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Recording Principals' Earnings Information
99/05/28-02
THE WORKERS' COMPENSATION BOARD OF BRITISH COLUMBIA
RESOLUTION OF THE PANEL OF ADMINISTRATORS
Re: Recording Principals' Earnings Information
WHEREAS:
Pursuant to Section 82 of the Workers Compensation Act, RSBC 1996, Chapter 492 and amendments thereto, the Panel of Administrators ("Panel") must approve and superintend the policies and direction of the Workers' Compensation Board ("Board"), including policies respecting compensation, assessment, rehabilitation and occupational safety and health, and must review and approve the operating policies of the Board;
AND WHEREAS:
Resolution 11/14/97-04 of the Panel requires the Board to obtain the approval of the Panel for changes in policy that are consequential to or required for implementation of systems under the Employer Services Strategy;
AND WHEREAS:
Upon implementation of the Assessment Department's new computer system/database, individual earnings information for principals of limited companies will no longer be collected;
AND WHEREAS:
The Board's current policy for workers engaged in their own business is provided in Policy Item #35.24 of the Rehabilitation Services and Claims Manual;
AND WHEREAS:
Policy Items 40:30:20 and 40:30:30 of the Assessment Policy Manual currently requires details of principals' earnings to be reported to the Board;
THE PANEL OF ADMINISTRATORS RESOLVES THAT:
- Policy Item #35.24 in the Rehabilitation Services and Claims Manual is amended to remove references to the collection and use of detailed principals' earnings information.
- Policy Items 40:30:20 and 40:30:30 in the Assessment Policy Manual is also amended to remove references to the collection of detailed principals' earnings information.
- The policy amendments as attached are approved.
- The amended Policy Items #35.24, 40:30:20 and 40:30:30 are effective on the date this resolution is approved.
Dated at Richmond, BC June 15, 1999.
| By the Workers' Compensation Board |
|
| DON COTT, CHAIR, PANEL OF ADMINISTRATORS |
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REHABILITATION SERVICES & CLAIMS MANUAL
AMENDMENTS
[Deletions Struck Through, Additions in Bold Italics]
#35.24 Workers Engaged in Own Business
Where the claimant is the principal of a small limited company the claimant will often continue to work following a compensable injury. Though unable to perform the former heavier work, the claimant can still perform administrative and other light work. Full wage-loss benefits will not be paid by the Board just because the claimant cannot perform the heavier work. As the claimant is doing some remunerative work, Section 30 requires that it be taken into account, and that only partial wage-loss benefits be paid.
The general position of the Board is that, in determining earnings on a claim, dividends from investments in corporations are not considered. The Board accepts at face value the wages paid by a company to its principal if they are reasonably related to what is done. However, where the principal receives nominal or no wages for the work done the Board will for assessment and claims purposes, estimate what it considers to be a reasonable wage for that work. and assess that amount. The result of this may be that income actually received as dividends is taken into account. Should a claim be received from a principal where assessments have been previously based on an estimate higher than the nominal figure reported by the principal, the Board will to that extent consider dividends in setting the wage rate on the claim. Where the earnings reported in respect of the principal for assessment purposes have previously been accepted, but the principal reports higher earnings at the time of making a claim, the Board may for claims purposes also use the figure which was reported for assessment purposes.
In determining wage rates of principals for compensation purposes, regard is primarily had to the earnings rate reported by the employer. to the Board's Assessment Department. A higher rate may be accepted, but only if there is good evidence that the claimant was paid higher earnings by the company.
If a company has reported earnings as are being received by a principal's or shareholder's spouse or child, and these earnings have been accepted and assessments paid accordingly, then it should normally be considered for compensation purposes that the earnings belong to the spouse or child and not the principal or shareholder. The same applies if information of this nature has been provided on Income Tax Reports.
In making reports of this nature for Assessment or Income Tax purposes, the company is asserting that the principal's or shareholder's spouse or child did work in the business and did earn the money paid. The Board is required to consider any evidence which may show that this assertion is incorrect and to make its own determination. However, the Board is entitled to rely upon this assertion unless there is good evidence to the contrary. Even if, upon investigation, the evidence shows that the spouse or child did not work for the company, that in itself does not mean that the payments to the spouse or child were earnings of the principal or shareholder. There could be any number of other reasons why the company might make payments to the spouse or child. In compensating the principal of a small limited company, the Board's obligations extend only to the losses suffered in the capacity of employee. Wage-loss compensation cannot be paid to reflect any detrimental effect that the injury may have on the company's business.
Similar principles operate when, although the claimant was not engaged in his or her own business prior to the injury, the claimant commences a business after the injury. Being in control of the business, the claimant determines what personal salary is paid. The claimant can, and will commonly, take no earnings at all, or very low earnings, out of the business when it is starting up in the expectation that he or she will reap the benefit later. Yet, the claimant may be doing a substantial amount of work which, under normal circumstances, would command a significant wage. In such a situation, the only way the Board can determine the claimant's real earnings is to estimate the value of the work the claimant does.
APPENDIX B
ASSESSMENT POLICY MANUAL
AMENDMENTS
[Deletions Struck Through, Additions in Bold Italics]
40:30:20 Annual Accounts
By the middle of December of each year, all employers who are assessed on an annual basis are sent an Employer's Payroll and Contract Labour Report to complete and return to the Board by the due date. On this report, the employer is to supply the assessable payroll figures for the period of operation in the prior year, along with details of Excess Earnings, Principals' Earnings and Contractors' Earnings calculations. Payment of any outstanding assessment on the payroll must also accompany the report. Failure to reconcile the account may be subject to a penalty assessment.
40:30:30 Quarterly Accounts
Those employers who have an annual assessment of $500.00 or more, or who are operating in the Forest Products, Mining or General Trucking industries are usually assessed on a quarterly basis.
Before the beginning of each quarter, the employer will receive from the Board an employer's remittance form to use in calculating the assessment payable for the period covered by the payment. After calculating the assessment payable, the employer marks this amount on the return portion of the remittance form and returns it or an electronic facsimile thereof to the Board with the payment by the due date.
If the assessment payable is "nil", the employer must mark the remittance form accordingly and return it to the Board by the due date to avoid a penalty assessment.
If the employer has Personal Optional Protection in effect and makes a "nil" return, the computer will produce a warning to the Assessment Unit responsible for the account, and they in turn will determine whether there is sufficient credit in the account to cover the assessment for the Personal Optional Protection. If not, a letter is sent to the employer with a duplicate employer's remittance form requesting the necessary payment within 30 days, and if this payment is not received a penalty assessment is applied to the employer's account.
If an employer underpays a remittance, that employer may be subject to a penalty or interest charge.
If an employer makes a partial payment on any quarterly assessment that is less than 50% of the required remittance the employer is subject to the regular penalty assessment for non-compliance. When this occurs, the Assessment Department will send a letter informing the employer that partial payments do not satisfy assessment filing requirements and that the employer is running the risk of receiving a penalty or interest assessment, and requesting the balance of the assessment payable. If this payment is not received, the regular penalty or interest assessment is applied at the same time as it is applied to all non-reporting firms.
At the end of each year, an employer assessed on a quarterly basis receives an Employer's Payroll and Contract Labour Report to complete and return. The employer must provide the assessable payroll figures for the year on this report, along with details of Principals' Earnings, Contractors' Earnings and Excess Earnings calculations.