MHR711 - Chapter 3 Notes PDF

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MHR711 – Chapter 3: Workers’ Compensation Workers’ Compensation  -

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Workers’ Compensation is a form of insurance governed by an act of Parliament to help workers who are injured on the job return to work o It is provincially and territorial based o No federal workers’ compensation scheme o Federally regulated employees usually receive compensation under the provincial scheme Workers’ Compensation will ensure that injured worker receives: o 1. First aid treatment  Either on the job or at the nearest local treatment facility o 2. Benefits while at home recuperating o 3. Proper treatment for any injuries o 4. Rehabilitation

Historical Roots  -

First Workers’ Compensation scheme was established in Germany in 1884 Appointment of Justice William Ralph Meredith (Chief Justice of Ontario) in 1910 to review worker’s compensation legislation from around the world and to make recommendations to Ontario Justice Meredith’s work and recommendations led to the Ontario Workers’ Compensation legislation in 1914 Similar legislation was subsequently passed in all provinces and territories in Canada Even though Workers’ Compensation Acts across Canada have been amended several times, they have largely retained many of the principles set forth in the Ontario Act of 1914 In 1998, the Ontario Workers’ Compensation legislation was re-named  “Workplace Safety and Insurance Act” (WSIA)

Meredith’s Principles  -

The principles upon which Workers’ Compensation Acts in Canada is based is commonly referred to as “Meredith’s Principles,” they include: o 1. Collective liability of employers, with some recognition of risk in the amount of contribution paid by individual employers o 2. Compensation for workers regardless of the financial condition of the employer o 3. Compensation based on loss of earning o 4. A “no fault” system (trade-off) o 5. A non-adversarial process  little or no recourse to the courts  Schedule 2 can allow legal recourse in Ontario  May also opt in for coverage

Collective Liability: where all employers in a class or other rate group are liable for the costs of any or all accidents and occupational diseases that occur in the operations of those employers -

A Workers’ Compensation system amounts to a tradeoff for both workers and employers o (a) Workers know they will be compensated for injury without having to undertake expensive and lengthy lawsuits  In return they accept the WCB’s (Workers’ Compensation Board) authority to determine the amount of compensation

o (b) Employers are obliged to pay for the Workers’ Compensation system but are also protected from litigation that could drive them into bankruptcy Workers’ Compensation in Canada   Administration and Responsibilities -

WSI/WCB Acts are administered by Workers’ Compensation Board (called WSIB – Workers’ Safety and Insurance Board in Ontario) o Workers’ Compensation Board is appointed by the lieutenant governor in council o The Board is empowered to fix and collect assessments o Determine the right to compensation o Pay the amount due to the injured worker o The Workers’ Compensation Boards have exclusive and final jurisdiction o Injured worker’s immediate family and dependents entitled to benefits if the worker is killed or dies as a result of an injury on the job

 Regulations & Responsibilities of Workers’ Compensation Boards -

Injured worker will receive: o 1. Payment while off work and all medical bills paid if injury happened at work and because of work o 2. Pension if disability is or becomes permanent o 3. Benefits if he or she cannot earn same amount of money earned before incident o 4. Benefits for workers’ immediate family and dependents if the worker is killed or dies as a result of an injury on the job o 5. Benefits to workers who are affected by an industrial disease that has resulted from his or her occupation o 6. Classification of employers to ensure consistency o 7. Decide whether an individual is classified as a worker, a subcontractor, or an employer, as each class has different conditions

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Workplace Safety and Insurance Board (WSIB) in Ontario: o 1) Prevention function added to compensation functions o 2) Compulsory and collective liability system of compensation o 3) Under collective liability, various industries are classified according to size and end product, and each employer is assessed a rate that is a percentage of its payroll o 4) Compensate for certain specified occupational diseases

 Workers’ Compensation Scheme: Additional Notes -

Public authorities and certain large corporations (Schedule 2 Employers) have a different liability approach from the collective liabilities scheme: o 1) They are individually liable for compensation o 2) They contribute their potion of the cost of administering the scheme o 3) The provincial and territorial Acts generally cover all employment on industries  I.e., lumbering, mining, fishing, manufacturing, construction, engineering, etc. o 4) Personal injuries resulting from the incidents arising out of and in the course of employment are compensated

o 5) Incidents attributed to the workers’ serious and willful misconducts are not covered unless they result in serious disablement  Prevention & Legislative Updates (BC) -

Prevention: o Prevention function was added to the mandate of WSIB in 1998  Premium reductions being offered to companies based on safety records  Ontario set up safety association to achieve the goal of prevention  WorksafeBC maintains a large online library of safety related publications  Nova Scotia and Newfoundland and Labrador provide workshops on how to prevent workplace injuries

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Legislative Updates (BC): o Broader compensation coverage for mental stress conditions resulting from the work environment o Adjustment to the compensation provided to injured apprentices to a level that fairly represents their loss of earnings o Grant survivor benefits to common-law couples without children after two years of cohabitation (previous three years)

 Compensation Rates and Methods -

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There are standards for determining the amount of compensation paid to injured workers o Eight jurisdictions base payment on a percentage (generally 90%) of net earnings  Salary after mandatory deductions o The other four base payment on 75% of average earnings  Generally calculated on the basis of his or her earnings during the past 12 months o Jurisdictions like Nova Scotia have used both methods depending on the date of the incident Workers’ Compensation is based on the individual’s past salary record, not on the loss or potential loss of future earnings Provide reasonable compensation without creating an incentive for individuals to stay off work

Net Earnings: salary after mandatory deductions (income tax, Canada Pension, and Employment insurance) -

Economic Loss: o Wage or earnings loss when workers can no longer earn the same amount of money that they were earning before the incident o Example  worker earning $20 per hour before incident and $10 per hour after incident; potential compensation is $10 per hour

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Non-Economic Loss: o Injured worker could receive non-economic loss if unable to perform some of the things that they had been able to do before the incident o Example  worker unable to gold as a result of the incident; a benefit could be paid for that non-economic loss

Medical Aid and Incident Prevention  -

Accompanying compensation in all cases is the provision of medical aid Medical aid includes

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o Medical and surgical care o Hospitalization o Nursing care o Drugs and supplies o Physical and occupational therapy o Provision and maintenance of prostheses Employees who sustain a work-related injury are compensated for loss of earnings and loss of functional capacity

Loss of Functional Capacity: limit of ability or dexterity depending on the seriousness of an injury o Workers are no longer able to perform some of their job duties, such as lifting, twisting, or bending, and are considered to have suffered loss of functional capacity for which benefits are payable -

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Employers within a particular industry may form safety association and , make rules for incident prevention that, on approval of the WCB and the lieutenant governor, are binding all employers in that industry WCBs pay the expenses for these associations out of the incident fund and have the authority to investigate the premises of employers to ensure compliance with safeguards required by law The goal of safety associations is to provide training in the area of incident prevention and health and safety

Social Goals of Workers’ Compensation  -

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Workers’ Compensation is driven by two main social goals: o 1. To provide services intended to prevent injuries or reduce the psychological impact or injuries when they occur o 2. To provide the training and development necessary to prepare an injured worker to return to work Various WCBs have come to view compensation as a means for society to share with the worker the consequences of industrial incidents and to ensure the restoration of the worker to active participation in the life of the community The social concept of compensation is grounded in the following standard provision contained in the various Acts: o Unlimited medical aid o Artificial prostheses o A fund to encourage re-employment  Second Injury  Enhancement Fund o Liberal compensation o Rehabilitation maintenance income Canada’s compensation system provides greater benefits than most other countries and also ensures that benefits are not prejudiced by earning after rehabilitation In Canada, a permanently injured worker draws compensation for life and is able to keep his or her pension, even if the sum of the pension and the earnings supplements amounts to more than the wages earned before the injury In contrast, many compensation programs in the U.S. hinder rehabilitation, either by cutting off compensation for permanent injury as soon as workers begin to earn as much money as they did before the injury or by paying compensation for only a limited period (which can leave workers stranded before they can be retrained)

 Provision for Second Injuries -

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In some provinces (e.g., Ontario) provisions may be provided to an employee who receives a second injury Second Injury Fund (provided by WSIA): o 1. Facilitates the re-employment of disabled workers o 2. Without a provision for multiple injuries, employers might be tempted to discriminate against workers with disabilities o 3. Additional injury could make employer responsible for a far more serious disability than if the worker had not had a prior injury Example: a worker who has lost one arm will be given a total disability rating if he or she loses the second arm By charging excess liability resulting from the cumulative effect of a prior disability and the subsequent injury to a disaster reserve fund, the various acts distribute the burden throughout industry as a whole rather than letting it rest on one particular class This way, employers are relieved of the extra risks associated with employment of workers with disabilities

 Rehabilitation -

Before WWI, persons with disabilities were left to fend for themselves Gradually, society realized that just because people had disabilities did not mean they could not be productive However, the first attempts at drafting people with disabilities into the workplace proved to be difficult and frustrating for those so drafted o People with disabilities found that though they were given an opportunity to make a living, they could do so only by accepting menial jobs that no one else wanted

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Only through effective rehabilitation can the future cost of Workers’ Compensation system be maintained at a reasonable level o After WW2, the need for rehab became more important and has been increasingly important since

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Three Types of Rehabilitation: o 1. Vocational  Helps injured workers return to their place of employment or find similar work elsewhere o 2. Physical  Restores workers’ physical function o 3. Social  Psychological and practical services to help workers with severe disabilities cope with daily life

Vocational Rehabilitation: the steps undertaken by WCBs to help injured workers return to their place of employment or find similar or suitable work elsewhere Physical Rehabilitation: the steps taken to restore fully or partially, the worker’s physical function Social Rehabilitation: the psychological and practical services that help workers with severe disabilities cope with daily life

Occupational Diseases and Workplace Stress  -

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Occupational diseases include: o Various cancers o Skin diseases o Allergic reactions to materials and components in the workplace Occupational disease compensation has been part of Workers’ Compensation ever since six specific diseases were cited in Ontario’s act of 1914 Today many occupational disease claims can be considered in the same way as any other claim o The requirement to isolate the point at which the disease was contracted has given way to a recognition that the disease could be the result of exposure or injury over time Occupational disease claims are often adjudicated by a special claim unit and may require additional expert medical opinion as well as exposure and employment histories The latency period is often a major factor in determining the acceptability of the claim

Latency Period: the time between exposure to a cause and development of a disease -

Stress-related disabilities can be divided into three groups: o 1. Physical injury of occupational disease leading to a mental disability  Dealt with in the same way as any other claim o 2. Mental stress resulting in a physical disability, traumatic occurrence, or series of occurrences  These claims have been subject to some selection  Example: cardiac attack is acute (disability)  considered for compensation; ulcer (disability)  not be considered for compensation o 3. Mental stress resulting in a mental condition

Assessments  -

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Employers group together according to the type of operation of industry in which they are engaged, and they are assessed on that basis The groups are referred to as: o Industries o Classes o Subclasses o Classifications In some jurisdictions, the term units and sector are used; employers are not grouped by occupation, though occupation may help determine a subdivision of an industry or class Assessments are determined by the WCB at least once a year when the board sets a percentage or rate to be applied to the payroll of the employer Payrolls are estimated; the employer is then required to submit a certified payroll statement

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The Workers’ Compensation system in Canada is based on the concept of dividing employers into three categories: o 1. Those who contribute to the incident fund and benefit from its collective liability o 2. Those who are individually liable for their own employees’ incidents o 3. Those in certain low-risk industries, who are excluded under various acts across the country

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All employers within a particular industry group are assessed at the same rate based on the injury experience of the group as a whole N more jurisdictions, within the general incident fund, a provision is made for a rate stabilization and disaster reserve fund

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One group by itself cannot sustain the heavy costs associated with a major disaster that might occur I any one year, or with a sharp decline in assessable payroll owing to massive layoffs in the industry

Industry Assessment Rates

 Calculating Injury Frequency and Severity Rates -

To determine the frequency injury ratio, consider that the term frequency is the number of medical aid injuries relative to the number of hours worked expressed in a ratio of 200,000 Some firms and jurisdictions use a factor of 1,000,000 rather than 200,000 Using the 200,000 figure, the relationship becomes: Frequency=

Number of Injuries x 200,000 Total Hours Worked

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Medical aid and lost time injuries considered

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Example: a company that employs 300 people who work 8-hour shifts for 250 days in one year o The total number of hours is: Total Number of Hours = 250 x 300 x 8 = 600,000 o This company has a record of 6 medical-aid injuries with no lost time, 15 minor injuries with 5 days lost, 3 major injuries with 55 days lost, and6 property damage incidents with no list time o The total number of injuries is:

Total Number of Injuries = (6 + 15 + 3) = 24 o The frequency is calculated as: Frequency = 

24 x 200,000 = 8 600,000

Therefore, this organization has an injury frequency of 8 or 8 to the ratio of 200,000 (8:200,000)

 Calculating Injury Severity Rates -

Severity of work-related injuries is the ratio of the number of days lost due to injures to a factor of 200,000 Severity is calculated by using the following relationship: Severity =

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Number of Days Lost ¿ ¿ Injuries x 200,000 Total Hours Worked

Example: a company that employs 300 people who works 8-hour shifts for 250 days in one year o The total number of hours worked is: Total Number of Hours Worked = 250 x 300 x 8 = 600,000 o This company has a record of 6 medical-aid injuries with no lost time, 15 minor injuries with 5 days lost, 3 major injuries with 55 days lost, and 6 property damage incidents with no time lost o The total number of injuries is: Total Number of Injuries = 5 + 55 = 60 o The severity frequency is calculated as: Severity = 

60 x 200,000 600,000

= 20

Therefore, the severity for the company is 20 or 20 to the ratio of 200,000 (20:200,000)

Experience Rating  -

Experience rating in Workers’ Compensation refers to: o Incident insurance premium pricing scheme that takes into account the clear cost experience of the individual employer  Firms with lower-than-average incident costs per worker pay lower premiums than firms with above-average incident costs  Safer employer will face lower Workers’ Compensation costs given two similar firms  Primary effect is financial incentive for relatively unsafe firms

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In essence, experience rating reduces or eliminates the cross-subsidization of relatively unsafe firms by relatively safe firms

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Given two otherwise similar firms, a safer employer will face lower Workers’ Compensation costs and hence lower production costs Thus, the primary effect of the experience ratings is to create financial incentives Experience rating is intended to offer an incentive to employers to reduce injuries and to return workers to their jobs as early as possible In this way, employers benefit because the amount of money spent on compensation is reduced; workers benefit because they return to their jobs quickly Experience rating is thus a process of rewarding good performers and penalizing those organizations that are not making efforts to reduce incidents and return workers back to work as quickly as possible

Reporting Requirements  -

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Employers must report all workplace injuries to WCB/WSIB within a certain time Employer report is designed to collect information about: o 1. Nature of employment relationship o 2. Employee’s salary and hours or work o 3. Nature of incident and injury o 4. Extent of time loss and medical treatment o 5. In Ontario:  (a) Employer must report injurie or illnesses to WSIB within 3...