Pulling Out of WSIB

When it comes to worker’s compensation insurance in Ontario, trucking companies have much to consider; that’s because trucking companies employ drivers who may be able to opt out of mandatory coverage provided through the Workplace Safety and Insurance Board (WSIB). These drivers, called ‘owner-operators’ because they own their own trucks, are subcontracted through trucking companies to deliver loads.

To protect against paying penalties and unpaid premiums to the WSIB if a work-related injury occurs, trucking companies need to confirm through WSIB that their owner-operators do qualify to opt out of mandatory insurance. Companies must then consider the risks and benefits of the insurance their owner-operators choose to carry, as it could have an impact on their degree of exposure to liability when a workplace injury occurs.

WSIB AND TRUCKERS IN ONTARIO

In Ontario, the WSIB regulates worker’s compensation. WSIB began as the Workmen’s Compensation Board in 1915, when it was established by means of government legislation. Under the Workplace Safety Insurance Act, many companies — including trucking companies — had to register their workers and pay insurance premiums to WSIB. The theory was that, with all of Ontario’s employers paying premiums to the WSIB, the province could make sure injured workers received compensation. In return, injured workers would forfeit the right to sue other WSIB-insured workers and employers. No-fault workplace safety insurance in Ontario was born.

Until 10 years ago, all owner-operators working for Ontario-based trucking companies were covered by WSIB. Some were covered as dependents; others were covered as independent contractors, which meant they were responsible for paying their own premiums. The WSIB has always distinguished between owner-operators that are ‘dependents’ and those that are ‘independent contractors’ based on the financial and operational characteristics of the relationship between the owner-operator and the trucking company. For example, does the owner-operator own his own vehicle or is he leasing it from the company? Does the company issue T4 slips for that owner-operator, or make deductions from his pay? And is the owner-operator obliged to paint his vehicle in the company colours, or wear a uniform? Answers to questions such as these help WSIB determine whether an owner-operator is independent.

Ontario in 1997 decided to allow optional WSIB coverage for owner-operators that qualified as independent contractors. The decision was a result of intense lobbying by industry associations, which argued that the cost of WSIB premium payments for independent contractors outweighed the claims benefits. (WSIB premiums are set at 5.7% of insurable earnings for 2008, while loss of earnings benefits are set at 85% of the insured’s net income. Private insurance premiums are negotiable and benefits are calculated on the insured’s gross income.) Private insurance would be cheaper for independent contractors, lobbyists argued.

Hence, owner-operators that the WSIB considers to be independent now have a choice between WSIB coverage and private insurance.

WHO CAN OPT OUT?

Unfortunately, many trucking companies misunderstood the new rules and assumed all owner-operators qualified to opt out of WSIB.

The misunderstanding proved costly for some: One trucking company was obliged to pay Cdn$1.2 million in unpaid WSIB premiums and penalties after one of its owner-operators was injured in a crash. WSIB investigated and discovered that, in addition to the injured owner-operator, all 30 of the company’s subcontracted owner-operators were not eligible to opt out of WSIB. According to WSIB, the owner-operators were dependent contractors and the trucking company’s payments were in arrears.

Such a loss underlines the fact that trucking companies are often unable to correctly determine the correct status of their owner-operators. Hiring practices for owner-operators vary widely (from a handshake to a signed contract) and contribute to the confusion over whether they are considered dependent or independent. But losses such as the one described above are avoidable, given that WSIB provides the means to correctly determine whether an owner-operator is dependent or independent. Owner-operators who wish to establish their independent status simply complete a form on WSIB’s Web site. This form, entitled the Trucking Independent Operator Questionnaire (Form 1149A), allows WSIB to determine whether the applicant is dependent or independent, by asking questions about the nature of the business relationship between the owner-operator and his contractor(s).

Once WSIB has determined status, the applicant should receive a letter confirming his dependence or independence. Trucking companies and owner-operators should not make any assumptions before seeing this letter, and should keep a copy for their records. If there is any change in the relationship between the company and the owner-operator, the owner-operator must reapply to WSIB to find out whether there has been a change of status.

WSIB AND PRIVATE INSURANCE

If an owner-operator qualifies as an independent contractor, he or she can choose to purchase private insurance or opt into WSIB coverage as an independent contractor, responsible for the payment of his own premiums. However, the decision to opt into WSIB or choose private insurance should not be made lightly, or solely on the basis of up-front costs.

Risks and benefits should also be weighed. For example, WSIB coverage may be more expensive; on the other hand, due to its regulated no-fault structure, it significantly reduces exposure to litigation for trucking companies and their business partners when liability is a factor. Private insurance does not provide the same protection. It costs less initially, but could cost more down the road.

WSIB benefits cover the costs of catastrophic injuries that require long-term care. Private insurance covers defined losses (such as the loss of a limb) and has indemnity limits. Such limits can be insufficient in catastrophic cases.

WSIB provides coverage for workplace injuries only, while private insurance can cover injuries incurred when an owner-operator is not at work. This might be an important to an independent owner-operator that experiences a loss of income due to an injury received off the job. The coverage flexibility of private insurance is also worth considering; in a private insurance arrangement, insureds can choose their level of insurance based on a calculation of their gross income.

The owner-operators’ choice of insurance coverage can have a significant impact on the trucking companies that pay for their services. It’s up to trucking companies to decide whether or not they are comfortable with the insurance choices made by their owner-operators. Trucking companies, like owner-operators, should carefully consider the risks and benefits of each insurance option. Only then is a company prepared to face the outcome of a workplace injury.