Industry Issues: Workers compensation covenant with employers broken

by David Bradley

Recently, the Ontario Worker Safety & Insurance Board (WSIB) announced its new 2006 rates charged to employers. While the average rate has been increased by three per cent, trucking and related rate groups have faired somewhat better than average. General Trucking will go from $5.68 (per $100 of payroll) to $5.84, an increase of 2.8 per cent. Warehousing remains exactly the same at $2.73 while Courier Services actually decreases by 3.1 per cent from $2.62 to $2.54.

Despite the relatively modest size of the increase rates for 2006, OTA will continue to work to have the government force the WSIB to reconsider its decision to raise rates.

The WSIB has suggested that it would like to raise rates by an average of 3 per cent per year for the next five years. While this year’s hike may be small, the cumulative impact of the Board’s strategy of raising rates slowly but consistently will be a 20-25 per cent increase in rates over the course of the next five years. What this amounts to is a 20-25 per cent hike in what is really a payroll tax – a killer of jobs – when other alternatives exist.

OTA recognizes the need for sound financial decisions to be made to ensure the long term financial viability of the WSIB system.

But, the primary objective of the WSIB’s recent “consultations” around premium rates, should have been to find a way to ensure the financial viability of the WSIB without a rate hike.

Throughout the “consultations” the employer community presented a plan that would have accomplished this.

Unfortunately, this counter-proposal was rejected by the WSIB and it became apparent that the “consultations” were nothing more than an exercise in justifying a rate hike.

The OTA and the rest of the employer community clearly and repeatedly indicated that rather than face a payroll tax hike, we would rather that the WSIB revisit the policy of achieving full funding by 2014 and move the date to 2016 or beyond in order to keep rates stable.

From our perspective, this full funding objective is clearly the “pressure” that the Board has the greatest control over and the greatest ability to modify in order to eliminate the need for rate hikes.

It is important to note that it was in fact originally employer groups that pressed the Board to deal with its unfunded liability issue by committing to the “full funding by 2014” goal. The reason for this position was the employer community’s concerns about the possibility of future massive rate hikes.

I think it is also extremely relevant to remember that at that time employers agreed to increased premiums in the short term in order to ensure that rates would continue to decrease over the long term. That was the basis for the 2014 policy, increased rates up front, elimination of the unfunded liability by 2014, and the reduction in premiums as we approached that 2014 date.

Increasing premiums now would violate the spirit of the consensus around 2014. As employers we accepted higher rates over the past two decades based on the promise of lower rates. The purpose of the 2014 policy was to ensure that rates would not go up, but now, by proposing an increase in rates, the WSIB has both violated our trust that rates would go down and invalidated the 2014 policy. The covenant with employers has been broken.

During the “consultations” the WSIB’s own analysis showed that there is currently no funding crisis, and that simply by moving the target date for eliminating the unfunded liability to 2016 the need for a rate hike at this time would be removed.

OTA cannot understand why the WSIB continues to propose a tax increase when such a simple alternative exists.

Further, there is, as far as we can see, no harm done to any group by moving the target date. Injured workers are not denied assistance, the WSIB’s financial viability is not threatened, and employers are relieved that they aren’t facing a tax hike. Everyone is satisfied and no one’s interests are harmed. Everyone it would seem, except the WSIB.

– David Bradley is president of the Ontario Trucking Association and chief executive officer of the Canadian Trucking Alliance.

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