Independent Operators and Transfer of Costs

Recently, one of our Ontario based Trucking clients contacted us regarding a unique and troubling situation they were facing. One of their Ontario domiciled Owner Operators (Independent Operator) was involved in a serious MVA with another Tractor Trailer. The driver of the other tractor trailer was an employee of another Ontario based Trucking Company, and was a ‘worker’ in the course of his employment for another Schedule 1 (WSIB covered) employer at the time of the MVA.

As per WSIB policy, Independent Operators are not required to have WSIB coverage, but they may “opt in” if that is their preference. The determination of who is or is not an independent operator for WSIB purposes, must be made by the WSIB.

The WSIB examines the relationship between the person claiming to be an ‘independent operator’ and his or her contracting carriers (or the Principal using WSIB’s terminology).

The Owner Operator involved in the MVA had previously submitted his questionnaire to the WSIB to determine ‘Independent Status’ two years prior to the accident. This status is determined based on a series of questions contained on the WSIB 1149A questionnaire for those in the trucking industry. Shortly after submitting the questionnaire, the Owner Operator received a letter from WSIB confirming his ‘Independent Operator’ status, with respect to the specific relationship he had with the Principal (our Ontario-based trucking client). In lieu of mandatory WSIB coverage, the Owner Operator was required to purchase suitable WSIB Alternative Coverage from a Private Insurer.

As a result of the MVA, the employee Truck Driver sustained injuries which were determined to be severe, and as a result the recovery period would be prolonged. Because of the severity of the injuries, the carrier who contracted with the Owner Operator was levied a proportional surcharge based on this particular accident and their overall historical claims experience through WSIB’s NEER program (New Experimental Experience Rating program). On learning of the potential financial liability that would result from this specific accident, the Trucking Company quickly engaged the services of a third party WSIB consultant to address and help mitigate the issue. This consultant advised the client to apply for ‘Transfer of Costs’ from their WSIB account to the account of the Owner Operator’s contracting company (our client).

As a result of this application, WSIB quickly determined that our client’s Owner Operator was ‘at fault’ for the accident, and as such, the employer should be responsible for all, or the majority of the other employer’s financial liability – a calculated surcharge of $110,000.

Upon reviewing the facts with our WSIB lawyer, we quickly determined that a Transfer of Cost would have been appropriate had the Owner Operator been a ‘worker in the course of employment’ at the time of the MVA. However, since the Owner Operator had been declared an ‘Independent Operator’ who had contracted with the principal, any Transfer of Costs would not be applicable. Transfer of Costs can only occur when both parties involved in the work related incident are determined to be employees (Workers) of either a Schedule 1or Schedule 2 employer. Since the driver at-fault was an Independent Operator, transfer of costs should not be permitted. Upon appealing the decision, WSIB quickly reversed their previous decision and the impending penalty and costs were not levied against our client.

It should be noted that this ‘victory’ does also come with some risk of potential liability. Since the Independent Operator operates outside of the Act (Workplace Safety and Insurance Act), they are not protected from being sued. The Act protects Schedule I and Schedule 2 employers from being sued for injuries. Whenever a worker claims WSIB benefits the Board the worker’s legal rights are always subrogated to the Board. So if the worker could sue a Third Party for damages, the Board has the right to initiate that legal action to recover their costs. In this particular situation, the Board opted not to proceed with any legal action.

Action Items:

If the Owner Operator had not previously applied for Independent Operator determination from WSIB, it is quite possible that the Transfer of Costs would have been allowed. Here are some action items for you to take today:

1) If you contract with Owner Operators, do you have a letter confirming their ‘Independent Status’ from WSIB which names your company as ‘Principal’? If not, have each of your Owner Operators complete the following questionnaire and submit to the board as soon as possible:

      A) General Trucking:

      B) Courier:


Key Facts about Independent Operators (Ontario):

The act of incorporating a business DOES NOT automatically establish an ‘Independent Operator’. Trucking companies who think differently are placing themselves in a very risky situation in the event of serious, fatal, or catastrophic injury arising from an MVA. Although incorporating a business is an important step in establishing a formal business relationship with a contracting company, the WSIB is primarily interested in assessing the overall business relationship between the parties. Part of this involves determining the amount of investment the Owner Operator has made in his/her business and their respective degree of operational control. In a nutshell, here are some of the key items that WSIB will review in making their determination regarding Independent Status.:

1) The Owner Operator must Own or have financial control over his or her truck. This establishes the amount of ‘skin in the game’ that the Owner Operator has. Traditional financing through commercial loans and arm’s length leases can satisfy this requirement.

2) The Owner Operator must be responsible for the majority of the costs of operating his/her business – Maintenance, Fuel etc.

3) The Owner Operator must have market mobility and the freedom to contract with other carriers.

4) There should be a very clearly defined contractual relationship between the Owner Operator and the Carrier which formalizes their intentions to remain as two independent businesses who are in a business relationship.

5) There should also be an easily distinguishable relationship (policies, practices, actions) between the Carrier Company and their own employee drivers and the Carrier Company and the Independent Operators. They should not all be treated the same way.

WSIB and OHS for Employers in Ontario – September 2013

First Annual Workers’ Compensation Case Update from the OBA Sept. 26 in Toronto

Come and join me and meet the very best in the field of Workers’ Compensation Law.  You can attend in person or on-line Thursday September 26, 2013 7:00 pm until 9:30 in Toronto.

September 30, 2013 NEER Annual Statements are coming!

If possible, get your most costly re-consideration decisions made and applied before Monday September 30, 2013. If there is an unfortunate delay in receiving your decisions, remember to include a request for a retroactive manual adjustment to your NEER statement in your written submissions. If you receive a surcharge, let’s see what we can do to get some of that back for you. And you will have to pay it within 30 days (you can request a payment plan to save on cash flow).

Management Side WSIB Guidelines to follow:

1. Form 7 Review (always send it to me first, so I can ensure that your interests are protected in the long run for Appeals, especially in sections C, F, and K). Remember to word Section C6 as the employer’s statement of what happened. Do not use the words dictated by the worker (they have the Form 6 for that). This IS a very important statement about what the employer is accepting liability for. When you sign your name on the Form 7 you are accepting the potential liability for an individual claim costing  up to a maximum of $416,0000 (2013).  Also, it is best to write everything in the tone that you are simply recording what was said, stated, alleged or reported by the employee.  Eg. The worker reported that he injured his back, the worker stated that he fell.. the worker indicated that he bumped his elbow.  Don’t put too much detail here.  Use “the worker stated that he fell from a platform and bumped his head” instead of “the worker fell 20 feet from a platform smashing his head on the cement”.

2. Send in the Notice of Intent to Object form on almost all decisions to protect your interests and opportunities to appeal in the long run. The time limit to submit this Form is only 6 months after a decision was written but more often than not, a claim does not reveal problems which should be appealed until long after 6 months. Submitting the Notice of Intent to Object does not start the Appeal process in motion, it only bookmarks your opportunity to object later.

3. Always offer suitable and safe modified duties in writing right away for every injured employee if not totally disabled. Doctors do not make the decisions in the Return to Work process. Return to Work is a team effort and decision making is collaborative process involving the worker, the employer, the doctor and the Case Manager or Return to Work Specialist. If you need help with getting someone back to work, we can help.

Canadian Breast Cancer Foundation Run for the Cure October 6, 2013

I am participating in this run for my beautiful cousin Beth who passed away last month at the age of 45 after a short and brutal battle with Breast Cancer. Your donations would be greatly appreciated.

Complimentary OHS Policy with IRS Statement

What do we want in health and safety?  To inspire, motivate and get our workers to pause, stop, and listen to their self-protective inner voice or intuition whenever they think about doing something unsafe! Protecting workers, saving lives, reducing costs, risks and liabilities: it is really all about prevention. (click here)


WSIB and OHS for Employers in Ontario – May 2013

Miracle of Medicine just to warm your heart and make you cry:

My son in first year med school sent this video clip on cleft lip.

Current Issues in WSIB Law: Diagnosis, Analysis, Resolution – May 23 – Register to Watch On-Line

Every year the Ontario Bar Association sponsors an Annual all-day WSIB conference that is tremendously informative and given to a room full of the very best WSIB practitioners, Vice Chairs, WSIB and WSIAT staff in the Province. It is well worth watching (in person attendance is now full). Prepare all of your questions, make new connections and get informed. You will receive such valuable information, that you will want to come back every year. Here are the links for both the registration information and the program outline.

MOL Inspection Blitzes Begin this Month:

The Ministry of Labour has posted their schedule of Inspection Blitzes in connection with their enforcement of both the Occupational Health and Safety Act and the Employment Standards Act.

The first focus is on “vulnerable workers” for May until August for the Industrial and Health Care sectors. Special attention, procedures, monitoring and mentoring should be in place for any “new” worker or any “young
worker”. Some other “vulnerable worker” categories that you should consider in your health and safety procedures include: pregnant, disabled, working with restrictions, working with a chronic mental or physical condition, first time employee (no matter what age), temporary, personnel agency employee, language barriers, employees with possible mental illness, long term or very senior employees (may be resistant to change and need special monitoring) and possible domestic violence victims.

Also, the MOL is looking to inspect the Mining Sector for their Internal Responsibility System. Every employer should be integrating the IRS into their health and safety program. For an excellent on-line course that you can purchase and teach your team, go here.

New BC Workplace Bullying & Harassment Policies March 2013

Will be helpful to all employers. Get them here.

Now Affiliated with Charlebois Associates: HR Proactive Inc.

Since 1997, HR Proactive Inc. has been helping employers understand and comply with their legal responsibilities through a wide array of training products and services. They provide extensive experience in Human Rights related services and expert Human Rights Investigations which are critical for providing a solid evaluation of the matter that you are facing, and also a fair and impartial report that can be used to assess your matter or to prepare for a Hearing before the Human Rights Tribunal of Ontario.

Golfers, Sponsorship and Donation opportunities urgently requested: Epilepsy Support Centre – Third Annual Rick Berg Invitational Golf Tournament

In London, Ontario on May 30, 2013. Come golf with me (I use that term very loosely and have a bad case of golfer’s amnesia from last year, my first ever season of “golf”). We continue to celebrate Rick’s legacy through this tournament and this year’s proceeds will be used to raise awareness and fund research funding epilepsy – with a focus on SUDEP (Sudden Unexpected Death in Epilepsy).

Everyone have a safe and amazing long weekend!


WSIB and OHS for Employers in Ontario – April 2013

Current Issues in WSIB Law: Diagnosis, Analysis, Resolution – Save the Date May 23, 2013 Toronto

Please join me in Toronto. Every year the Ontario Bar Association sponsors an Annual all-day WSIB conference that is tremendously informative and given to a room full of the very best WSIB practitioners, Vice Chairs, WSIB and WSIAT staff in the Province. It is well worth attending! Bring all of your questions, make new connections and get informed. You will receive such valuable information, that you will want to come back every year. Here are the links for both the registration information and the program outline.

Mandatory WSIB Construction Coverage Effective January 1, 2013:

Before January 1, 2013 there were approximately 6400 CAD-7 (construction) employers registered in Ontario. Effective January 1, 2013 all construction companies (with or without employees) including Partners, Executive Officers, Independent Operators and Sole proprietors will be now be “deemed” workers under the amended Workplace Safety and Insurance Act and the number of registered construction employers is expected to rise substantially.

There are two exemptions: 1) people who only do home renovation work, directly for home owners, and who do absolutely NO other commercial construction work and 2) one partner or executive officer of a corporation may file for an exemption (will need to file a Declaration of Exemption from coverage if he or she does absolutely no construction work.

Periodic site inspections are permissible.  These “deemed” workers are now classified into two groups: 1) those who do non-exempt construction work and 2) those who do no construction work at all.

For those who do non-exempt construction work, they will have to pay regular premiums at the Construction Rate Group rate on the labour portion of all of their contracts. Independent Operators or owners of construction companies who do their own construction work are expected to feel the greatest cost impact of this new legislation. They will now have to pay full premiums of approximately $7500 per year (using Rate Group 764) on their own earnings up to the maximum insurable earnings per year (which is $83, 200 for 2013).

For those partners and executive officers who do no construction work at all, they will have to pay premiums on their income (no matter how it is classified, even dividends) at a nominal rate of .21 cents per $100 / payroll. To get this nominal rate, non-exempt partners or executive officers in construction will have to complete a Request for Rate Group 755.

New JHSC Training Provider

Workplace Health and Safety Network provide WSIB Courses (beginner to advanced) click on the logo and check them out now or go to

Sometimes a swimming pool is just a swimming pool

In 2007, a guest at Blue Mountain Resorts died while swimming in an unattended pool at the resort.

The Ontario Ministry of Labour issued orders against the employer for failing to report this death under subsection 51 (1) of the Occupational Health and Safety Act.

The employer argued that they should not be required to report the death of a guest in a swimming pool, because the pool was not a “workplace” and there was no “worker” even present when this tragic accident occurred.

The Ministry of Labour disagreed and issued orders against the employer.

Throughout Ontario, employers were stunned when both the OLRB and the Divisional Court upheld the orders of the MOL.

With the Dofasco case in 2007, the Court of Appeal told us that “due diligence” required employers to literally have eyes on the backs of their heads as they contemplated even the “rogue and defiant worker” in their legal responsibilities.

The Blue Mountain decisions by the MOL, the OLRB and the Divisional Court resulted in a shuddering wave of resignation by employers.

The Court of Appeal for Ontario has thankfully restrained and limited the broadening reach of the MOL in saying that their interpretation of this section “would make virtually every place in the province of Ontario (commercial, industrial, private or domestic) a “workplace” because a worker may, at some time, be at that place“.

They set aside the decisions of the Divisional Court and the Board.

This is great reading for employers! Read the Court of Appeal for Ontario decision.

WSIB and OHS for Employers in Ontario – September 2012

WSIB Policy Review

In an excellent initiative this year, the WSIB is beginning a process to regularly review all of the major operational policies which govern decision making. There are four policies currently under review: 1) Recurrences 2) Work Disruptions 3) Permanent Impairments and 4) Aggravation Basis. All stakeholders should consider reviewing the policies and contributing their input for change, clarity, consistency, relevancy and improvements. Stakeholder feedback can be submitted at public hearings starting at the end of October 2012 or in writing, or directly to WSIB staff.  More Info.

WSIB Appeal Backlog: 9000 Appeals!

1. Be proactive for fair evidence based decisions starting on the Form 7 (specifically sections C6, C7, C11 and C12 give lots of details. In section C6 when you are describing “what happened” remember it is the employer’s statement about what was “alleged” or “reported” to have happened, not the worker’s statement);

2. Object now and within the time limit (usually 6 months) to all decisions that could be incorrect, or could be found to be incorrect anytime in the next 4 years (NEER) or 5 years (CAD-7) in order to preserve your opportunity to appeal if and when the time comes;

3.When Appealing a decision look for: 1.Facts (included, excluded, missing) 2.Evidence: (Medical, Expert, Witnesses, Reports, Investigations) 3.Policy 4.Law 5.Reasons (how facts, policy and law were used by the decision maker) 6.Detailed Causation analysis (in both the decision and the WSIB Access file) 7.Credibility issues

Cézanne is Guest Speaking in London & Toronto:

Click Here to find out more!


Sometimes the judge does have a sense of humour

In July 2011, Kenton Circuit Judge Martin J. Sheehan was relieved to see that a case he was apparently dreading reach a settlement before reaching his courtroom. He refers in his order to the case being settled amicably, although there is a footnote indicating he is using that term loosely. Part of his order reads:

[S]uch news of an amicable settlement having made this Court happier than a tick on a fat dog because it is otherwise busier than a one legged cat in a sand box and, quite frankly, would have rather jumped naked off of a twelve foot step ladder into a five gallon bucket of porcupines than have presided over a two week trial of the herein dispute, a trial which, no doubt, would have made the jury more confused than a hungry baby in a topless bar and made the parties and their attorneys madder than mosquitoes in a mannequin factory …

The jury trial scheduled herein for July 13, 2011 is hereby CANCELED [and] …

The Clerk shall engage the services of a structural engineer to ascertain if the return of this file to the Clerk’s office will exceed the maximum structural load of the floors of said office.

Trucker kids as employees – further details emerge

When we wrote about our client a few days ago, we decried the WSIB’s rush to judgment in declaring this Independent Owner/Operator (IO/O) to have employees when, in fact, he does not. We’ve now learned the confusion might have arisen because of the tax receipts the corporation issued to acknowledge income splitting. But that won’t excuse the WSIB from exercising poor judgment.

WSIB matches up records with Canada Revenue Agency and they received a report that this IO/O had issued T4 slips to his children. From the WSIB perspective, that appears like there are employees in this corporation. The IO/O, on the other hand, does not have a WSIB account because he is entirely self-employed and has his own private disability insurance. Like many independent operators, though, he does exercise his right under CRA rules to split income with family members.

So WSIB sent him a letter on September 30, 2010 demanding that he register an account. When he didn’t reply by October 13th, they called him and were advised that both he and his accountant were on vacation when the letter arrived, and were still away. WSIB was apparently unwilling to wait a short while for their return.

For their part, WSIB defends their action by saying they did write to the IO/O for clarification. But they waited two weeks for an answer and, even knowing he wasn’t available to answer, went ahead without hearing from him. They waited two weeks! When is the last time WSIB made a decision within two weeks?

Here’s the problem – issuing the tax forms appears to be an accounting matter. We’re told the T4 may not be the best way to share profits (note: we are  not taxation experts); but it was the issuing of those forms that got WSIB excited in the first place. So you would think a reasonable and sensible solution would be a discussion with the IO/O and an inquiry into whether or not there are any ‘employees’ under a contract of service with the corporation. Nope. Rather than a discussion, or to await the IO/O’s return from vacation, WSIB arbitrarily registered an account, listing the two children as employees, and demanded two years of retroactive premiums. [It isn’t hard to tell WSIB is getting desperate for money these days.]

These kids are NOT employees. No documentation filed, correctly or incorrectly, with any agency changes that fact. It cannot create an employee where none exists. Both WSIB and the Workplace Safety and Insurance Appeals Tribunal tell us this regularly, when ruling on the ’employee versus independent operator’ issue. You cannot create an ‘independent operator’ simply by completing enough documentation (or even forming a Corporation) to generate the appearance of independent status as a way of avoiding the ball-and-chain that an employer/employee relationship involves. In the same way, WSIB shouldn’t be permitted to create an ’employee’ out of thin air, or thin paper, as it were, simply by completing their own forms.

CRA permits the splitting of income and that does NOT create an employer/employee relationship.  There is no contract of service, no service performed, and hence no need for premiums and no ’employer’ as defined by  WSIB’s own governing legislation. To see just how little sense this makes, we can ask: “who would these premiums be protecting?” and “who could possibly file a WSIB claim”?  The director who drives the truck has valid private disability insurance and absolutely no need for WSIB protection. There is no one else to protect.

In a subsequent discussion with the manager in charge at WSIB, she refuses to even consider that this decision was simply wrong and offers the appeal process instead. There is no reason this IO/O should need to go through the expense of an appeal over a situation so inane. Far too often, adjudicators and managers who do not want to be held accountable for objective, legal, and evidenced-based decisions just pass the buck to Appeals, having no regard for the cost and the valuable resources being wasted.

It is quite clear that the WSIB rushed to judgment and has an incomplete understanding of the concept of income splitting, and even their own legal definition of an ’employer’. That is scary. We wonder how many ‘documentary’ deemed employers have been created in Ontario? As we pointed out in our last blog, there is not a lot of value to WSIB connecting and sharing information with CRA if they can’t grasp how to properly use the information the taxman gives them.

Posted by Paul Harris/Cézanne Charlebois

Truckers who haven’t hired their kids might be surprised to learn WSIB disagrees

We have learned of an Independent Owner Operator (IO/O) who is the director of a corporation with no employees. His Articles of Incorporation list both him and his wife as directors – and, so far as they are concerned, there are no other people involved in the company.

Like many IO/Os, he splits income for taxation purposes – perfectly in accordance with Canada Revenue Agency rules. But on reviewing the shared information from CRA, the WSIB decided that his two children – with whom there was also income splitting – were employees. They determined that the IO/O was, in fact, an employer and they assessed premiums against him – retroactive for two years!

Now here’s the problem – these kids are NOT employees. CRA permits the splitting of income and that does NOT create an employer/employee relationship. There is no contract of service, no service performed, and hence no need for premiums. WSIB says they wrote a letter to the employer asking for clarification but when he didn’t respond, they simply went ahead and issued their order for the back premiums. They wrote to the IO/O on September 30, 2010 and followed up by telephone on October 13. They were advised that both the IO/O and his accountant were on vacation, but they just went ahead and ruled against him rather than await his return.

They waited two weeks! That must set a new record for decision-making at WSIB.

In subsequent discussion with the manager in charge at WSIB, she refuses to even consider that this decision was simply wrong and offers the appeal process instead. There is no reason this IO/O should need to go through the expense of an appeal over a situation so inane.

It is quite clear the WSIB rushed to judgment and has an incomplete understanding of the concept of income splitting. There is not a lot of value to them connecting with CRA if they can’t grasp the information the taxman gives them.

Posted by Paul Harris

The Judges and Mr Webster

The Supreme Court of the United States (SCOTUS) must surely be considered an august and intelligent body. It might come as a surprise, then, to realize how many times they are unable to interpret the law without referring to common dictionaries to grapple with the meanings of some very common words. [Some of you might remember former president Bill Clinton asking at a deposition for a definition of the word ‘is’.]

In May of this year, the justices cited dictionaries in eight separate cases to determine what legislators meant when crafting statutes. In particular, their references to the dictionary in May included such words as ‘prevent’, ‘delay’, and ‘report. Probably the most unusual was Chief Justice John G. Roberts Jr puzzling over the meaning of a federal law using five dictionaries. One of the words that troubled him was the exact meaning of the word ‘of’.

Over the years, it appears the justices have looked up some very common words (‘now’, ‘also’, ‘any’, ‘if’) and a few you would expect them to know better than anyone – ‘attorney’ and ‘common law’. Even the editor of the esteemed Oxford English Dictionary thinks this is wrong. Jesse Sheidlower says that “it’s probably wrong, in almost all situations, to use a dictionary in the courtroom.” Sheidlower continues that “dictionary definitions are written with a lot of things in mind, but rigorously circumscribing the exact meanings and connotations of terms is not usually one of them.”

Apparently the trend of justices referring to dictionaries – and then arguing over which dictionary and which definition is authoritative – has seen an increase in recent decades. Starting in 2000, there have been 295 words or phrases in 225 opinions where SCOTUS used dictionaries to reach their conclusions. During their long careers, famous SCOTUS justices Oliver Wendell Holmes Jr, Benjamin N Cardozo, Louis D Brandeis, and Learned Hand never turned to dictionaries in their deliberations.

Since the SCOTUS justices have cited some 120 dictionaries, there is the suggestion that they have cherry-picked something that suited their own prejudices.

It’s not known if this practice is prevalent in Canada, but the findings of courts in this land often make one wonder what judges were thinking. Perhaps they have sometimes been misled by reading the wrong dictionaries.

Posted by Paul Harris