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Transfer of Experience Rating
2001/06/19-06
THE WORKERS' COMPENSATION BOARD OF BRITISH COLUMBIA
RESOLUTION OF THE PANEL OF ADMINISTRATORS
Re: Transfer of Experience Rating
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:
The Board's policy regarding the transfer of experience rating is provided in Policy No. 30:50:50 of the Assessment Policy Manual;
AND WHEREAS:
The policy provides that the principal consideration for determining whether a firm's experience rating may be transferred following a business reorganization is the extent to which the firm's ownership remains the same and whether the firm requires a new account number;
AND WHEREAS:
The Board has been made aware of concerns that the current policy is impractical to the extent that it is linked with the Board's policy concerning the assignment of new account numbers and precludes consideration of whether a firm's business operations continue unaffected by a change in ownership;
AND WHEREAS:
On the advice of the Policy Development Consultative Committee, the Policy and Regulation Development Bureau consulted with the worker and employer communities on the issue;
THE PANEL OF ADMINISTRATORS RESOLVES THAT:
- Policy No. 30:50:50 of the Assessment Policy Manual is amended to remove reference to the Board's policy on the assignment of new account numbers and to enable the Board to consider, when determining whether to continue/transfer a firm's experience rating, the extent to which its business operations are unaffected by a change in ownership.
- Policy No. 20:30:21 of the Assessment Policy Manual regarding the assignment of new account numbers is amended to provide consistency with the amendments to Policy No. 30:50:50.
- The amendments to Policy Nos. 30:50:50 and 20:30:21 as attached are approved.
- The amended policies are effective July 1, 2001 and will apply to changes in ownership that occur on or after that date.
DATED at Richmond, British Columbia, June 19, 2001.
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By the Workers' Compensation Board
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| MAUREEN NICHOLLS, CHAIR PANEL OF ADMINISTRATORS |
APPENDIX 1
ASSESSMENT POLICY MANUAL
PROPOSED AMENDMENTS
[Deletions Struck Through, Additions in Bold]
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ASSESSMENT OPERATING POLICY |
POLICY NO. 30:50:50 |
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SUBJECT: TRANSFER OF EXPERIENCE RATES |
PAGE 1 OF 1 |
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DATE: MAR/95 July/01 |
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REPLACES ISSUE DATED: OCT/92 MAR/95 |
Employers often change portions of their business for a variety of reasons. These changes may be to the equipment used, the location of the business, the ownership of the business or a change in the legal entity running the business. When changes of this nature occur in the business, the question posed which arises is whether there should be a change in the experience rating of assessment for the business.
Policy 30:50:41 (Era - The Plan) 30:50:10 (The Concept of Experience Rating) states that the concept behind the plan experience rating is to promote positive safety attitudes and provide a degree of assessment equity down to the firm level equity among employers, through a system of recognition and accountability for claims costs arising out of an individual firm’s operations.
It is the owners of the business who determine the key ingredients of the business and the general approach to safety in the business. The Board recognizes that it is the owner(s) of a business who determines the nature of operations and the approach to occupational health and safety in the workplace. Therefore, the general criteria as to determine whether a firm’s the experience rating will be transferred/continued will rest on whether there has been a change in ownership of the business. and will generally follow the assignment of the account number (Policy 20:30:21). Where the ownership remains substantially unchanged, experience rating will be transferred/continued. Where ownership has substantially changed, experience rating will not be continued/transferred and the new business will have to determine its own experience rating.
Where a firm undergoes a change in ownership, its experience will continue if it is determined that at least 50% of the ownership remains the same. Generally, the firm’s classification must also remain the same (see Policy No. 30:20:40). In these situations it is assumed that the firm’s relative hazard or cost of compensation remain substantially unchanged.
Where a firm undergoes a majority change in ownership (i.e., less than 50% of the ownership remains the same), the experience of the old firm will generally not continue or transfer to the new firm.
As an exception to this general rule the Board may elect to transfer/continue a firm’s experience if it is satisfied that the firm’s business operations remain substantially the same. Indications of continuing business operations may include situations where the firm’s undertaking, management, staff, plant, equipment, location, and customers/clients remain the same. Under these circumstances, it may be reasonable to expect the firm’s relative hazard or cost of compensation to remain the same.
This exception is primarily intended to address the following situations:
1. Where the firm’s owner is relatively removed from day-to-day operation and management decisions. Such is typically the case for a large publicly traded firm where shareholder activity may result in a change in ownership, but does not alter the firm’s business operations.
2. Where an equal partnership splits apart and the former partners continue to operate in the same business. In this situation, the former partners may, through their respective firms, continue the business operations of the old firm.
3. Where the new owner is a "family member" of the previous owner and the firm’s business operations continue unaffected by the change in ownership. Consistent with Section 1 of the Workers Compensation Act, "family member" means wife, husband, father, mother, grandfather, grandmother, stepfather, stepmother, son, daughter, grandson, granddaughter, stepson, stepdaughter, brother, sister, half brother and half sister. The term "family member" also includes a same-sex spouse.
Where the business changes result in a change of classification, the criteria set out in Policy 30:20:40 (Change in Classification) must also be considered.
In situations where a new "account number" is assigned (see Assessment Policy 20:30:21) experience rating will be transferred if:
1. The old firm has ceased operating completely and a
new firm starts up and carries on the business; and
2. The majority of ownership of the new firm remains the same as the old firm; and
3. The same type of business is carried on as evidenced by the new firms receiving the same classification as the old firm.
In situations where any of these conditions are not fulfilled, the experience rating will not be transferred as:
- In condition (1), if the old firm continued to operate, it would be entitled to the experience rate and not the new firm.
- In condition (2), as outlined previously in this policy, ownership is the basis for the transferring.
- In condition (3), a key element of the plan is comparing the firms "costs to assessable payroll ratio" to the "costs to assessable payroll ratio" of the subclass to which they are assigned. According to Policy 30:20:40, a distinct change in business of any firm causing a change of classification is one of the situations which results in the firm having to establish a new experience rating position.
APPENDIX 1
ASSESSMENT POLICY MANUAL
PROPOSED AMENDMENTS
[Deletions Struck Through, Additions in Bold]
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ASSESSMENT OPERATING POLICY |
POLICY NO. 20:30:21 |
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SUBJECT: ASSIGNMENT OF ACCOUNT NEW NUMBERS |
PAGE 3 OF 4 |
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DATE: MAR/95 July/01 |
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REPLACES ISSUE DATED: OCT/92 MAR/95 |
- Two or more registered employers come together and one employer carries on (continuation under the account number of the remaining employer).
- When two or more companies amalgamate and continue as one company under either Part 8, Division 4 (Sections 271 to 279) of the B.C. Companies Company Act or Sections 181 to 190 of the Canada Business Corporations Act (Chapter C-44) or Societies amalgamating under Section 17 of the Society Act. (The amalgamated company or society holds and possesses all the property, rights and interests and is subject to all the debts, liabilities and obligations of each amalgamated company.)
- A non-registered corporation purchases the assets of a registered employer and commences operations (corporation now an employer under the Act, hence new account number).
- (a) In a two-party partnership, or joint venture, one party leaves and the other party continues to operate the business as a proprietorship (the proprietorship will retain the account number of the partnership) (a new account must be set up for each partners’ subsequent operations).
- A Receiver or Trustee appointed to liquidate assets. (As there is not a new employer, a new account number is not issued.)
- A Receiver-Manager is appointed to operate the company (Receiver-Manager is a new employer, hence new account number).
Hence in amalgamations we will assign a new account number but we will transfer experience and excess earnings.
(b) A two-party partnership or joint venture adds another party (as majority ownership remains the same, the account number will stay the same).
(c) A partnership or joint venture of three or more parties adds or deletes the partner (as majority ownership remains the same, the account number will stay the same).