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The Need for Employers’ Due Diligence in an Experience-Rated Environment: A Discussion of Changes to the WSIB’s Appeal System Practice & Procedures
Lukasz T. Petrykowski* Introduction
As of January 2006, an inconspicuous insertion found its way into the Workplace Safety and Insurance Board’s (WSIB) Appeal System Practice & Procedures Manual.1 The lack of hullabaloo and ballyhoo surrounding this occurrence, however, should not discount its importance to employers who operate in the experience-rated environment of the workers’ compensation system in the province of Ontario.
WSIB’s Appeal System Practice & Procedures Manual (January 2006)
The occurrence was actually an addition to the previous version (January 2005) of the WSIB’s Appeal System Practice & Procedures Manual. It established expressed guidelines for the WSIB to consider when tackling the issue of retroactive experience rating adjustments sourced in Second Injury and Enhancement Fund (SIEF) relief. The addition was twofold and is reproduced below:
(1) “In considering requests for retroactive experience rating adjustments based Second Injury and Enhancement Fund (SIEF) relief granted past the applicable experience rating window, the ARO will have regard for exceptional circumstances that may exist in accordance with the guidelines set out in – APPENDIX F.”2
and
(2) “APPENDIX F - GUIDELINES FOR RETROACTIVE EXPERIENCE RATING ADJUSTMENTS – EXCEPTIONAL CIRCUMSTANCES
Retroactive experience rating adjustments may be presented as a stand alone issue in appeal after SIEF relief has been decided. As a result, it is important for decision-makers to have regard for the experience rating window when deciding SIEF cost relief to be applied. However, there may be circumstances where retroactive adjustments to SIEF relief occur after the closure of the experience rating window.
Circumstances that may constitute “exceptional circumstances” include but are not limited to:
- whether the employer pursued SIEF cost relief within a reasonable period after the employer knew or ought have known the worker’s recovery period was prolonged or enhanced by a pre-existing condition.
- whether there was a delay in identifying a pre-existing condition.
- whether undue delay in the decision-making process caused the decisions to fall outside the experience rating window.
- the length of time between the closure of the experience rating window and SIEF decision. It would be expected that discretion be extended in cases where the period is relatively short (i.e. less than six months).
When an ARO is deciding on the experience rating adjustment as part of a SIEF appeal, the ARO must be aware of the appeal time limit for the experience rating adjustment, if a decision has been made by the operating area relating to that issue.”3
In more understandable terms, the WSIB has clarified the circumstances it will consider in deliberating whether to allow a “retroactive experience rating adjustment” as it concerns SIEF claim cost relief. The WSIB Prevention Services Branch and practitioners familiar with the importance and worth of this mechanism for financial reprieve will recognize this concept as alternatively being termed a “manual adjustment” or “manual recalculation”.
Retroactive Experience Rating Adjustments
The notion of retroactive experience rating adjustments are predicated on the existence of an experience rating “window”, a finite period of time where a WSIB claim is alive for the purpose of the computation of its impact (i.e. costs) to an employer. As administrators of the NEER experience rating system,4 for example, the WSIB is obliged to review the costs of each claim in each of the three years following the accident year. This review includes recalculating the costs of each claim on the basis of its activity. This process should also include the mitigating effect of any approved cost relief on a claim.
For example, a worker suffers a musculoskeletal injury at his workplace in August 2003. The NEER experience rating window for this injury will hold the employer responsible for the claim’s costs in accordance with the mathematical formulae parameters of NEER on three separate occasions (termed “issues”, as in issuance of either a NEER surcharge or rebate): September 30, 2004, September 30, 2005, and September 30, 2006. For all intents and purposes, the NEER “window” will have closed on September 30, 2006, whereby an employer is held to a final accounting of the claim’s costs. This strict terminus serves as an administrative tool based on the need for finality in the workers’ compensation system, which in essence is an insurance system largely based on actuarial data.
In the circumstances of the above-noted example, any adjustment to claim costs will not be generally allowed beyond September 30, 2006. The WSIB has created a Policy,5 however, where unique circumstances such as WSIB errors, court judgements, and reversals of entitlement decisions on appeal allow for the WSIB to reopen and recalculate experience-rated surcharges or rebates past the closure of the NEER window.
More so, it should be understood that the strict closure of the NEER window produces a duality of effect for an employer. It firstly insulates an employer from further financial exposure to claim costs that may be accruing beyond the temporal closure of the NEER window. At the same time, however, this insulation becomes like an impenetrable sound barrier whereby an employer’s calls for assistance in the form of future claim cost relief can no longer be heard or acted upon by the WSIB in normal circumstances.
Second Injury and Enhancement Fund (SIEF)
SIEF is a relief valve available for employers6 who are amassing the pressure of claim costs. WSIB Policy explains the basis and effect of SIEF7 as follows:
“if a prior disability caused or contributed to the compensable accident, or if the period resulting from an accident becomes prolonged or enhanced due to a pre-existing condition, all or part of the compensation and health care costs may be transferred from the accident employer…”.8
The quantum of SIEF claim cost relief (given in percentage format) is determined according to a matrix9 containing two variables: medical significance of a pre-existing condition and severity of accident. Quantifying the existence and significance of a pre-existing condition for a worker who has claimed a work-related accident requires time and vigilance, both on the part of an employer and the WSIB.
The authority for ruling on SIEF initially rests with the WSIB Claims Adjudicator and can be made with or without the instigation of an employer who suspects the contribution of a pre-existing medical condition to the disability period resulting from a work-related accident. Given the massive systemic volume of WSIB claims adjudication and lesser priority assigned to cost relief (as opposed to entitlement) issues, it should come as no surprise that SIEF relief can be easily overlooked or entirely forgotten. The most salient point of this discussion paper, however, does not concern if SIEF claim cost relief is appropriately granted but rather when it is granted, if at all.
If SIEF cost relief is granted after the closure of the above-described NEER window, an employer will generally not benefit from the mitigation of costs normally expected through the relief process. To continue the above-example for illustrative purposes, if 50% SIEF cost relief was granted by the WSIB in January 2007 on a claim involving the worker who was injured in August 2003, the employer would not receive any actual cost relief since the SIEF decision occurred after the closure of the NEER window on September 30, 2006.
Appeal Practices
This potentially costly and seemingly unjust predicament has led to thousands of employer-initiated appeals at the WSIB and the Workplace Safety and Insurance Appeals Tribunal (WSIAT) over the last decade. The WSIB has historically taken a very stringent approach in determining whether to allow retroactive experience rating adjustments sourced in SIEF decisions issued after the closure of the final NEER window for a claim.
The publication of the above-noted changes to the WSIB’s Appeal System Practice & Procedures Manual, and more importantly its concomitant operational effect, signifies a relaxation of the stringent standard previously adopted by the WSIB. This is a commendable development in terms of transparency and adjudicative justice. As a result, employers and/or their representatives will now be able to comprehend the precise case that needs to be met when attempting to secure SIEF claim cost relief and how this is affected by temporal considerations.
The Need for Employers’ Due Diligence in an Experience-Rated Environment
This reality should lead employers to amend their internal administrative claim processing practices so as to fully benefit from this development. This will require employers to largely account for the first of the above-listed “exceptional circumstances” in the WSIB’s Appeal System Practice & Procedures Manual since it is the one most within the ambit of their care and control. This first circumstance concerns whether an employer was laissez-faire or actively and vigilantly engaged in the pursuit of SIEF cost relief given the unique nature of a worker’s disability period. This imports the need for employers’ “due diligence” within the confines of an experience-rated environment.
Unlike the concept of “due diligence” within the sphere of Ontario’s occupational health and safety law regime, a failure to demonstrate experience-rated “due diligence” in Ontario’s workers’ compensation scheme will not result in costly prosecutions under the Provincial Offence Act but it will result in countless lost opportunities for an employer to minimize the costs of WSIB claims. From this recital, it is clear that employers are truly the masters of their own destiny when it comes to soaring through the sometimes turbulent skies of the workers’ compensation system of Ontario.
It should also be highlighted that the four-pronged characterization (as reproduced above at the outset of this discussion piece) of what is meant by “exceptional circumstances” in the WSIB’s Appeal System Practice & Procedures Manual for the purpose of retroactive experience rating adjustments was not conceived at the WSIB. The genesis of these four main areas for decision-makers to deliberate upon can actually be found in WSIAT case-law.
The seminal framework for discerning the existence of exceptional circumstances at WSIAT as they concern retroactive experience rating adjustments can be found in Decision No. 591/94,10 which notes the following factors ought to be considered:
“1. whether the employer had acted with due diligence in pursuing a SIEF claim after the employer knew, or ought to have known, of a “prolonged” recovery period or “enhanced” disability;
2. the nature of the disability - i.e. whether it involved a longer than usual recovery period; whether it involved a complex condition which made diagnosis and treatment difficult; or whether the pre-existing condition was unknown;
3. whether systemic delay resulted in a final decision outside the three-year “window”; and
4. the elapsed time between the NEER cut-off date and the final SIEF decision because a longer elapsed time period could mean a more complex adjustment.”11
This framework has been routinely used to assist the adjudication of this unique issue at WSIAT (and formerly the Workers’ Compensation Appeals Tribunal) for over a decade. A review of WSIAT case-law on the matter demonstrates that the first factor of “due diligence” has consistently been the most important (and hence usually determinative) in the adjudication of such issues at WSIAT. This further bolsters the above-noted proposition that employers need to recognize the importance of “due diligence” within the experience-rated environment and take appropriate action.
Furthermore, it needs to be said that the seminal framework found in Decision No. 591/94 is a substantive mirror-image to the recent addition in the WSIB’s Appeal System Practice & Procedures Manual which lies at the heart of this discussion paper. The near-uniformity between the WSIB and WSIAT approach to the adjudication of retroactive experience rating adjustments is an important example of how WSIAT case-law has beneficially influenced the operational processes and priorities of the WSIB.
Conclusion
This discussion paper has proposed that a need exists for employers to appropriately monitor and be duly diligent in their efforts to secure SIEF claim cost relief in the WSIB experience-rated environment. This should be done in a timely manner and can be best understood as an effective claim cost-containment strategy. The impetus behind this proposal is the recent change to the WSIB’s Appeal System Practice & Procedures Manual, which is largely commensurate to existing WSIAT adjudicative considerations.
* Lukasz (Luke) T. Petrykowski, B.Sc., LL.B., of the Ontario Bar, is a post-graduate student in the Program of Occupational Health and Environmental Medicine at McMaster University in Hamilton, Ontario. He is studying towards his D.O.H.S. (Diploma in Occupational Health & Safety) and articled at the Workplace Safety and Insurance Appeals Tribunal. He can be reached at lukepetry@hotmail.com.
1 Available online from the WSIB at www.wsib.on.ca
2 WSIB’s Appeal System Practice & Procedures Manual (revised January 2006), page 12.
3 WSIB’s Appeal System Practice & Procedures Manual (revised January 2006), page xiv.
4 For the purpose of brevity, this paper uses the NEER experience rating program as a vehicle for discussion. Its considerations, however, have substantial comparative merit for the CAD-7 and MAP experience rating programs by way of analogy.
5 See generally, WSIB Policy #13-02-07, entitled “Adjustments to NEER Refunds and Surcharges”.
6 The SIEF cost relief program only applies to employers found in Schedule 1 of the Regulations made pursuant to the Workplace Safety and Insurance Act, 1997.
7 It should also be noted that the SIEF program was designed in part to assist the employment of disabled individuals while offering some mitigation of financial risk to the employers who offer employment to such individuals.
8 WSIB Policy #14-05-03, entitled “Second Injury and Enhancement Fund (SIEF)”.
9 Ibid.
10 (1995), 33 W.C.A.T.R. 157.
11 Ibid.
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Volume 11, No. 2 - January/Janvier 2007 
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