Thursday, October 01, 2015

Primer on Workers’ Compensation

A typical client call to the firm starts out as:

We have been in business for 10 years. Nobody ever told us before that we had to be registered for workers’ compensation, but we are being advised by a WSIB representative that we have a big problem because we didn’t. They want us to pay 7 years of back premiums, interest and a whack of penalties. If this is compulsory, why didn’t the government tell us at the beginning when we registered our business?”

Background Information

Workers' compensation was Canada's first social program to be introduced as it was favoured by both workers' groups and employers, who hoped to avoid lawsuits. The system was developed after an Inquiry chaired by Ontario Chief Justice William Meredith, who outlined a system in which workers would be compensated for workplace injuries, but, in return, must give up their right to sue their employers. The system was introduced in various provinces on different dates. Ontario was first in 1914, Manitoba in 1916, and British Columbia in 1917. The system remains a provincial responsibility and thus the rules vary from province to province. In most provinces, the workers' compensation board or commission remains concerned solely with insurance. The workers' compensation insurance system in every province is funded by employers based on the employers’ payroll, industry sector and track record of injuries (or lack thereof) in their associated workplaces (usually referred to as the "experience rating").

In Ontario the Workplace Safety and Insurance Act, 1997 sets out the purpose of the Act in s.1:

The purpose of this Act is to accomplish the following in a financially responsible and accountable manner:
1. To promote health and safety in workplaces.
2. To facilitate the return to work and recovery of workers who sustain personal injury arising out of and in the course of employment or who suffer from an occupational disease.
3. To facilitate the re-entry into the labour market of workers and spouses of deceased workers.
4. To provide compensation and other benefits to workers and to the survivors of deceased workers.

The Workplace Safety & Insurance Board, (formerly Worker's Compensation Board), (“WSIB”) is a branch of the Ontario Ministry of Labour and was established in 1914. It is a workers' compensation insurer for Ontario, and is tasked with maintaining and administering the insurance fund.

The WSIB was formed in 1914 through the passage of the Workmen's Compensation Act. In 1998, the Workplace Safety and Insurance Act was passed at Queen's Park. This resulted in the formation of the Workplace Safety & Insurance Board or WSIB, which took over the functions of the previous board.


Registration with the WSIB is required for most Ontario employers. It is not required for all employers, and the means of knowing which category a business falls into are not commonly known. As a result, as new businesses start up, it is all too frequent an occurrence that the question of registration with the WSIB never arises.

Since the inception of the worker's compensation system 100 years ago, Ontario employers have essentially fallen into one of three categories.

The first and by far the largest of these categories is Schedule 1. These employers include most manufacturing, sales, distribution, service and construction activities. All Schedule 1 employers in Ontario are required to register with the WSIB effective on the day they first employ workers, and to pay premiums calculated as a percentage of payroll, roughly ranging from 0.2% to 18.3%, based on anticipated injury rates in the given sector of the industry.

Schedule 1 is divided into a number of classes and each class is sub-divided (examples appear below with highlighted transportation industries):

          Class A – Forest Products  
          Class B – Mining and Related Industries
          Class C – Other Primary Industries
                        6. Fishing
         Class D – Manufacturing
                        1.c. canoes
                        1.o. skiffs
                        1.p. small boats
                        15. i. Shipbuilding or ship repairing
                        15. ii. Operation of dry docks.
                        20. ii carriages
                        20. iv motor truck bodies
                        20. vii vehicles, other than self-propelled vehicles.
          Class E – Transportation and Storage
                        1. Hauling or loading logs on cars, trucks or vessels.
2. Operating grain elevators.
3. i. Carting, teaming and trucking.
ii. Loading or unloading cars or other vehicles.
iii. Stevedoring.
iv. Operation of aeroplanes, airships or other flying machines.
v. Operations of forwarding companies or persons engaged in the business of transportation by canoes, scows or sleighs.
vi. Operation of wharves or work upon wharves.
vii. Sanding streets or roads.
viii. Scavengering.
ix. Street cleaning or removal of snow or ice.
x. Warehousing or storage, with carting, teaming or trucking.
xi. Warehousing or storage, without carting, teaming or trucking.
xii. Business of supplying truck drivers.
xiii. Conveying passengers by automobile or trolley coach.
xiv. Operating a taxicab business.
                        4. Operation of railways, not included in Schedule 2.
   Class F – Retail and Wholesale Trades
   Class G – Construction
   Class H – Government and Related Services
   Class I – Other Services

Schedule 2 employers, on the other hand, do not pay premiums but are instead directly responsible to reimburse to the WSIB the cost of all claims paid, plus an administrative surcharge in excess of 22%. Employers in this category tend to be larger and more established on the whole, and include the following:

    telephone companies within the legislative authority of the Parliament of Canada
    telegraph companies
    navigation companies
    international bridges
    the provincial government, including boards, commissions, and Crown agencies
      any airline with a regularly scheduled international passenger service
    municipalities, including municipal boards and commissions, except hospital boards
    public library boards
    school boards.

The balance of employers in Ontario not categorized into either Schedule are not required to provide worker's compensation coverage to their employees. There is no particular pattern by which to identify those employers; they include such diverse operations as golf courses, photography studios, funeral homes, dental offices and summer camps. The legislation provides that some employers, who are not compulsorily covered under either Schedule 1 or Schedule 2 of the Act, are eligible for Schedule 1 coverage by application. These include, but are not limited to:

    banks, insurance companies, and trust companies
    barbers and hair salons
    membership organizations (such as labour organizations, professional associations, political organizations, etc.)
    motion picture producers
    offices of lawyers, dentists, medical doctors and veterinarians
    radio and television broadcasters
   touring and travel agencies.

The WSIB does not extend coverage by application, under any circumstances, to:

    teams or individuals competing in sports
    persons who perform stunts in films, videos, theatrical, or live performances, including any actors or performers who do their own stunts.
   foreign diplomats and members of a diplomatic staff in embassies as defined by the Vienna Convention on Diplomatic Relations, 1961, including head of the mission, members of the diplomatic staff, and diplomatic agents.

The WSIB has an online Employer Classification manual at that sets out whether a business activity is compulsorily covered under either Schedule or is available as an option.

Failure To Register

Employers who fail to register are potentially liable for retroactive premium assessments plus penalties and interest going back five, and in some cases more, years. Further, the WSIB will bring the full weight of its enforcement powers to bear upon such an employer that it discovers on its own.  Prosecutions and fines are a distinct possibility. To that end, the Board draws information from its own investigatory activities, information exchanges with the Canada Revenue Agency and other government authorities, anonymous tips, and reports of worker injuries by individuals whose employers are unknown to the Board.

Where an employer steps forward and voluntarily discloses non-compliance, the WSIB will apply its Voluntary Registration policy and waive its rights to levy penalties and interest, or to lay charges. While the employer will be assessed retroactively for premiums, that assessment will be limited to the 12 months prior to the date that it in fact registers.

It goes without saying that employers who are ineligible and cannot provide workers’ compensation benefits or employers who may choose to provide same but do not are exposed to tort claims by their employees. As not every insurance policy provides for third party liability coverage where an action is commenced by an employee, great care must be taken to ensure that any private insurance coverage is adequate.


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