Commentary

Employees And Employers Harmed By Sharp Increases To Workers Compensation Rates

Image: The Canadian Press

Since WorkSafeNB announced July 17 that workers’ compensation rates were expected to increase again in 2019 to such an extent that they will have effectively tripled since 2015, the old ‘employees vs employers’ narrative seems to have arisen once again.

It seems to me that employer and employee groups should mostly be in agreement when it comes to the current workers’ compensation situation.

We all have a stake in the system and all employees and employers should be highly incentivized to ensure that the system is efficient and sustainable. At this point in time, it is clear that it is neither. The system is broken and in crisis.

To state otherwise is to say that the business community, the government-appointed task force, the WorkSafeNB CEO, its entire board of directors along with the auditor general are disingenuously ringing alarm bells.

Since 2016, all provinces, with the exception of New Brunswick, have seen their workers compensation rates decrease. The average decrease for the other nine provinces is 8.3 per cent (2016-2018). New Brunswick, however, saw a 53 per cent increase in the same period (which is about the get much worse) – this is not a national trend – New Brunswick is the anomaly.

The system must be fully funded, and as I stated in November 2017: WorkSafeNB’s decision to reset their funding target to 100 per cent, down from 110 per cent was ill-advised. Not only does it make the fund less sustainable – it’s a bad business decision.

I don’t know of any group or individual employer that made that suggestion to the task force or government. As of June 30, the fund sat at 97 per cent funded. By the end of the year it is expected to be at 92%. This is the reason for the skyrocketing rates to nearly $3.00 per $100 (the highest in the country) – to ensure that the funds are there when workers need them.

Some have argued that’s a perfectly fine rate and businesses should just close and take their jobs with them if it’s too much. Ok – but what happens when there’s a similar increase in 2020 and again in 2021 and again in 2022? Still no need to act to make sure the system is sustainable? It’s not that rates have started trending towards their historical average; it’s that on January 1, 2019, the rate will have blown by its historical high in a matter of three years.

An actuarial analysis estimates $100 million in additional annual benefit costs resulted from the unintended consequences of new legislation between 2015 and 2017. This, despite workplace accidents decreasing by 3.5 per cent since 2001.

Moreover, ‘severe or external injuries were down 47 per cent between 2002 and 2013 and have held steady at the lower mark since then. Increased workplace injuries aren’t the problem, added benefits aren’t the problem – so, just what is escalating these costs so rapidly?

WorkSafeNB identified a couple of direct cost drivers in July – the length of claims is on the rise (New Brunswick is last in Canada on return-to-work metrics at both the 30-day and 6-month marks). So even though the total number of accidents are down, employees are off the job longer. The other specific reason cited by WorkSafeNB is a sharp rise in hearing-loss claims, especially for those workers over age 70.

The more fundamental issues began in 2015 when legislative changes were made to try to modernize the system. Unfortunately, a number of unintended consequences resulted – the most serious of which is the loss of policy-setting power by the WorkSafeNB board of directors.

As the legislation now reads, the appeals tribunal has the authority to overturn WorkSafeNB policy. The appeals tribunal chair has also plainly stated that his mandate does not include concern for the sustainability of the system.

So the system we are now left with has the appeals tribunal setting policy, WorkSafeNB tasked with managing the system sustainably with greatly diminished control levers, workers relying on a weakened system that is in turmoil and employers required to pay for whatever results arise. Employees and employers should have never been placed in this situation.

Fortunately, former minister Don Arsenault convened a task force in May 2017 with equal employee and employer representative to dig into the escalating costs, evaluate the sustainability of the system and make recommendations to improve the system.

The task force report that was produced is a roadmap to prevent the financial collapse of the system. Whatever party forms the next government must implement the recommendations of the WorkSafeNB Task Force as their first order of business.

This isn’t business telling government how to solve the problem, its a group of experts made up of workers and employers that have worked for a year to examine the situation and come up with a plan. They’ve done their work. It’s time for the government to do theirs

Krista Ross is CEO of the Fredericton Chamber of Commerce, a nationally accredited organization with nearly 1,000 members, is an active business organization engaged in policy development and advocacy that affects the competitiveness of our members and the Canadian business environment. The Chamber’s vision is ‘Stronger Community Through Business Prosperity’.