Ontario law allows for execs to be exempt from WSIB coverage
When Sam’s Auto Wrecking removed its executives from its workers compensation coverage, the Hamilton-based scrap metal company didn’t realize it was putting itself in a position to be held liable for injuries that could be incurred by those executives.
In Ontario, sole owners, partners, independent operators, and executive officers are not required to have workers’ compensation coverage.
One of the company’s operations managers, John Ferber, was badly injured when a worker ran over his leg and foot with a crane when he was supervising the worker.
Because Ferber’s position fell in the same category as an executive, the company had removed him from its coverage. It replaced that coverage with disability insurance. But when the insurance company denied coverage under the company’s disability insurance policy, Ferber sued Sam’s Auto Wrecking and the worker who ran over his foot.
Sam’s Auto Wrecking then launched a suit against the insurance company, along with the insurance brokerage and the broker who had secured the insurance. Sam’s Auto Wrecking argued it had been misinformed when it failed to provide insurance coverage for an employee not covered by workers compensation.
“What’s interesting here is that if he had workers’ compensation, he can’t sue. But, of course, if you take him out of workers’ comp, he can sue,” says Stuart Ducoffe, an employment lawyer with Toronto-based e2r Solutions.
The workers’ compensation system offered by the Ontario Workplace Safety and Insurance Board (WSIB) is a “no-fault” insurance plan that prohibits injured workers from suing for work-related injuries.
“What the company should have done was get insurance coverage that included bodily injury arising out of employment (coverage),” Ducoffe says.
Companies should explore purchasing coverage for their executives because the costs could outweigh any potential liabilities the organization could find itself facing, suggests Ducoffe.
“It would seem that the most protection a company can have — the best protection — is to have the person on workers’ comp and then you don’t have to worry about the employee suing,” he says.
David Marchione, a lawyer with CompClaim in Toronto, has seen this problem a number of times in his career.
“I used to work at the WSIB and I ran into this a few times where you had the owners of the company who were basically working foremen,” he says. “I had one who fell off a wall and broke his leg and he was not entitled to coverage.”
Because the risk of an executive experiencing an injury is low, employers may not consider the possibilities of an injury, he says.
“The downside to that is if they don’t have either coverage through the compensation board or private coverage, then they wouldn’t be covered for any workplace injury,” he says.
Organizations can choose to opt-in on WSIB-offered workplace compensation coverage for executives.
“If it was me, I would want coverage. If I had a business and there was a situation where I got hurt and I couldn’t run my business… I would definitely want to have insurance in place to mitigate that risk,” says Earl Glyn-Williams, assistant director of the Employer Services Centre at the WSIB.
Registering workers
An injured worker that legally requires workers compensation coverage will always be eligible for workers’ compensation coverage whether or not he has been registered with the WSIB.
When the injury occurs, the compensation board will look at the incident and determine the company ought to have been registered with the WSIB.
“They will cover the worker and they will retroactively register the company and they will go after the company for back premiums,” says Marchione, adding the WSIB would also charge heavy interest.
That’s not all.
“Failing to register carries a potential for prosecution under the Workplace Safety and Insurance Act, which has a maximum penalty of $100,00 for corporations and a maximum penalty for individuals of $25,000 and or six months in prison,” he says.
Construction industry
In January, Ontario passed Bill 119, which made it a requirement for all employees in the construction industry to have workers compensation coverage — including owners and executive officers.
“If you have a company like EllisDon, the executives used to be exempt from coverage. Well, they’re not exempt anymore,” Marchione says. “The new rules allow companies to exempt one executive officer, but they have to pay premiums for the rest of the executive officers.”
Independent operators conducting work solely in home renovations may also be exempt from coverage.
“If you’re just doing work for the owners or occupants of a home and it’s renovation-type work, then those (independent operators) do not have to have coverage,” says Glyn-Williams.
However, many people misclassify themselves as independent operators, according to Marchione.
“In order to be an independent operator, you have to be deemed as such by the WSIB,” he says. “There are a lot of people out there who think they’re independent, but they’re not really independent.”
