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Six hundred thousand dollar fine levied on employer pleading guilty to WSIB fraud charges

| April 1, 2000

Following the recent adoption by the Workplace Safety and Insurance Board (WSIB) of a “zero tolerance” approach to fraud, many expected its efforts to focus on fraudulent claims by workers. However, increasingly, WSIB investigations are unearthing deliberate, and innocent, violations of the law by employers.

It appears that non-compliance by employers has become a more attractive target, possibly for two reasons: employer violations are by nature easier to identify and employers, unlike injured workers, have money. With maximum fines payable to the insurance fund set at $25,000 per offence for individuals, and $100,000 for corporations, employers are clearly a better bet for enhancing the financial viability of the system in the short run. Further, when a corporation commits an offence, directors or officers who knowingly authorized, permitted or acquiesced in the offence are also guilty of the offence, whether or not the corporation has been prosecuted or convicted. In addition to a personal fine of $25,000, individuals may be liable to six months’ imprisonment.

If anyone doubts the danger these investigations represent, a guilty plea entered in a Windsor courtroom sends a clear signal to employers covered under the Workplace Safety and Insurance Act: know your obligations under the Act, and abide by them. The plea resulted in a fine of $600,000, the largest ever imposed on an Ontario employer for misrepresenting or not reporting workplace accidents to the WSIB.

The fine was handed down after the signing, on March 26, 1999, of an Agreed Statement of Facts (ASF) between the employer, the Canadian Salt Company Limited, and the Board’s Special Investigations Branch. The ASF not only sets out the specific factual circumstances of the case, but the statutory and administrative context within which the employer’s violations occurred.

“THE CORNERSTONE” AND “NEER”

The ASF restates the employer’s obligation to submit the Employer’s Report of Injury/Disease, better known as Form 7, which it describes as the “cornerstone” of the WSIB system. As such, failure to submit accurate information will have a “deleterious” impact on the entire process. A Form 7 must be submitted within three days of a work-related disease or injury occurring, if “the accident necessitates health care or results in the worker not being able to earn full wages”.

The ASF also describes the functioning of the New Experimental Experience Rating Plan (NEER), the system used to set employer premiums. It explains that the NEER, which sets the premiums for different industry groups based on the claims costs incurred by individual employers, penalizes employers with claims over the group average and provides rebates to those with claims costs below the average. The NEER therefore provides an incentive for employers to take positive steps to reduce their employees’ claims costs through safety and prevention programs, and assistance in workers’ early and safe return to work.

“FALSE AND MISLEADING”

Unfortunately, as Canadian Salt demonstrates, there is also an incentive under the NEER to underreport workplace injuries and the costs incurred as a result. The employer did so with respect to injuries sustained by six workers. One example will suffice.

Satish Shonek was a mechanical repairman who had two of his fingertips amputated while performing machinery maintenance. He was taken to hospital, where he remained for four days. The day after the accident, the employer filed a Form 7 which the ASF describes as “false and misleading”, an offence under the Act.

Despite knowing of Shonek’s hospitalization and the details of his condition, the employer described the injury merely as “damage” to two fingers. Further, it failed to indicate that Shonek was absent from work on the day after the accident, and failed to provide information concerning the last day he worked and the day he returned to work. The employer also indicated that Shonek would be given modified work, and that he lost no wages due to the injury. On the basis of this information, Shonek’s claim was classified as a “No Lost Time” claim, one eligible for health care payments but for no further services or benefits.

It came as some surprise, then, to the Board’s regional office when a bill arrived for four days of in-patient treatment for Shonek as a result of a workplace accident. Matters only became worse when the employer’s Personnel Manager attempted to explain this turn of events by claiming that Shonek’s hospitalization was for a non work-related angina problem. No mention was made of the surgery done to repair the damage to Shonek’s fingertips.

Canadian Salt was fined $90,000 for having filed this misleading report, $65,000 each for reports filed for five other workers, and $65,000 for failing to advise the Board of a worker’s workplace injury, also an offence under the Act. It also had to pay a 20 per cent surcharge of $96,000 and $24,000 towards the Board’s costs.

LESSONS OF CANADIAN SALT

This case, although involving a pattern of non-reporting and misrepresentation, has lessons for the average employer who believes in playing by the rules. Because there is an incentive under the NEER system to hold down the number of claims, even honest employers may be tempted to avoid reporting what they believe to be dubious injury claims.

However, as the ASF noted, the WSIB alone can determine whether an injury or disease is work-related. Further, employers will likely be caught either when, as in Canadian Salt, a health practitioner files a report to or bills the WSIB, or the worker files a claim in his or her own name. And there is always the possibility of the Board being contacted by a disgruntled current or former employee and informed about an employer’s refusal to submit a claim.

Once caught, an employer will face a minimum late filing fee of $250 and, where a pattern of non-compliance is suspected, the possibility of a visit by a squad of ex-RCMP officers belonging to the Special Investigations Branch. These investigators have the power to go through records, take over offices, and close down parts of plants to obtain information.

The implications of this are clear. If you have any doubts about the origin of a worker’s injury or illness, it is best to err on the side of caution and submit a Form 7. Where you suspect the injury to be spurious or fraudulent, it may be necessary to conduct an internal investigation of the incident. Following the investigation, if there is still doubt as to the nature of the injury, indicate this on the Form 7, and attach a letter of explanation. Similarly, do not hesitate to object to an allowance of a claim or to the continuance of benefit payments if you doubt the honesty of the claim. Your objection must be in writing, and filed within six months of the Board’s decision.

OTHER OFFENCES

Other offences relevant to employers include:

  • failure to report a material change in circumstances in connection with the employer’s obligations under the Act within ten days of the change, such as the day an employee returns to work on modified or regular duties;
  • failure to register with the Board within ten days of becoming a Schedule 1 or Schedule 2 employer, and failure to provide the Board with payroll or other information requested by the Board in connection with the registration;
  • failure to advise the Board when ceasing to be a Schedule 1 or Schedule 2 employer, or to provide payments owed and payroll information required at that time;
  • failure of a Schedule 1 employer to provide accurate annual statements or other statements requested by the Board;
  • obstruction of an investigation authorized by the Board; and
  • deduction of the cost of WSIB premiums from the workers’ wages.

In Our View

A special prosecutor has been appointed from the Board to pursue violations under the Act. Employers are therefore urged to become familiar with their obligations under the Act and to avoid the temptation to not report workplace accidents. The core obligation is to submit an accurate Form 7 within three days of learning of an accident that requires health care or results in lost wages. If you continue to pay wages to a worker who is off work due to the injury, the Board will consider these wages an advance that should be indicated on the Form.

Employers should also be aware of planned changes to the Board’s policy about what constitutes a reportable accident. If approved this Spring, a new rule will require that employers report any occasion where a worker does “modified work” for a week or more, even when no medical care was needed. This new rule may complicate the duty to report claims – resulting in more mistakes by employers and more fines payable to the Board.

For further information, please contact Colleen Dunlop at (613) 940-2734.