are an example employment – they are usually paid at the rate of pay at the time of injury be it the hourly rate, the daily rate, the weekly rate etc for the length of the season or for the first 8 weeks – whichever comes first. Whichever ones of those comes first we do a rate review and we look at whether or not the long term earning capacity or earnings reflects the – what we set initially. With seasonal workers, too, you can't always get an hourly rate or a daily rate – you may in fact be already looking at a situation where the workers are paid by the pound as opposed to the hour, etc. You may starting out with having to take – the amount of time they have so far spent in that season – calculate the amount of money they've earned and calculate the daily rate – that may be one way of establishing a rate of pay at the time of injury to those particular types of workers. Looking at the rate change value – you are probably looking at what did they earn all year and what did they earn last year. Plus as well you are probably looking at what the season would hold – what other seasons would be available to them for example if they are a berry picker – there may be different types of farms they can go to or industries they can go to throughout the year and you just have to make a judgement as to what the best rate would be.
Regular worker – there seems to be fewer and fewer of these as we have more and more casual and part time workers but regular workers is someone who has a regular attachment to the workforce. With those particular workers we pay the claim on the rate of pay at the time of injury for the first 8 weeks. And that at 8 weeks we do a rate review as I've already explained and adjust the rate accordingly.
The division has made a recommendation that the 8-week rate change as it currently exists be changed to a 13-week proposal. The reason for this is the effect of the 8-week rate change is having on our continuum of care.
During the continuum of care the first program is the work conditioning program and the treatment during that program is interrupted usually by the 8-week rate change - it is just the timing of it. And what happens is is that rather than workers concentrating on recovery and return to work their mindset is affected by the fact that this rate change has occurred in the middle of that process. So to alleviate that we have made a recommendation that the 8-week rate change – the timing of it be changed to 13 weeks. In fact this goes back to a practice that – the 13-week rate change was held by the Board for many years in the past.
For your information 70% of the short-term disability claims that are currently paid have less than 4 weeks compensation benefits; 85% of short-term disability have less than 8 weeks; 90% have less than 13 weeks. We also did a study of about 200 cases in our continuum at the 8-week point and we found out that 40% had a rate reduction; 10% had a rate increase and the 50% resulted in no change at all. The average reduction was $58 per week and the average increase was $56 per week. The range of the increase was pretty compressed around $56 but the range in the reduction is quite extensive; it goes all the way from a few dollars per week up into the hundreds of dollars per week.
The challenge to us of course is to balance fair compensation on individual cases against the need for consistency in decision making; we also have to maintain timeliness and efficiency – we don't want a system that is so complicated that it affects our ability to make timely payments. I'd like to conclude by pointing out that the setting of average earnings not only affects wage loss compensation, it also affects pension benefits, as well as the entitlement to and the level of vocational rehabilitation benefits. I'll return this to Joe who will complete the subject this morning and then a summary.
JOE PINTO
I assume Mr. Robertson that we will have a few minutes at the back end because we started later and is that a safe assumption? [Mr. Robertson: Yes.]
So the first of the topics that is sort of our not things done in BC is the issue of whether benefits should be paid on net. Now the Board has never formally taken a position to the best of my knowledge on whether this province should pay compensation on the basis of net average earnings as opposed to paying at 75% of gross average earnings which is the current method.
Although the Act does specify that gross earnings be used it has been interpreted in that fashion since 1916. When we look across Canada – we see that most boards use some percentage of net – the discussion paper that was prepared by the Policy Bureaus is very extensive and goes into great detail on this topic. I don't propose to repeat all that this morning – but some of the highlights as to the rationale for that are – equity between workers at the same income level, so for example if somebody is making – if you have two workers both making $40,000 per year but with different dependent status they would normally take home different income on their pay cheques so one of the rationales for moving to net as we understand it is that a net system more clearly reflects actual take home. Equity between workers at different income levels – workers who pay – using the example of workers who make $40,000 versus workers who make $20,000 let's say –again there is a difference in take home pay – or a percentage in take home pay because of the percentage difference in tax and one of the arguments advanced to moving to net is that – that sort of equity ought to be maintained in the compensation take home pay. There is the issue of over-compensation and under-compensation – a gross system treats everybody as if they were – treats everybody as if they were – treats everybody at 75 – at 25% deduction as in BC. But workers at different rates at the high end arguably are taking home more than they would normally take and workers at the low end, in general, are taking home less than they normally would based on that 25% deduction that occurs in BC. Again that's – that's the arguments that have been advanced in other provinces for that – for the move to net. And finally as the Bureau points out in the paper –some provinces particularly when it came to determining out what percentage of net as opposed to net itself rationalized the reduction or the amount – 75%, 85%, 80% as part of a cost reduction solution or dealing with unfunded liabilities, etc. So those are the rationales that we detected. Now just a quick – because of some glitch in our software some of these lines don't show up – but what we have here is a comparison of all the different provinces and what they are – whether they are at net and what percentage of net so reading across this way – Alberta $45,000 – their maximum is $45,600 and they pay at 90% of net. In BC $56,900 and 75% of gross. Manitoba - $50,000 maximum – 90% of net for the first 24 months and then it moves to 80%. New Brunswick at $44,100 maximum – 80% of they call it loss of earnings but it's effectively net and then for the first 39 weeks and then at 85%. Newfoundland had a 75-80% but it's just moved to 80% for all. Northwest Territories at 90% of net. Nova Scotia - $39,300 with 75% of net for the first 26 weeks and then 85% thereafter. Ontario has just moved from 90% of net to 85% of net with $58,200 maximum. Prince Edward Island – 80-85% with $36,200 for a maximum. Quebec at $50,000 – one of the originals at 90% of net. I believe Saskatchewan was the original at 90% of net and they are $48,000 maximum. And BC is the only other jurisdiction where 75% of gross is still in place. Their maximum is $54,200.
Now just some quick comments that aren't on this – aren't on this particular overheard and I've extracted a lot of this just to give you a sense from the paper that the Bureau prepared. High wage single earners can receive as much as 110% in take-home pay and if they are retained on salary which is a feature more in the public sector than elsewhere they could be upwards of 120% in take-home pay in a gross system.
Low wage earners under the statutory – because of the statutory minimum in BC low wage earners actually aren't affected as badly with a gross system as they might otherwise be. And so they also can receive more than 100% of normal take-home pay.
By way of contrast – in the net system – a worker with one dependent and just above the statutory minimum might only receive about 87% of take-home and more dependents in a net system would likely result in a similar reduction in benefits – sorry that's – that's still in a gross system so by way of contrast – a worker with one dependent just over the statutory minimum in a gross system receives as little as 75% - 87% and the percentage could be lower with more dependents. So it just reinforces I suppose the – the argument made in other provinces that the move to net that a statutory flat deduction of 75% of gross treats people differently at different income levels and depending on their different dependent status.
According to the Bureau's analysis at 90% net most workers in this province could expect a decrease in benefits ranging from 1-15%. A smaller group of employees could expect an increase in benefits ranging from less than 1 up to 4%.
Additional comments that you might want to be aware of but again I refer you to the discussion paper for more detail - 1989 our actuarial department did a fairly high-level estimate and estimated that a move to 90% would result in a 6% overall reduction in benefits and a possible 4% reduction in assessment rates. The issue of administrative costs comes up in a net system. And very global – very very global estimate because the BC Board has not been actively moving to net – we've not done significant costing in any of these arenas. But very global estimate based on the experience of other provinces and the volume of claims they are experiencing relative to our volumes a one time cost of about $5 million to retool computer systems, forms, retraining, re-educate, pamphlets etc etc so a one time administration cost of $5 million and the Board would not want to be held to that until it had an opportunity to further analyze it and an estimate of about a $1 million additionally in administration - again very high level and again we would want to have an opportunity if there was serious consideration for this to further analyze that. So those are the comments with regard to net.
With regard to waiting period – the as I mentioned at the outset this morning in BC compensation begins day – the next working day after the date injury. Those words can be found in section 5.2 of the Act. Workers receive payments beginning the first working day after injury and that is arguably a waiting period in this province because workers do not receive payment from either the Board or their employer for the date of injury unless the employer chooses to make that payment re-emphasizing the current – re-emphasizing the comment I made at the outset. Now the history in BC which is bullet three on this – is that in 1916 the Act contained a 3 day waiting period and over subsequent amendments over the decades we saw a repayment provision in the legislation so the three day waiting period remained consistent but if a worker was disabled originally for more than 14 days and then three days the Board was required to repay the waiting period. So it remained at three days but depending on the length of disability the payment could be made back to the worker for the waiting period. In 1972 the waiting period was removed from BC's legislation other than for what I just described in terms of section 5.2. a quick snap shot again – I apologize again for our computer unable to pick up the differences. The different lines.
So Alberta has no waiting period – the employer is required to pay for the date of injury. And there is no payment required by the employer after the date of injury. BC – no waiting period other than the date of injury – the employer is not required to pay for the date of injury and there is no requirement for payment after that. Similarly in Manitoba. New Brunswick essentially along with Nova Scotia is the only provinces with waiting periods. And that refers to 3/5's of weekly benefits – this is all from the Workers' Compensation Board – BC publication but in fact it is a three day waiting period in New Brunswick . In Newfoundland there is no waiting period – Newfoundland is one of the provinces where the employer is required to pay for the date of injury – Northwest Territories similar to Manitoba and BC. Nova Scotia has a 2/5's deduction, which is equivalent of a 2-day waiting period for workers who work for a 5-day week but amounts to less or more depending on the number of days worked per week. No requirement for the date of injury or beyond. Ontario according to the Workers' Compensation Board – BC publications it shows a 5-day business delay when in fact there is no delay and the employer is required to pay for the date of injury. Prince Edward Island is essentially the same as BC – Quebec there is no waiting period and the interesting feature in Quebec is that the employer maintains payment for the first 14 days and the Board then reimburses the employer. A sense from Quebec is that this is an income continuity provision because the Board is actually required to send a cheque to the employer as opposed to the employer simply picking up that first 14 day cost. And then these two provinces are similar to BC.
Now what I'm going to show you next are – there's theories abounds I guess that the introduction of waiting periods or the elimination of waiting periods impacts claims volumes and impacts claims costs and Scott if we could take a look at the BC picture initially – 1972 was the elimination of the waiting period – the picture seems to be one of steady – relatively steady volume of claims in BC. And then an escalation of claims – coincidentally or otherwise – after the year in which the benefit – the two day period was eliminated. Now with both this chart and the chart with respect to Nova Scotia and New Brunswick who have more recently brought back waiting periods it is important to note that there were other factors that occurred in and around this time. Changes in maximum and other benefits that may also influence them – that may also influence that pattern. And also there is also the normal growth – the 1970's were a period of high growth in claims – some of which may have been due to economic factors including job growth, high injury rates, perhaps different prevention methods – those kinds of things –we haven't conducted any comprehensive analysis trying to figure out what else may have contributed to this uptake.
Now New Brunswick has had the longest experience with re-introducing their waiting period. In 1993 they brought back a waiting period. Again a pattern of some decline in claims before that and then seemingly a new plateau for claims volume after the introduction of the waiting period. New Brunswick will tell us and has told us that we have got to be careful about attributing this new plateau to the waiting period. At the same time as they introduced the waiting period they also reduced benefits to 80 & 85% of net from a previous 90% I believe in the same year – in 1993. They were also experiencing a diminishing volume of claims in any event. They believe that they changed to more of a prevention focus in this timeframe. They also believe that the mix in their economy was changing rapidly to become one more oriented to technology; less oriented to the high risk resource sector so they do acknowledge that the waiting period and the benefit reduction had an impact but they are not able to quantify whether – what portion of this impact they can ascribe to those. In Nova Scotia the 2/5's waiting period – the 2/5's deduction which is equivalent to a waiting period was accompanied – was accompanied by a 75% net for the first 26 weeks and that was introduced – both of those changes were introduced simultaneously in June of 1995. Again, Nova Scotia if you looked at that a bit more was experiencing a bit of a downward trend in claims so there was a decline in the claims base to begin with. But again seemingly a new plateau after the benefit changes but a significantly lower than the other plateau. And Nova Scotia by legislative statute I believe will be doing a review in the next year or two. And one of the things they will be required to do is explain what happened to these claims and what theories there might be around where they went.
And before – if Scott if we could just slip back to the previous slide so that I can make a couple of comments – there are theories that claims move from – that the benefit level and a waiting period – that some claims will move to other benefit systems – to perhaps Employment Insurance, to sick leave plans, there are also that workers will grin and bear it so to speak. That – and there is a concern associated with that – that perhaps they may come in to work in relatively bad shape and risk re-injury. There's theories that also abound that some of the claims are so minor and perhaps non-existent in the first place that they are now driven off by the fact that you would have to take a loss of pay so you might expect those viewpoints coming from different quarters and various stakeholder communities. But we are not able to find any definitive research that would answer those questions of where the claims go when waiting periods are introduced – waiting periods combined with reduced benefits are introduced. To answer the question of where do claims come from if one assumes that you see an increase in claims with the elimination of a waiting period – there is no sort of any definitive research. We are not aware of any research that was done in BC after the elimination of the waiting period here. That kind of comprehensive analysis that might have been helpful.
Okay so on to the last topic – the issue of whether benefits should be stacked or integrated and just to provide a bit of a definition.
Stacking – the term used – this is a local definition – there term used when in the context of workers' compensation legislation when no regard is had for other social benefits or income – so in other words workers' compensation pays and other benefits or income can be had on top of that. The term is usually but not exclusively used with reference to the same injury – the other income or benefits for the same injury.
Integration to some degree represents the opposite. Benefits are reduced or integrated with those paid by other agencies or by the employer at prescribed levels. Now in terms of other social programs – Unemployment Insurance Commission benefits are really not a factor because the Unemployment Insurance Commission legislation makes the Workers' Compensation Board the first payer. And similarly with Social Services – they make Workers' Compensation Board the first payer so they won't be for the most part unless the Workers' Compensation Board was at a very very low rate be topping up or making any additional benefits.
Really the argument around other social benefits is centred around the Canada Pension Plan and we'll show you a range of options across the country. With regard to employer salary top ups and also employer funded pension plans the issue is should workers' compensation have any regard to what's happening on the employer front. In BC this – there is integration in the sense that the Board is required to consider payments made by the employer under the terms of section 34 of the Act. And where the employer maintains salary continuance the Board is generally required to invest – to send the employer the money that it would ordinarily be sent to the worker. The Board in BC does not worry about any top up that the employer may make nor does it worry about employer funded pension plans. And I suspect they are a concern – some of the employer community which is why you asked us talk about this – those two aspects. Private insurance benefits – the general trend in most provinces – I see we are missing a quotation mark after private – but the general trend in most provinces where they have looked to integrate has basically ignored any private plans that workers may have.
The counter argument to whether these other benefits or other sources of income – whether they should be integrated as opposed to stacked is that even in the historical tradeoff and in the modifications if you will since then there is only a maximum to which workers can get benefits in this province and in every other province. So I think worker groups – their representatives will argue that one of the tradeoffs for having a maximum in place is the fact that there may be other Acts – other sources of income that may be available. There may also be an argument that has been made I think in other provinces and would be made in this province that when someone is on a workers' compensation claim they lack to access to promotional opportunities, and to other benefits like fringe benefits – as Keith pointed out we don't include those in calculating benefits – in calculating our payments.
So very quickly just to – I know we are running out of time – this is what the picture looks like and I will tell you that this picture that the Policy Bureau provided to us comes accompanied by a lot of caveats and notes and we'll make those available to the Royal Commission and to counsel if you'd like but it comes with a lot of footnotes so very quick overview – Manitoba as you can see integrates workers' benefits and allows stacking with respect to survivors' benefits – Alberta – allows stacking of both. New Brunswick requires integration of both in its legislation. Newfoundland again – integration – I won't read the rest I think they are self-explanatory and you have it in the copies of the overheads that I've provided to you. BC which is not in your overheads – workers' benefits are stacked and survivors' benefits are integrated. And that chart by the way as I pointed out was with – which is in the title is with respect to Canada Pension Plan alone.
Final comments then – the issues this morning – I think we've covered them are average earnings – is a legislation change required; is a policy change required? And arguably is a change in the Board's application in individual cases required? Should the Board -–or should this province because likely a legislative amendment would be required – should the province be moving from a gross compensation or compensation on gross earnings to net earnings? Should there be an introduction or a reintroduction of a longer waiting period perhaps? Stacking/Integration – should there be more regard – particularly in workers' benefits to things like Canada Pension Plan – I should point out by the way that Canada Pension Plan has introduced legislation that allows it to engage in discussions with the provinces. I should have mentioned this earlier – that might allow for integration of benefits but as far as we know those discussions with the individual provinces has not yet begun. Should the Board pay more attention to employer salary top ups or to other employer funded benefits? Should, as most provinces, the Board continue to ignore "private" benefits? And what about these trade offs? What about the fact that there is a maximum in this province and that workers don't get sort of a full remedy – what about the loss of other benefits and loss of other opportunities the workers might experience and they perceive as reasons why stacking of some of some sort should continue?
So those are the kinds of questions we think we've raised for the discussion this morning. In closing there is additional material available as part of our research for this presentation today that may not be in all of the discussion papers and we in Bureau would be happy to share those with you to help you explore these issues further. Thank you.
QUESTIONS
ALAN WINTER
Q: I'm going to take about a half-hour and ask several questions on the topic presentation. Obviously there are a wide variety of issues to be discussed but I don't think fully in half an hour. I'd like to start with average earnings –and just some questions or areas I want to explore. Correct me if I am wrong my understanding of the average earnings section is to determine the rate which most accurately represents the worker's actual loss of earnings – earnings at the injury– is that correct?
A: In a nutshell – so as to best represent the loss are the words that are actually used.
Q: And the intent of the 8 week review - is to determine what rate best represents the long term earnings lost by the worker?
A: Yes, I'll deflect some of this to Keith for additional – but the intent of the – as I understand it is that the Board in developing this sort of two pronged approach started with the notion that for the vast majority of claims it wanted a quick, efficient, simple way of getting the cheque out. So that's the starting point and that it would not do a detailed investigation into the worker's longer term earnings pattern with some attempt at sort of what may occur in the future. What it said is that for the short term – the earnings at the time of injury for the most part was a pretty accurate reflection. And so that accurate - accurate reflection was around for 13 weeks and then later for 8 weeks.
Q: But if I understand what you just said – the initial driving force of paying the rate – the pre-injury rate was administrative - to get that cheque out as quickly as possible?
A: It seems to have been – yes.
Q: And if I understand also listening today and reading the position paper on average earnings - when the rate review is conducted –approximately 40% have a decrease in their rate?
A: After a study of 200 cases in the continuum, yes.
Q: 10% had an increase?
A: Yes.
Q: And approximately 50% had no change?
A: Right.
Q: My understanding is that that similar number is all the way back to from the 8 week review and the 13 week review – is that accurate?
A: I believe it's fairly accurate, yes.
Q: It's ball park - that 40% figure is a ball park figure.
A: Yes.
Q: It is something that we can use for our discussion today as reasonably accurate?
A: As a ball park figure, yes.
Q: So if I understand correctly for administrative purposes the Board in fact has been overcompensating for want of a better term 40% of the claims by using the pre-injury rate as opposed to finding out the actual rate that should be used to best reflect the actual loss of earnings?
A: No, I wouldn't agree with that because the short term wage rate if I can refer to it as that is to compensate for the immediate loss – the worker's immediate loss at that particular point in time – it's estimated that that's going to last about 8 weeks. That's the figure we've put on it – is 8 weeks historically. After that point in time then we took a closer look at what the worker's long term costs would be and we go on from that point in time.
Q: So for an employee who has a serious injury – and you know in fact they have a serious injury - you know you are going to do a rate review at some time – now it's 8 weeks – 40% chance that rate is going to go down so this person - you don't agree that they have been over compensated in that first 8 week period because there are checks and balances wouldn't you agree – this person is no longer facing similar contingencies that other workers have if they have a long term injury – i.e. they are not going to be subject to lay off, reorganization, termination – they are entitled to continue to receive benefits from the Workers' Compensation Board.
A: Yes.
Q: So in the long term for that person they are receiving during that first period of time before you do the rate review more than what has been determined at the end of the day - that best reflects their loss of earnings?
A: Yes, I guess I hesitate to say that they are receiving more than – there's two philosophies in operation that Keith tried to point out – one is that closer to the injury it's more likely that what happens is that the money you are making at the time of injury is best reflected by what – is best reflected with what's likely to happen in the next few weeks. And if it's with administrative – simplicity around 70,000 claims. So I just want to qualify my response by saying that there is value in sort of a short term look whether it is an over compensation or an under compensation because I think we'll hear that it is potentially an under compensation after 8 weeks. And I guess we don't necessarily accept both of those views.
Q: Why would it be an under compensation after 8 weeks if that is when you are doing a more detailed review?
A; Do you want to save that question for your colleagues when they ask that?
Q: I might as well ask – you raised it?
A: Well, that's – that's the whole issue of I guess the nutshell of the debate of the Board's setting of average earnings is we're trying to use and by policy we are using the past as a general predictor for what the future is likely to look like in terms of earnings. We are also tempering it with simplicity and – some degree of simplicity – because I hate to – I think our staff would jump up and down if I told them that this was a simple process. It isn't. But the argument is that if you were making a lot of money at the time of injury and perhaps you've been making it in the recent past for let's say in the past three months or so I think the argument for under compensation after 8 weeks is that what's to say that that pattern would not have continued? I was making $700/week at the time of injury and I've been doing that in the recent past although I've not had a really good track record, earnings-wise, I think the argument that's made to adjudicators and to the Board is why don't you do that - why don't continue that pattern as opposed to perhaps to looking back over a longer period of time and saying well you haven't had a good track record so we don't know that you are going to make that kind of money in the future.
Q: And again this is not unique to this area of law –I mean we are talking about having objective information that you can rely on the past versus a lot more speculative subjective information about what people may think will happen in the future.
A: I'm not an expert in whether there is a loss&ldots;.
Q: Even the Workers' Compensation Board – I mean that's the problem.
A: Certainly the Board is required in other arenas look to the future and try to predict what might happen when it comes to loss of earnings for example.
Q: And the reason I am asking this question though is that we are going to talk about moving the 8 week review to 13 weeks –obviously it is a concern of moving in that direction as opposed to the other direction. My understanding is that it was 1985 that the then 13 week review was brought down to 8 weeks – is that right?
A: Yes.
Q: Do you know why that was done?
A: Basically it was for fiscal reasons.
Q: For fiscal reasons.
A: Yes.
Q: And what was the fiscal amount that was dealt with by moving it from that from 13 to 8?
A: The amount of money – I really can't give you that information – I'd have to look it up.
Q: My understanding from reading the recent discussion paper on moving it back to 13 weeks is that that would – it is anticipated that that would cost an additional $2.7 million in additional benefits. Is that your understanding?
A: Yes, that's the amount they calculated out of that same study of 200 cases.
Q: So the best number that we have to work with is that it is going to cost about $2.7 million.
A: Yes. Just one additional point – with regard to the move in 1985. I think in addition to the fiscal reasons the internal audit group had been and others have raised the issue that for some types of workers the – it's the same issue that we've just had the discussion about – that for some types of workers – 8 weeks might be a long time – or 13 weeks back then might be a long time to be paying them at the date of injury income because the date of the work may not have lasted for as long as 13 weeks so I think that was the other argument beside the fiscal reason that was raised at the time. But there isn't a lot of written material around that move.
Q: From my understand it was in fact the goal was to reduce it even further than 8 weeks – that was the intent – it never happened. Was that your understanding also?
A: I was a neophyte in the business at the time so I wasn't privy to all of the discussions but there was debate I think between some within the Board – perhaps outside about perhaps four weeks. And I think the division at the time was saying wait a second if we are going to have to do a rate at four weeks – and I am only quoting historians that were there and they do recall this – but the administration was saying if we have to start doing earlier you are going to drown us in administration. I think there was some discussion around that line.
Q: Is there an easy way of getting the rate information –for example if we use the one year bases as the norm to determine past history - Revenue Canada has that information. Correct?
A: By calendar year.
Q: By calendar year.
A: Yes; but the problem is that workers aren't always injured in January or February.
Q: I understand that but it gives you an objective number to be working off of.
A: In some instances as long as the worker's employment hasn't changed since the prior year – as long as there hasn't been a large time span between the date the tax was actually filed and the date of injury. It could give you a basic, yes.
Q: And is there any sort of arrangement with Revenue Canada at the present time to get that sort of information?
A: No.
Q: Has there been any discussions?
A: I believe there's been some discussions; we simply don't have the right to obtain that information directly; we have to go through the worker.
Q: What about the flip side – getting from Revenue Canada information about employers and their payroll? Have there been discussions on that?
A: I can't answer that. I believe that Sid Fattedad has been having discussions but I'm not aware of the details – perhaps Ron has a better sense of that. I think you heard from Sid that he was exploring the issue of obtaining earnings from Revenue Canada and certainly if some sort of protocol can be arranged we would be interested in having access to workers' earnings for the purposes of establishing wage rates so I think the discussion is going on with respect to the Board having a protocol arrangement to receive information for both workers and employers.
Q: Thank you; I want to talk a little bit about this proposal from Compensation Services Division to go from the current 8 weeks back to the 13 week review –if I understand the motivation of this it has to do basically with the Rehabilitation side – it's the work conditioning program is ongoing at the same time - is that correct?
A: Yes, the – I think as Ron and others have alluded to is that – and there will probably be an opportunity for further discussion this afternoon – a series of programs early – for want of a better word – early intervention, activity-based, outcome based programs have been introduced – work conditioning being the first of those for soft tissue and others – other types of injuries that are amenable. That typically starts at 4 weeks – typically ends about 10 weeks. And the issue that was put by various management and staff was if the rate review is occurring at the tail end of that program and shifting the focus off recovery and perhaps into dispute because you can see from the chart 40% of rates change – but even for those that aren't changing there is apprehension about a possible drop in the rate occurring in the middle of the first treatment program and the other side that the Bureau did not include in the paper and chose not to because they felt it was too early to sort of be able to say that definitively was the sense that if workers got back to work earlier as the result of these treatment programs there would be a substantial win for them but also a cost saving to employers generally so that while we didn't in the final paper that was sent out for discussion make that linkage – that was part of the thinking behind the move to 13 week recommendation or the recommendation to move to 13 weeks.
Q: Does everybody have a copy of that discussion paper because it is recent and I do have copies here if people would like copies of the discussion paper.
A: [Judge Gill]: You are not aware we have?
Q: No, that is why I'm asking; I'm not sure if the Board yet has it – or the Royal Commission has it?
A:[Judge Gill]: I'm not aware of it.
Q: Maybe I'll give it out; I'm not sure if I'm going to deal with it directly.
A: [Judge Gill]: Looks like we have it.
Q: I want to explore of a couple of reasons to move it because I'm a little bit concerned about it now that I've read the discussion paper and others – first off – the obvious answer would be moving it up to 4 weeks so it's done before they go to work conditioning –I take it listening to your discussion you would say administratively that would cause quite a few concerns for the Board?
A: Sorry, could you&ldots;.
Q: Move the rate review up to 4 weeks before work condition starts?
A: What I was saying was that was the argument at the time in the 1980's and yes there would be concerns about – the earlier the rate review occurs the more rate reviews there are and the more administration I think that's a fair comment.
Q: Okay let's deal with continuance of care first off – is that cost borne in every location of the Board – the continuance of care program?
A: It's available to workers in every part of the province, yes.
Q: So every worker that has a soft tissue injury will end up in the continuum of care program if it is not resolved in a certain period of time?
A: There are some limitations; physicians have to approve it etc. but the intention is that it is offered to every &ldots;I'll Ron answer this he's certainly much more knowledgeable. The intention is for every worker in the province to have that opportunity if they are not employed by an employer who has a bona fide disability management program in place whereby the worker would be offered a graduated return to work so the intention is that every worker would be offered this particular treatment program. We – there has been research that has indicated that if you can keep people focused on recovery and if they have a job return to the outcomes from rehabilitation programs are much greater than if they don't have that particular opportunity. I should also say that we could find no research with respect to any particular reason why the rate review had been reduced from 13 to 8 historically in this jurisdiction. The rate review had been done at 13 in other jurisdictions. It is quite common for there to be a 13-week rate review; in fact I'm not sure than any other jurisdiction has a shorter rate review than that. If I could add one other thing; aside from the continuum of care argument it is very difficult to explain to a worker as we had to do in Prince George recently who had suffered an amputation as a result of a skidder accident. That worker had every expectation that he was going to be employed as a skidder operator over the duration of the logging season. It is difficult to tell the worker and his wife and his dependents that for some arbitrary reason we were going to exercises an 8 week rate review and in his case reduce his earnings under Workers' Compensation Board from maximum to minimum because he'd had a very checkered work history prior to the injury so workers have an expectation that when they are injured that there is every expectation that they should be compensated at the level of pre-injury earnings. And it is very difficult to rationalize why we are exercising an arbitrary 8-week rate review.
Q: And again from an employer viewpoint we see it the other round in the arbitrariness – is that the rate that is being paid at the date of injury doesn't necessarily reflect the actual loss to the employee – it is just a matter of as you describe setting an arbitrary line –and really should go find the best rate that reflects that and so your focus is on the worker concern but you don't seem very aware of the employer concern.
A: If there is evidence as there may be in the construction industry or on a project job that the employment would have terminated within a specific period of time I believe the adjudicators would exercise that particular discretion. But I think those would be – infrequent compared to the situations where there is no evidence that the worker would not have continued to work at the job where the worker was injured.
Q: Now on this discussion paper that I handed out –the last two pages talk about other jurisdictions and there are some that have a 7 week review – Manitoba and Prince Edward Island – so you weren't aware of that?
A: Yes I was. But
Q: You just said before that you are not aware of any jurisdictions that does it before 13. A: Well, we don't benchmark against Prince Edward Island for obvious reasons.
Q: Well, again you said that there were none that you were aware and now you say there were – you are aware of Manitoba; you are aware of Prince Edward Island.
A: I don't have the paper in front of me so if I said all then I should rephrase that to most.
Q: And a variety of them have no formal review and I don't know that that means. Do you know what that means? What rate they set?
A: Yes, I think what that means is that the rate review if you will – the long-term rate that's borne investigation upfront – they spend I suppose the time upfront to do that.
Q: So all of the ones that say no to the review could be well before the 13 weeks because they are trying to do it upfront is your information?
A: We think so but – but I wouldn't want to confirm that because this research was done by somebody else.
Q: That's fine – but from that viewpoint that includes Saskatchewan, Quebec, Ontario, Northwest Territories, and the Yukon Territories. There are quite a few that may well do this earlier than 13 weeks.
A: Would do the long-term or don't worry about it in the short – yes.
Q: Now when I try and sit and think about this –about the motivational impact and people in work conditioning – it strikes me that we are talking about a very, very small group of people that could be adversely affected. I take it that you disagree with that?
A: Well, we are currently see about 2500 a quarter go through work conditioning, so on an annualized basis that would be about 10,000 people and if 40% are going that down that would be 4000 workers.
Q: From the way I understand it looking at if from another view point –the statistics that Mr. Pinto put up was that – I think it was 85% of new claims are finalized within 8 weeks?
A: That's right.
Q: So those wouldn't be any problem – they are out of work conditioning if they ever went into it – they don't even get the rate review so we are left with a potential of 15% of claims?
A: Correct.
Q: And of those –you said under – you said 90% are finished before 13 weeks. So in other words 10% go beyond anyways – they are going to have a rate review no matter when you do it.
A: Yes; Keith might recall the exact number that would have a rate review at 13 weeks. It was about 9, yes.
Q: And so we are talking about the 5% –the 85% that are going to be done at 8 weeks and the 90% that are going to be finished by 13 weeks. In other words 10 keep going. That's really a 5% difference in there.
A; We are talking about the 5% that could actually have the rate reduction occur – yes. But they all have to go through the process should they reach that level. And it is going through that process as well; it's just having the rate reduced that can affect their thought processes.
Q: I understand –but those are in the working conditioning I take it a significant amount of those are going to continue on disability because only 90% finish by 13 weeks and that means 10% - the rest keep going. Through whatever – your continuum of care or get their pension or whatever it is – they keep going through the system.
A: Yes, the drop off in claims is much slower the further out you get. There is a chart that I could photocopy and make available that sort of shows the drop off by week. And it's pretty much a J curve – the design of the continuum is based on the theory that if you get in there early but not too early you can get a substantial success rate without intervening too quickly or intervening too late.
Q: Isn't it possible that some people would actually be positively motivated by the fact that they are now getting a lesser rate and they want to get back to work to get their full rate?
A: Yes, but the chap that did a lot of research on that found surprisingly that there was not a huge drop off from 8 to 9 weeks – that if you look at this continuum and the drop off associated with it there is not a big drop off at 9 weeks. Now if think that 40% of those workers were getting their rates reduced at the 9 – at the 8th week- and earning less money at the 9th week – and if you work – the conventional thinking has been a lot of people will go back to work because there's quite a drop in their rate. But it doesn't show on the drop off rate – that our colleague – our colleagues had looked at.
Q: Again – we are only talking about a small amount because of the ones that are past 8 weeks i.e. the remaining 15% – 10% are going to stay on anyways they've got a more severe disability.
A: Right, but there isn't a drop of say 10 to 14% or whatever it is 85% to 90% in the 9th week and then a gradual falling off it just seems to be a consistent pattern after that.
Q: I understand what you are saying Joe but you're suggesting what I consider to be a substantial policy change based on a hypothetical motivational situation and what I'm trying to explore is hypothetically there could be a positive motivation for some people also who want to get through this program and get back to work.
A: Sure, there's all kinds of theories and I guess even we search and I am sure you are aware of it and the Royal Commission is undoubtedly aware of it that says there is a correlation between the amount of money and the length of compensation. I can't speak to that but I think there has been a litany of papers written that have about it particularly in the US and a little bit in Canada.
Q: That's right. People are getting more than maybe they should be getting and they may find it is a disincentive to go through work conditioning with a view to going back to work. That's a possibility too.
A: Yes, I leave your comment as rhetorical but I guess I'm just saying that there is research saying that there is a correlation and reduced benefits, increased benefits affects claims incidents and claims duration; that is what the research apparently shows. Why it is we don't know. If that were to be the view of the Royal Commission and I think the whole issue of secondary gain should be applied throughout the system not just applied to this particular population of worker. I think with our focus on moving these people into treatment the whole idea is to keep people focused on recovery and return to work and not to inject a negative intervention into that treatment program such that people get focused on appeals or advocacy or other particular outcomes and we waste the opportunity to effectively rehabilitate someone to the workplace so that's the assumption and I suppose you could have a different point of view than that.
Q: That's fine one more area I want to talk about and then I have to move off of this 8 week review– I've been trying to establish some of the concerns I have with the motivational aspects of moving from 8 to 13 –but the real practical concern I have now that I've read the discussion paper is in fact the topic of average earnings overall is before the Policy Bureau – is that correct?
A: Later in the year; they've scheduled to go back to average earnings. Keith gave you the history; it's been around for awhile but later in the year a more comprehensive review of average earnings will be undertaken.
Q: And they tend to do that some time in 1998 as you say? Later in the year.
A: That's the current time.
Q: But what they say in this discussion paper on page three under the heading "On interim nature of proposal" – it says - the last sentence – "Whether or not the current proposal is implemented the timing of the rate review is likely to be reconsidered in the future as part of the average earnings project." Basically what they are saying when you read this whole paper is that we are going to do it again anyways. Whether we go up, go down, whatever we do now that could well be changed some time in 1998 yet again. That is my understanding of what this says; is that your understanding?
A: The commencement of the broader review will occur in 1998; it is unlikely that it will come to resolution in 1998 but it's a possibility that the whole concept of rate review – when we go out to the stakeholders for broad consultation and we will certainly be guided by the Royal Commission's report on that point. But the – we will be looking at all the issues; everything will be on the table.
Q: So in a year or a year and a half - two years you may see the outcome of this review of average earnings which could deal with what the review date should be.
A: Yes, we can't presuppose what the Panel of Administrators might ultimately decide after – but yes that's a possibility.
Q: So you may be doing a very short term measure and when it is looked at in the context of average earnings altogether you may find that the move to 13 weeks was not the best from the viewpoint of average earnings?
A: Yes, just to repeat – I think good treatment programs seems to be working – early results are positive – the sense was that some of the success was being deterred by a squabble or an apprehension about the rate – recognizing that there is a big, broad review coming – why not reinstate the 13 week review recognizing that this province has had it essentially I think since the beginning and leave the bigger debate to a later day – if there aberrant groups that were getting undue benefit from the 13 week rate then let's look at the aberrant groups rather than move everybody to 8 weeks – I think that's a nutshell explanation.
Q: And again from the employer viewpoint –we've always asked for the cost-benefit analysis because we think that a $2.7 million increase over the short term while the average earnings is being looked at doesn't fit with the cost-benefit analysis based on the hypothetical –as this report points out – the hypothetical move may find you savings – and if you are going to find savings you are going to get them anyways for a significant amount of people in the continuum of care. Cause 50% aren't going to go down – they will continue through the program and hopefully that will have a beneficial effect.
A: Yes.
Q: Let me move on to a different topic within average earnings and that is fringe benefits – my understanding on the compensation side fringe benefits are not included in assessable payroll – in earnings – compensable earnings?
A: On the average earnings side. That's correct. 71.20 I think Keith alluded to it earlier.
Q: Would you agree - you talked about trade offs and you said loss of benefits – my experience is that most workers that suffer a work-related or a non-work-related disability but they suffer a disability do not lose their benefits they would get otherwise from work. Do you disagree with that?
A: Your experience is that most workers would not lose their fringe benefits?
Q: That's right. While they are off on Workers' Compensation Board – first off it would infringe on human rights.
A: I don't think that's true.
Q: Well, okay.
A: I don't know – I guess let me put it this way – I can't quantify whether the majority of workers lose their benefits or not but certainly we hear complaints from workers that A) they lost their job because it's a small company the employer had to move on so usually lost their jobs accompanied by a loss of everything – benefit wise.
Q: I don't disagree with you that if you lose your job you are going to lose your benefits. I can't answer whether these people have gone to human rights and looked at it from that view point because human rights would protect them from not losing their fringe benefits simply because they have a medical disability.
A: I don't know about that.
Q: What about in the collective agreement world – I mean my understanding of collective agreements is that employees continue to receive their benefits while they are off on Workers' Compensation Board?
A: Yes, I would think that would be a fair comment that most collective agreements do provide benefit continuance during disability and workers' compensation.
Q: And so if we included fringe benefits into the compensation scheme that would be an area of double payment – at least for those employers that are required either through law or collective agreement to continue to pay the benefit coverage anyways.
A: Yes. It gets down to the issue of what we're being asked to include – potentially yes.
Q: And some benefit coverages as I understand it can't even be covered when a person is off on disability for example an employer provides short term disability or long term disability there is no coverage for disability when you are off on disability – in other words you are not pay someone short term disability protection when they are already off on short term disability or Workers' Compensation Board.
A: Well, I think you are sort of pointing out some of the difficulties the Board would experience if it was asked to sort through you know the multitude of fringe benefits and say this is actually a loss to the worker. I think that is part of the concern is trying to figure out what the quantifiable loss is as opposed to the mere fact that you may not be eligible for something.
Q: Now I know this is not really your bailiwick - would you agree that common sense dictates that for fringe benefits that if it is not going to be included in compensable earnings it should not be included in assessable payrolls?
A: The best comment was that it is not my bailiwick, I guess.
Q: You think that makes sense – common sense that if it is not being paid out it should not be assessed?
A: I suppose as a general rule that says we should generally be collecting what we are – what we are collecting on what we intend to pay out but I think there are differences in wording on the collecting side which is the average earnings side – legal differences – that is what I've always been given to understand and do understand.
Q: My understanding and my experience is that for assessable purposes some fringe benefits are actually included in assessable earnings. Is that your understanding?
A: I don't know. Somebody else? No.
Q: That's all right; I'll come back to this and maybe argue with you later – Okay on the replacement income side –Employment Insurance and whether that should be included – this is not – Employment Insurance does not consider it to be income; it considers it to be a social insurance another social insurance scheme – statutory social insurance scheme –you would obviously agree that Employment Insurance is not being paid by an employer to a worker – it is paid by government?
A: Right.
Q: And it is not treated as assessable earnings – nobody is paying assessments on Employment Insurance – the worker is not asked to pay assessments on Employment Insurance earnings?
A: Nobody is.
Q: Nobody is.
A: Assessments; the Board's assessments, no.
Q: Okay, just a couple of other quick questions; I should be finished in about five minutes. You've talked a bit about the net and the gross and I appreciate that the Board is not taking a position on this. My understanding is that the rate moved to 75% of gross in 1954?
A: I believe so, yes.
Q: And you would agree that there have been significant tax changes since 1954? The impact tax has on earnings?
A: I think so. I wish I knew what they all were but I think there have been.
Q: Would you agree that there are other expenses that a disabled worker does not necessarily have to incur when they are disabled that relates to work such as automobile, transit expenses?
A: Sure.
Q: Childcare if they had it? They may not have to incur that?
A: Yep.
Q; Meals?
A: To some degree, yes.
Q: Clothing to some degree?
A: To some degree, yes.
Q: And most of the, if not all of the expenses on the medical side if it's a compensable claim are covered through the Workers' Compensation Board?
A: Related to the claim.
Q: That's right.
A: Yes; related to the injury but not to &ldots;.
Q: That's right – the issue of stacking and integration from your chart you would agree that with respect to worker benefits –the pension benefits the majority of jurisdictions actually integrate – Canada Pension Plan and the benefits? I think my reading was 8 to 4?
A: I'd accept that – the records – the record's there.
Q: Okay - the reason I'm asking is it looks like the tendency is to go to integration from the other side also –when I read the discussion paper – there's a discussion paper on benefit integration and stacking - it talks about the recent discussions that the Federal Government has been having with provinces on the Canada Pension Plan plan –and one of the focuses there again is the integration of Canada Pension Plan with workers' compensation. Is that correct?
A: Yes, the feds have talked about it – integrating services – it also talked about coordinating services – it talked about integrating benefits which is I think what you are alluding to.
Q: Yes, and the issue then becomes who should be first payer when you integrate between the two as opposed to whether there should be integration or not.
A: Yes, the legislation as we understand authorizes the minister, the federal minister to engage in discussions with the province with the view to – how integration occurs – it doesn't state whether their intention is to make themselves the second payer – it simply seems to be driving at look we both shouldn't be paying. But it doesn't point one way or the other where the feds would like to end up on those negotiations.
Q: Okay – consumer price index adjustments I have a quick question – obviously we know in BC consumer price index adjustments are done semi-annually to the wage rate being paid to a worker. Is that correct?
A: That's right.
Q: My understanding from reading one of these papers – I forget which one - is that we are the only jurisdiction does it semi-annually – everybody else if they do it – do it annually – is that your understanding?
A: Don't know that for sure. And I would point out that the worker misses the first consumer price index. The first one that comes up. There is a 6-month delay before it kicks in.
Q: Okay - overpayments just for a quick question then – there was a decision of the Appeal Division dealing with the overpayment issue –retroactive adjudication overpayment?
A: Right.
Q: And my understanding of that decision is that there are certain areas that the Board is safe to seek overpayments – if there was fraud or misrepresentation by the worker the Board has the authority to recover the overpayment. Is that your understanding?
A: Correct.
Q: Equally if there was an administrative error – somebody typed the wrong cheque –
A: Yep.
Q: Equally – they said if the Board actually had no statutory jurisdiction to do what it did – was the final example that they gave – is that your understanding?
A: That's right. I think so.
Q: The main area they said you can't do is for decisional errors.
A: Well, ..[tape interruption] I guess is another term.
Q: And that because the Appeal Division said there's no explicit statutory ability to do that – there could be but there isn't in our Act.
A: I can't remember if that is the rationale they used but it may well be.
Q: Are you aware in other provinces whether they seek overpayments on decisional errors?
A: Not intimately familiar with other provinces – on that issue.
Q: My understanding is that Ontario has, in fact a policy that they will receive – recover overpayments on decisional errors where it does not involve severe or long term financial hardship. You are not aware of that?
A: No.
JIM SAYRE
Q: I'd like to by just clarifying here when we are talking about benefit levels – would you agree with me that the premise of the Act as it now stands at least is that injured workers should be compensated fully for their actual financial losses by reason of the injury?
A: Fully. I guess you would have to clarify for me fully. Because I guess my understanding was that this Act was not intended to be a sort of a full remedy. It is the same question as&ldots;.
Q: Okay, we may be thinking of the same thing. I have some follow up questions of course – I'm thinking of the language in section 33.1 which talks about picking a wage rate which best represents the worker's actual loss by reason of the injury.
A: That is what section 33.1 says.
Q: The wage rate is intended to provide full compensation for the wage – the loss of earnings as a result of the injury – that is why it says that – right?
A: I don't recall that that it uses the term full compensation but I do recall that it uses the term actual loss so it – the best represents – the Board has got to – the way I would interpret that is that the Board's got to do the best job it can at trying to come up with what the actual loss is.
Q: It's supposed to compensation the worker for what he's lost – isn't that right?
A: Well&ldots;
Q: Isn't that what 33.1 is about and 23.1 and section 30?
A: We may be splitting hairs slightly but I don't know that it says that it is supposed to compensate him for what he's actually lost but it's - it says that the Board has got to try and best reflect the actually loss – now whether there is a distinction there or not may not be worth pursuing the argument on I'm not sure.
Q: So in your view in setting the wage rate the Board should say well okay we've got figure A here which reflects the actual loss but we are going to pay something less than A? Are we going to set the wage rate at something less than A?
A: No, we know that if we have a figure that best reflects the actual loss then we should be using it.
Q: Good – okay - that's really all I was asking – and Section 23 and 30 which talk about partial disability benefits – 23 is permanent benefits and section 30 is temporary benefits - those are also intended to ensure that the money that the worker receives reflects what he is actually losing from time to time as a result of the injury isn't it? I mean the language is complicated we don't have to go into that now but generally speaking it's supposed to – if you are currently – if you are totally disabled then you get all your wage rate and if you are 15% disabled, you get 15% of your wage rate – the theory at least behind those sections is that the worker gets compensated for what he's losing.
A: Well the combination of 29 and 30 and the combination of parts of 23 speak to quantum but also extent and duration I think.
Q: There are ways - indirect ways that the Act sometimes seeks to achieve that – as opposed to direct ways. That's the goal.
A: Yes.
Q: Okay. Now on the other hand –and I guess before we leave that subject - the 75% of gross benefit rate was also intended historically to represent what workers actually lose given the fact that benefits are non-taxable – that was supposed to represent what the worker was losing in his pocket as a result of being injured. Isn't that right? That's basically what you told us.
A: I think that was the original concept.
Q: And now there is an issue about whether through tax changes and so on whether that rate is any longer the best way of accomplishing that. On the other hand workers - injured workers get no compensation at all as it now stands for pain and suffering, loss of enjoyment of life, other things that would make up general damages if they were injured in say a non-work auto accident and suing in a court system – is that correct?
A: Correct.
Q: That's a very substantial - that can be a very substantial amount of money in the case of serious injuries that the worker loses right off the top, is that right?
A: Yes, I wouldn't be able to draw the distinction in quantum about which system pays more for the serious&ldots;
Q: Okay - just to take an example the Commission heard from one worker who suffered quite a horrendous injury to his face in a sawmill accident - now that worker had suffered disfigurement – went through numerous operations was off work for a long period of time - is there any doubt that if he had – if that same injury – that same critical injuries had occurred in an auto accident he would have been entitled to $50,000, $75,000 or $100,000 in general damages on top of whatever loss of earnings he suffered?
A: Unfortunately, I'm not an expert as to what the auto system would pay
Q: It sounds reasonable, doesn't it? From what you know of what happens in court.
A: I'll accept your word for it.
Q: All right, let's take a worker whose life style has totally changed by reason of a work injury – take a worker for example who has a very active sports life – plays physical sports, goes hiking, goes climbing, goes skiing and suffers - has –maybe buys himself – bought himself property - recreational property to facilitate those activities – suffers a very serious hip and leg injury to the point that he can't do any of those things again –the whole focus of life has been changed –the whole focus of his recreational life has been changed - the Board does not pay anything for that loss of the enjoyment of the things that that worker was able to do before the injury does it?
A: Yes, not in the form of compensation as it is traditionally known. There may be limited assistance in the area of special apparatus under medical aid or some apparatus under rehabilitation&ldots;.
Q: If he could ski with a special pair of boots the Board might compensate him by buying those boots – is that right?
A; Yes, but not &ldots;.
Q: But if he loses the ability to ski altogether the Board isn't going to compensate him for having spent all that money on the equipment and buying himself a cabin to stay in while he's skiing and whatever other losses he may have lost as the result of his life being turned upside down as the result of that injury?
A: That's right.
Q: So in a sense workers who suffer a serious injuries at least may be severely undercompensated in ways that – because the Act just doesn't contemplate those types of general damages. It's the point I'm trying to make – and you I think would agree with that, wouldn't you?
A: I – why don't you just make the point?
Q: I did. We have also talked earlier – the first week - about the maximum wage rate – for those workers who earn more than the $56,000 a year or so maximum wage rate don't get any compensation for their loss of earnings above that rate.
A: That's right.
Q: That's right? And there are many other wage rate issues - Keith Sullivan talked about some of them and I am going to be directing some questions to you, Keith, in a moment about some of the specific ones that we know of that have been raised from time to time – one that was mentioned already was the question of Unemployment Insurance Commission benefits and periods of unemployment – it's undeniable isn't it that if a worker – say a seasonal worker has a pattern of having earned $40,000 a year through the seasonal employment income and getting another $10,000 from Unemployment Insurance Commission for periods of unemployment and becomes totally disabled he's $50,000 out of pocket but his wage rate is going to be $40,000 isn't it because the Board doesn't count Unemployment Insurance Commission benefits nor does it subtract for the periods of unemployment when it calculates the average earnings. That's correct isn't it?
A: That's right; that's the current policy, yes.
Q: So workers in that category have lost – to take that example – have lost 20% of their earning capacity without compensation – or 20% of their income without compensation.
A: Yes, the distinction there I guess is earnings – the Board has not accepted that those are sort of employment or average earnings. They haven't met the definition of average earnings.
Q: Of course we are talking here –this is a Royal Commission and we are talking not about –I'm trying to keep in mind myself not to fight over old battles about individual cases and so on because the focus really should be on what the system ought to be in the future and if we can agree that the system ought to provide workers with compensation for what they've actually lost financially as a result of their injury then a lot of these other pieces can fall into place –if there is a problem in the language in section 33.1 that kept Unemployment Insurance Commission benefits from being considered but we all agree that that is a real loss that the worker suffers you can change the Act –the Royal Commission can recommend that the Act be changed. So, you know I'm not too concern about the fact about the reason for the Board's policy I just want to clarify what the practice is and what the reality is for injured workers who are in that position as of today. Now before I look at some of the specific average earnings issues and there's a number of them – probably more than we are going to have time to talk about in detail - I'd like to turn just briefly to the two issues that you brought up which represent changes for the future that seem to be on the employers' agenda – one of the them is that the Act to be changed to – instead of paying 75% of gross to be paying a certain percentage of net –it seems to me that that raises two questions – first of all the difference between calculating net earnings as opposed to calculating gross earnings and then secondly the suggestion that the worker should get something less than 100% of net –whatever net turns out to be – so go to the first question isn't it true that it would be a major additional administrative task of the Board if you had to calculate net earnings as opposed to the present system of having to calculate gross earnings?
A: Yes, I think I made the point that there would be both a one time and ongoing increase in administration costs. I gave you some very, very global estimates.
Q: If in fact we take two workers –one of them is unmarried and single and the other one married and has 5 children – obviously the second worker has lot more deductions and will have a lot more – a bigger chunk of his gross earnings will come home with him in his pay cheque than the worker with no deductions. The first worker may or may not have a pattern of paying RRSP contributions every year – that makes a big difference to how much their net earnings is doesn't it? These are all things that would have to be factored in if the Board were to go to a net approach as opposed to a gross approach.
A: Yes, the only things that most Boards concern themselves with when they move to net are the probable income tax, Canada Pension Plan, and Employment Insurance deductions. It's not a true net – it's not what your actual pay cheque is so they typically do an approximate net. And I think there's examples of that in the Bureau's discussion paper.
Q: How could the Board calculate probable Unemployment Insurance Commission or probable income tax deductions without taking into account the worker's dependents and other tax deductions from time to time.
A: Yes, they again – they approximate the net by just worrying about dependent status and then they factor in the amounts that the worker would be paying for Employment Insurance and Canada Pension Plan and leave it at that so at that point it is – and they also don't worry about changes that might occur in the future – independent status for example. It's an approximate net system.
Q: They don't worry about changes?
A: They don't worry about changes that occur for the most part in the future to dependent status – now some provinces may be more – those that are on an actual wage loss may require renewal but for the most part net systems don't chase after the worker and keep track of changes in dependency status.
Q: So take our hypothetical example – we've got a 25 year old single employee with maximum income tax withholding because he just has his own deduction and we've got a 35 year old married – or say a 25 year old to keep the ages the same – married worker - same job and same income but married with several children –the net income of the second worker is going to be a lot higher – income liability is less correct?
A: Correct.
Q: You are saying that if that single worker gets married a couple years after the accident and starts having a family and eventually ends up with 5 children – he is going to continue to receive lower benefits for the rest of his life if he has a permanent disability. As I understand it. You are saying that – you are saying that is the way the net system works.
A: As we understand most provinces don't regularly update – or don't change the benefits – particularly long term benefits to reflect that change.
Q: It is kind of unfair isn't it? The single worker would say it was unfair. Wouldn't you agree?
A: I'm sure they would.
Q: If the Act were to go to net and we are still to have as a goal paying benefits that reflect the actual loss of earnings by reason of the injury as we I think agree the goal is – presently – wouldn't it be necessary to have a provision that every time a person's deduction status changes they are entitled to have their wage rate changed and I suppose from the Board's perspective they would say well yes and what's more we have to find out if your deduction status changes in a way that increases your tax liability because we then might decrease your benefits. So instead of having one wage rate we are going to have a wage rate that changes every year. Isn't that&ldots;..It seems to me we either have that or we completely give up on the goal of representing the actual loss by reason of the injury. Because you can't have them both.
A: I don't think we should be dealing with this based on the Board's ability to administer – I think we should be looking at this in the context of what is right according to the Royal Commission's view on social policy and we should then be administering whatever the Royal Commission's recommends relative to this matter. With systems the way they are these days I'm sure that we are better equipped today than ten years ago to capture different dependents status, changes in those kinds of things – while it would be an administrative change I'm not sure that we should make a lot about the Board's ability to administer.
Q: Well I think that employers as well as workers are concerned about the consequences of such a change – obviously it adds administrative costs to the system – it adds costs to the appeal system and we have wage rate decisions that change every year as the people's dependency changes – children grow up and are no longer dependent, new children are born, families break up and people get divorces and people may go from having a wife as a claimed dependent to fully employed to having an ex-wife who is entitled to alimony or who may not be entitled to alimony and who is – and the alimony may or may not be tax deductible depending on the agreement between the spouses as recent changes to the family legislation - aren't these all factors that would make it extremely difficult for the Board to efficiently administer the workers' compensation Act without doing what Joe has described –and saying okay we're going to take a snapshot of your net earnings as of the time you're injured and that's it; we don't care if it changes.
A: Yes, the – just to repeat I think the move initially from 75% of gross to a percentage of net in most provinces was let's get better at the outset of trying to reflect the actual loss. For the most part, as I said, from my understanding is that they do not then try to replicate that exactness so that approximate exactness in ensuing years&ldots;.every large employer in the province is faced with that challenge every day and so again my point is we should be administering what the right social policy is around this issue and if Boeing who has 20,000 workers can accommodate this on a payroll system then the Board should be able to accommodate these kinds of changes in a payroll system.
Q: You sound like a proponent of net.
A: No, that's not to say that we are advocating net
Q: You are sure defending it.
A: No, I'm saying that we are here to administer what the Act requires us to administer. If the Act is changed to a net system we'll make the appropriate changes – if the wishes of the Royal Commission are that we stay gross we'll stay administering the gross system. But I think sometimes too much is made of the administration piece – I repeat every employer in this province today is faced with making those changes to benefits and everything else around reporting to Revenue Canada and making appropriate changes to pensions status and those kinds of things.
Q: I'm not sure what you are saying – employers take a T1 form from their workers and they send the money accordingly but there is no question of arguing with the employer about how much it ought to be.
A: When there are dependent changes the worker comes in, files a new form and the appropriate deductions are made so if it's possible for employers it would be possible for the Workers' Compensation Board to administer it in that way.
Q: Okay – all right – I have your point there - now let's turn to the question of what I think employers are really after which is trying to give workers less than what they've really lost as the result of an injury –first of all again a little bit of groundwork - saw mill orders some new milling equipment – it doesn't arrive on time – the mill loses some orders of $1 million – can you imagine if the mill went to court and sued the vendor of that equipment - the judge would say well your loss was $1 million – I'm going to give you 90% of a $1million –ever heard of a legal system that operated that way?
[Judge Gill interrupts]: I don't think that is an appropriate question - If you asking, Mr. Sayre, what should be the objectives of the system and whether the Board has any comments on that – how it relates to earnings capacity and measure that – I think you should restrict your questions to definable questions as opposed to something like that.
Q: Well, I was getting there – I'll jump ahead then - the point I'm making of course is that no where else in our legal system do people who have suffered a loss – or people who have suffered a loss are asked to take something less than full compensation – certainly employers don't do that when they get involved in civil litigation – I'm sure that generally speaking the way our system works is that losses are adjudicated and people get their losses. What principled rationale is there that you are aware of in these jurisdictions that can give people less than the full amount of their losses? Other than this somewhat foolish notion that if give people – if you make life hard enough for people by giving them less than they are used to living on they'll get back to work quicker? Is that the only basis for 90% of net, 95%, 99% anything less than 100%? The coercion of injured workers?
A: I'll try to cover and certainly the Bureau's discussion touches on the rationale for net and I'll try to provide a quick snap shot of rationale for net – whether it be equity issues or an issue of overcompensation, undercompensation and there's the equity between the different levels of income as opposed to workers with the same income and among others there was also the notion advanced in some of the discussion papers that some of it was a financial rescue strategy – it depends on the situation in each province at the time that they brought it in as to why they brought it in. There's also, I guess, a lot of stuff written in literature – I'm not sure how much attention was paid in each of the provinces as to the appropriate level of compensation so as to not create an incentive or disincentive to go back to work versus providing enough compensation to sort of live the sort of life style you were in before the injury. If you are asking me to pick one of those it is not for us to do today I don't think. I think again Mr. Sayre that the administration of the Board takes no position on what the appropriate benefits scheme is within the system.
Q: I understand that.
A: I think your submissions would be better reserved for when you wish to put forward your views because
Q: I'll ask my questions Mr. Buchhorn – I would appreciate it if you would answer them – if you can't answer them or if the Board takes no position that's fine.
A: We take no position.
Q: The question of staking and integration I think you've acknowledged that it really doesn't have much of a bearing on Unemployment Insurance Commission benefits because Employment Insurance makes the Workers' Compensation Board the first employer – first payer – and the GAIN benefits again unless the system is so – that the worker's claim is such that they would be entitled to more money on welfare than workers' compensation – there isn't going to be any duplication there is there? It's going to be a duplication it's just that there – GAIN is a level below no worker – no person normally speaking is allowed to sink in terms of their income and if workers' compensation is paying less than that then GAIN makes up the difference.
A: I can't speak to the intricacies of those legislations but my general point in my presentation was that for the most part it was a non-issue as to – they perceive the Workers' Compensation legislation to be – to make us the first payer and they perceive their own legislation to make workers' compensation the first payer- I think that is the most common.
Q: Isn't it also the current proposal of under Canada Pension Plan? My awareness – as far as I know that the most recent discussion papers on Canada Pension Plan benefits suggest that the workers' compensation should again be the first payer and the Canada Pension Plan Disability should only kick in to the extent that&ldots;.
A: As I was saying in my opening comments my understanding of what Canada Pension Plan is proposing and I don't purport to be an expert on this but what they are proposing and what their actual language calls for is for the minister to be authorized to be engaged in discussions with the provinces with the view to some kind of integration with the benefits. As I was saying I think earlier I didn't see there that the discussion necessarily would take the form of the province or in this case the workers' compensation system taking on the responsibility for first payment status while Canada Pension Plan falls to the back as second payer. It's not clear in that legislation as I read it but I don't know if there is anybody else - Heather do you have anything – I know you tried to look at that a bit? I think when the original discussion papers were issued back in 1995 and 1996 the discussion was that there would be a deduction for Canada Pension Plan to represent the payment by workers' compensation. As far as I understand it the current legislation just as Joe has said was to leave the negotiation open between the provinces and the Federal Government. We've been told that there is currently policy development taking place in Ottawa as to how they will broach the provinces in this respect.
Q: It is a very complicated formula amendment formula for Canada Pension Plan – it requires that the majority of provinces with the majority of the population agreed to any change in the Act so it is your understanding then that any change by the BC Board would be effective only to the extent that it was concurred by the Federal Government and reflected in comparable changes to the Canada Pension Plan Act?
A: I'm not sure if I understood your question. And I am probably far out of my league in sort of amending constitutional arrangements between or fiscal arrangements between the provinces but to repeat what I do understand or what I think I understand in reading what Canada Pension Plan has put together and what the association of Workers' Compensation Boards in monitoring this situation is that legislation has reached a stage whether it has the concurrence of the provinces I don't know but it has reached the stage where the Minister is now authorized to engage in discussions and I don't think it even specifically names a provincial governor – it just sort of says the appropriate authority with the view to integration of benefits. That's as much as I can tell you on it.
Q: It is a complicated area in that BC has no control over it, is that right?
A: I &ldots;
Q: Did you hear my question?
A: I sort of caught the tail end of it but yes I think your question was it's a complicated area that BC doesn't have complete control of and I would agree.
Q: Turning to waiting periods –in the jurisdictions that have waiting periods is there anything that – is it normal practice – perhaps I should put it this way – is there anything that prevents the employer and worker from agreeing that during the waiting period the employer will cover the salary – for those first three days or whatever it might be?
A: Yes, I think in at least one of those two provinces the intent is that if the employer pays the Board won't pay.
Q: Yes.
A: So it is clearly intended to be a true waiting period – in other words it can't be filled by the employer through some arrangement with the worker or with the union.
Q: You say one province does it that way?
A: I think Nova Scotia, for sure. I don't know about New Brunswick .
Q: But there would be no reason that if this Royal Commission were to see fit to recommend a waiting period why they couldn't leave it – at least make it open for the employer to pay for the three days directly or better yet – from an injured worker's point of view – make it mandatory that the employer cover it directly. It is not inconsistent with having a waiting period is it?
A: The Royal Commission certainly could do whatever it felt saw fit to do and I guess it is not inconsistent with the idea that the Workers' Compensation Board not paying the first day or two or three or whatever.
Q: In jurisdictions that have a waiting period – is it still mandatory to require all injuries that result in any time off work at least – I guess other injuries as well – the 3 day waiting period doesn't mean that the Board is never told of injuries that last two days? Does it?
A: No - I think it is a requirement in both those provinces that the injuries be reported, medical aid get paid and that sort of thing.
Q: Wouldn't that be a concern if it resulted in – those statistics you showed us they concerned me because it looked like there were thousands of claims that prior to the institution of the waiting period that were no longer being made. Now did that just mean that there were thousands of claims in which the Board didn't have to pay any money because the worker got back to work in three days? Or did that mean there were thousands and thousands of minor work injuries that were not being reported at all to the Board?
A: Yes, I think the unfortunate part is that nobody can answer those kinds of questions definitively. There's – as I said there's a lot of theories about what happened to those claims and in particular to the reporting of the injury. The injury&ldots;..
Q: The figures you showed us did they – were they figures for the claims reported or for monies paid out?
A: I was just going to get to the point. I don't think the claims reported dropped in the same proportion as the short term disability claims paid. So in other words and perhaps the Bureau could double check that for us – but my understanding is that there was a much more significant drop in short term disability claims paid as there were in claims reported.
Q: Theoretically going to a waiting period shouldn't affect the claims reported at all should it? All claims should still be reported?
A: I bet that's the intent in those provinces that have a waiting period.
Q: So something has gone wrong in those provinces based on the figures you showed us?
A: If the research shows that – you know – following normal trends and - and barring any other explanation for where they went or the economy suddenly took a dive, etc. – that kind of thing – substantial decline in the reporting of accidents I guess would require more investigation.
Q: I'd like to address some questions primarily to you Keith, although anybody is free to jump in and answer - regarding the setting of wage rates –the – first of all you mentioned that were a very, or relatively or surprisingly small number of appeals at least being decided by the Review Board given the number of wage rate decisions that are being made each year – could that be a reflection of the fact that it is made at the very outset of the claim? I mean it seems to me and I'd like to hear your comments on this that if we put together what you are recommending by going from 8 to 13 weeks and the reason for it – being that it has a negative effect on the worker's relationship with the Board and therefore could harm the chances of getting the continuum of care process working. That it is reasonable to assume that up until the time when the Board cuts the wage rate the worker is not involved in a conflict situation with the Board?
A: That's true, yes.
Q: And it is that 40% of cases in which the rate is dropped that may start a conflict relationship as opposed to a cooperative relationship – and that's precisely why you want to delay that period – at least until this active continuum of care process is over?
A: That's true.
Q: Would you agree with me that the purpose – as you talked about the tension and this has been debated for many many years between the focus of the present language of Section 33.1 and some of the other sections which refer as much as anything to average earnings as opposed to earning capacity – and the goal of the process which is to measure what the worker is going to lose in the future as a result of the injury. That – that - you would agree with me that that is the goal of the process?
A: It's to measure the average earnings over earnings capacity, yes.
Q: Yes, but specifically to figure out not what the worker earned in the past because he hasn't lost what he earned in the past – it is to figure out what the worker is going to earn in the future as a result of being injured at work through the – and the Act says you should do that by reference to average earnings.
A: And the measure that we usually use for that is the earnings pattern that has been established to that point in time – it being the best reflection of what the future loss is going to be.
Q: And that has the affect of some of the instances that you mentioned such as the Unemployment Insurance Commission period of unemployment question of putting the Board in a quandary because the past may not – the way the Board interprets that jurisdiction at least – the past may not properly reflect what the worker is going to earn in the future. There may be changes in the worker's earning pattern that aren't going to be reflected in the past.
A: There is always potential for change to happen in the worker's future that we can't foresee. We just try to best estimate it by what has usually happened in the past – of course there are always exceptions that we can look at and we do have to do – we have to look at whether or not for example if a worker is going to be staying with a particular employer – that may be a change right there – the worker's attachment to the workforce which would cause us to look more at the future than just what the earning pattern was – has been to that point in time.
Q: How much time do I have left? If Mr. Steeves wants his full share then you have 5 minutes Mr. Sayre. Okay, then I'm going to have to defer most of my specific questions on average earnings –our group has specifically identified about 20 separate issues in which we feel that workers are being under compensated by the way the Board calculates average earnings. Many of those questions are before the average earnings-working group and as you described that process was never resolved because it there was never consensus among the stakeholders. What I'm going to go to now is a suggestion for you and I'd like your comments on this. Instead of any – first of all it seems to me that any automatic review at any number of weeks – whether it is – whether it is 8 weeks, 13 weeks, 26 weeks or one week - it inherently contradicts the purpose of the assessment unless we assume that the worker – that every worker's job pattern is going to change at the end of that number of weeks and that's absurd. There are workers who would have worked at their pre-injury employment for a full year and there are workers who might have only worked for a few days after the injury and you can't and yet both of them are subject to the same review. Wouldn't the Act and maybe the Board can better achieve the goal of compensating the worker for what he has actually lost by reason of the injury if it provided that all wage rates would start off at the date of injury earnings because that obviously was what the worker was earning at the time that he was injured. And then instead of an automatic review there – the ability of the Board to reconsider these earnings for wage rates if there is substantial evidence that the wage rate no longer reflects the ongoing losses due to the injury. And I was intrigued when I discussed the question with Mr. Winter the question of the provinces – some of the provinces where they have no specific policy - isn't it possible that that is exactly what they do? Accept the rate at date of injury earnings and then change it only if there is a good reason to change it?
A: There's two possibilities and our leader in the Policy Development Bureau has volunteered to clarify what happens in each province. One is that they do an extensive inquiry into past earnings. The other possibility – and therefore don't do another review – and the other is they take earnings at the time of injury and leave them in place unless one party or the other objects. And there may be a mix of both approaches in those other provinces.
Q: Wouldn't that just generally speaking though be a good answer to the question that Mr. Buchhorn raised of – the example he raised of the skidder operator who asked the Board why are you arbitrarily reduced my wage rate when I would have worked the whole season? Because the Board's answer would be we don't arbitrarily reduce rates at any particular period of time - what we do is make sure you are getting what you are losing – we try to make sure you are getting what you are losing – and will only change your wage rate if you are getting more than you are losing or more than you are losing. Wouldn't that conceptually be a better way of approaching wage rates?
A: I guess what you are proposing and I think the Board would want to have a look at it and then perhaps comment but it sounds to me what you are describing is a sort of presumption in favour of earnings at time of injury with an onus for the Board to then disprove that, is that?
Q: I would be a little reluctant to put labels like presumption on it because they have legal connotations that may or may not be appropriate. What I am saying is that you start with that because that is where the worker starts – the day after the injury that's what he has lost. Whether you change that relatively quickly into the claim or never depends on depends on the type of employment it is it seems to me and other factors with - that could persuade the Board to make a decision based on evidence that this no longer reflects what you are no longer losing by reason of your injury. If you are a seasonal worker you have regular lay off periods – if we paid you the full day injury rate without any reductions that would give you more