COLUMN

Costly help for the wounded

Worker compensation systems across Canada are growing more expensive, and reforms are needed now to save the programs

DIANE FRANCIS July 10 1989
COLUMN

Costly help for the wounded

Worker compensation systems across Canada are growing more expensive, and reforms are needed now to save the programs

DIANE FRANCIS July 10 1989

Costly help for the wounded

COLUMN

Worker compensation systems across Canada are growing more expensive, and reforms are needed now to save the programs

BY DIANE FRANCIS

Cowling Storage Services Ltd. installs shelving in factories, warehouses and offices in and around Toronto. Like many employers, proprietor Michael Cowling makes large contributions to Workers’ Compensation, the nationwide system of insurance designed to replace incomes for injured workers. But over the years, his premiums, and everyone else’s, have escalated dramatically—to $6.54 per $100 in wages in 1989 from $3.72 per $100 in 1985. Cowling has had several run-ins with the system and now says that he realizes why premiums soar.

In one incident, an employee tripped over his work boots in the parking lot, fell and damaged his knee. Because the employee had not actually begun working, Cowling did not report the incident to the board. But the worker did—and successfully collected 90 per cent of his $300 salary for one week. Provincial compensation boards record accidents against employers’ accounts and can increase premiums accordingly. Because of that, Cowling wrote a letter protesting that his worker’s fall was not a genuine industrial accident. But, he recalled, “the board said rules are to pay claims if the worker was performing a reasonable act within the scope of employment.” He added: “I called them up and said, ‘What if he had tripped over his work boots getting out of bed? Would that be an industrial accident?’ They said it wouldn’t be, but a car accident on the way to work would be. It’s absolute nonsense.”

Another businessman told me about a factory worker convicted of theft and violent acts, but out on bail awaiting sentencing. While he was at work, his forklift hit a wall and he sustained a back injury. The board in Ontario awarded him 90 per cent of his pay, and he collected it while in prison, even though taxpayers were already paying for his room and board.

Such grievances by businessmen are not isolated. There is growing awareness among members of the business community that the Workers’ Compensation system is in a mess,

having strayed miles from its original concept. And the problems affect all of us as the costly system deteriorates into an open-ended private welfare system, which you and I eventually pay for indirectly. We pay because skyrocketing premiums are passed along in the cost of goods and services wherever possible.

In addition, provincial governments are on the hook for multibillion-dollar deficits that pile up because premiums don’t cover costs. An interesting study called Workers’ Compensation in Canada, released in April by the Canadian Manufacturers’ Association, makes a compelling case for change. It cited that, as of Dec. 31, 1987, compensation boards across the country had run up a collective and unfunded liability of $9.4 billion. That represents the difference between the board’s revenues and what it pays out in claims.

With so much red ink flowing, something has to give. And the way out is to charge businesses more, trim compensation paid, or do a bit of both. The biggest financial shortfall is in Ontario and Quebec, which accounts for $6.6 billion and $2.36 billion respectively. Businessmen there say, with some justification, that they cannot absorb higher premiums. In Ontario, those premiums rose by 74.5 per cent in

Ontario between 1980 and 1987, to $2.88 per $100 of salary on average from $1.65 per $100 of salary. In Quebec, premiums have climbed by 32.28 per cent, to $2.50 from $1.89.

The Ontario government introduced the Workers’ Compensation system in 1914, and eventually all the provinces and territories established compensation programs. They were supposed to be self-sustaining, supported by employers. Self-employed individuals cannot participate but they can buy private-sector income-replacement insurance. The original principles of workers’ compensation are still valid, but in some jurisdictions there have been major deviations.

According to the manufacturers’ association study, “accidents occurring on the companies’ parking lot or during activities organized by the employer (social or sporting events) have been compensated.” Not only that, but claims have been paid to employees suffering from medical problems that they may have already had when they were hired.

The average claim in 1980 in Ontario was $3,194, and by 1987 it had grown to $6,592. The highest jump was in Manitoba, where payments went from $694 in 1980 to $2,192 by 1987, an increase of 216 per cent. In some cases, workers earn more on compensation than at work because they do not pay taxes on their earnings. Boards also pay claims beyond retirement age or in addition to Canada or Quebec pension plan disability payments. Business is to blame, too, for overpayments by sometimes providing so-called topping-off benefits. That is when an employer willingly adds 10 per cent or more to the 90 per cent of salary paid by a compensation board while the employee is off work.

The manufacturers’ association report on compensation said that “by doing this, employers pay moneys to injured workers that otherwise would not have been paid and, according to Revenue Canada, these amounts are nontaxable. Obviously, the injured worker will receive more net income staying home, and this does not help to create the necessary incentive for the worker to return to work as soon as possible.”

Worse yet, a worker receiving a so-called permanent disability award can return to work without losing his benefits, says Jason Mandlowitz, director of the Ontario ministry of labor’s office of the employer adviser, which helps businessmen like Cowling who wish to fight the compensation board or its decisions. Mandlowitz added that what is needed in Ontario is a “wage-loss system” where pensions are only paid to those unable to work. Several provinces have done that, and Bill 162 proposed in Ontario promises to do the same. I hope that provinces will continue to reform laws. Clearly, the system is sacrosanct but has veered off course. No one quarrels with the responsibility of society and business to look after injured workers. It is to be hoped that the system provides an incentive for employers to provide safe work conditions. But a system that overpays victims or in other ways hands out money indiscriminately is a system that injures society and business alike.