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Workers’ Compensation – Key Vocabulary

Introduction

  • Workers’ compensation = provincial/territorial insurance program delivering benefits to workers absent due to work-related injury/illness.
    • Funded solely by employers; administered by a Workers’ Compensation Board/Commission (e.g., WSIB–ON, WCB-AB).
    • Federal employees’ claims administered provincially; federal government reimburses awards + admin fees.
  • Pre-1910: employees sued employers → costly, slow, often futile; successful suits bankrupted firms.
  • 1913 Meredith Report (ON) anchored modern legislation → Meredith Principles:
    • Collective liability – all covered employers finance compensation.
    • No-fault compensation – benefits payable regardless of fault.
    • Security of payments – awards based on lost earnings, independent of employer solvency.
    • Independent administration – non-political, financially autonomous boards.
    • Exclusive jurisdiction – board’s decision final on all claims.
  • Legislation specifies:
    • Covered industries/employees, employer premium duties, claim conditions.
  • Participation advantages:
    • Employers: protection from worker lawsuits.
    • Employees: income replacement + medical cost coverage.
  • Registration deadlines (examples):
    • ON: within 10 calendar days of first hire.
    • AB: within 15 days.
  • Registration data: business info, owners, activity description, payroll estimate.

Employee Eligibility

  • Covered (most jurisdictions):
    • Full-time & part-time employees; office, plant, medical, construction staff.
    • Students after school/during breaks.
    • Casual & seasonal workers (e.g., harvesters).
    • Domestics paid by private households.
    • Apprentices/trainees.
    • Paid relatives/spouses/children of owners.
    • Temporary foreign workers.

Exempt Employees & Occupations

  • Not automatically covered:
    • Sole proprietors.
    • Non-salaried partners & spouses.
    • Executive officers (chair, president, VP, secretary, treasurer, de facto officers).
    • Independent contractors.
  • Personal/Optional coverage available to all above except independent contractors.
  • ON exception: coverage mandatory in construction for independent operators, sole proprietors, partners & exec officers.

Exempt Classes of Employment / Excluded Professions

  • Certain sectors (e.g., financial institutions, unions) excluded unless voluntary.
  • Sample excluded professions: private daycare (ON); bowling-alley staff (AB).
  • Employers in excluded professions can:
    • Apply for voluntary WC coverage if offered, or
    • Obtain private insurance.
    • Risk of employee lawsuit if no coverage.

Personal/Optional Coverage (POC)

  • Apply via annual payroll statement or dedicated form.
  • Must prove annual earnings; subject to jurisdictional min/max.
  • Approved individuals treated as workers (benefits + loss of right to sue).
  • Renewal may be automatic or require annual re-application depending on region.

Independent Contractors (IC)

  • Must open their own WC account (POC not allowed) except construction-ON (mandatory coverage).
  • Clearance certificate/letter confirms registration + good standing; protects client from premium liability.
  • Status determination criteria (sample-ON):
    • Ownership/maintenance of equipment.
    • Degree of control/supervision.
    • Multiple clients?
    • Collective agreement coverage?
    • HST filing behavior.

When Coverage Is in Force

  • Employees covered while:
    • Performing work duties.
    • Travelling for business or between employer site & remote job locations (direct route).
  • Not covered:
    • Commute from home to regular workplace.
    • Periods of leave (vacation, maternity, etc.).
  • Temporary inter-provincial transfer: employer must check host jurisdiction re: account setup.

Premium Assessments

  • Benefits paid from General Accident Fund financed mainly by employer premiums + investment income.

Employer Classifications

  • Regular employers (≈99 %) – pay premiums; participate in collective liability.
  • Self-insured employers (≈1 %) – railways, Crown corps, school boards, telcos; pay actual claim costs + admin fees, no premiums, no experience penalties.

Total Annual Assessable Payroll (TAAP)

  • Determined by:
    1. Earnings types deemed assessable.
    2. Dollar amount up to the annual maximum per employee.
  • 2025 Maximum Assessable Earnings per jurisdiction (highlights):
    • AB 106{,}400; BC 121{,}500; MB 167{,}050; NB 84{,}200; NL 79{,}345; NT 112{,}600; NS 76{,}300; NU 113{,}900; ON 117{,}000; PE 82{,}900; QC 98{,}000; SK 104{,}531; YK 104{,}975.
  • Premium formula: \text{Annual Premium} = \frac{\text{Assessable Payroll}}{100} \times \text{Rate}
    • Example (veterinary hospital): \$200{,}000/100 \times 1.31 = \$2{,}620.

Assessable Earnings (all jurisdictions)

  • Regular wages, overtime, shift premiums, call-in, standby, commissions*, cash gifts, tips, bonuses, retro, sick pay, stat-holiday, vacation.
    • *QC exception: commissions of self-employed route salesperson.
  • Extensive jurisdiction-by-jurisdiction matrix includes vehicle benefits, housing, stock options, allowances, LTD/STD, SUBs, etc. (refer to Exhibit pages 9-14 & 9-15).

Industry Classification (IC)

  • Broad groups: sales/service, manufacturing, construction, fishing, farming, mining, forest products.
  • Collective liability per IC – higher risk ⇒ higher rates (e.g., mining vs retail).
  • Sub-classification based on injury frequency (metal pipe vs dairy).
  • Rates span pennies to >10 per 100 of payroll.
  • Multi-classification eligibility criteria (all must be met):
    • Distinct operations; independent revenue streams; employees exclusive to each; separate payroll; unique locations.
    • If criteria fail → higher rate applied to total payroll.
  • Example: Classic Concrete (NS) granted separate manufacturing & construction codes → premium savings on manufacturing payroll.

Experience Rating Programs (ERP)

  • Purpose:
    • Fairly allocate cost based on claim history.
    • Motivate safety by linking premiums to performance.
  • Eligibility (typical): 3 yrs contribution history + minimum premium size.
  • Adjustment range: 5\%–50\% discount or surcharge.
  • Example (Jarvis Construction):
    • Injury rate 80 % better ⇒ 40 % discount (max).
    • Normal rate 4.10, payroll \$1.8M.
    • Unreduced premium \$73{,}800.
    • Reduced rate 2.46 ⇒ premium \$44{,}280.
    • Annual savings \$29{,}520.

Non-Compliance Penalties

  • Imposed for late annual statements, late remittances, or under-estimating payroll beyond threshold.
  • Best practice: review payroll estimates periodically and update board.

Workers’ Compensation Awards (WCA)

  • Benefit amount (lost-wage replacement) calculated from average weekly earnings reported by employer.
    • Jurisdiction may base on gross or net pay.
    • Net-based regions require TD1 claim code (and TP-1015.3-V code in QC).
  • Job-protection & day-of-accident pay vary:
    • Most provinces provide job protection; BC, NT/NU, SK do not.
    • Employer pays balance of day in most regions (exceptions noted).
  • Award methods summary (examples):
    • AB: 90\% of net; employer pays day.
    • ON: 85\% of net; employer pays day.
    • YK: 75\% of gross; employer pays day.

Award Calculation Example (AB)

  • Weekly gross 900.
  • Stat deductions 308.06 ⇒ net 591.94.
  • Award = 0.90 \times 591.94 = \$532.75 per week.

Practical Scenario – ON Two-Week Advance

  • Company policy: advance 2 weeks of anticipated award; WSIB reimburses if claim approved.
  • WSIB formula: award = 85\% of net average earnings.
  • Bi-weekly gross 1{,}650; deductions (CPP 90.17, EI 26.90, tax 255.75) ⇒ net 1{,}277.18.
  • Award per 2 weeks: 1{,}277.18 \times 0.85 = 1{,}085.60.
  • Advance not processed via payroll; recorded as A/R.

Ethical, Practical & Strategic Implications

  • Proper classification and accurate payroll reporting → fairness across employers, avoid penalties.
  • Safety investments can yield substantial premium savings via ERP.
  • Optional coverage decisions affect right to sue; employers must educate owners/execs.
  • Maintaining WC coverage essential to mitigate lawsuit risk in excluded professions.

Key Formulas & Reference Values

  • Premium: \text{Premium} = \frac{\text{Assessable Payroll}}{100} \times \text{Rate}
  • Experience-rated premium: \text{Adj Rate} = \text{Base Rate} \times (1 \pm \text{Discount/Surcharge \%})
  • Wage-loss award (net-based): \text{Award} = \text{Compensation \%} \times (\text{Gross} - \text{Stat Deductions})
  • Two-week advance (ON): 2 \times (0.85 \times \text{Bi-weekly Net})

Quick Content Reviews (Consolidated)

  • Eligibility: most employees covered; certain classes/occupations exempt; POC optional.
  • Coverage period: at work, business travel; excludes commute & leaves.
  • Premium drivers: TAAP + IC; ERP modifies via claims record.
  • Awards: % of gross/net; employer day-of-accident responsibility varies.
  • Penalty risk: late filings, low estimates.