CONTENTS
Monday 22 August 1994
Resignation of Chair
Subcommittee report
Workers' Compensation and Occupational Health and Safety Amendment Act, 1994, Bill 165, Mr Mackenzie / Loi de 1994 modifiant la Loi sur les accidents du travail et la Loi sur la santé et la sécurité au travail, projet de loi 165, M. Mackenzie
Ministry of Labour
Hon Bob Mackenzie, minister
Jim Thomas, Secretary of the Management Board of Cabinet
Marguerite Rappolt, director, workplace policies and practices branch
Mitchell Toker, manager, workers' compensation
Mike Cooper, parliamentary assistant to the minister
STANDING COMMITTEE ON RESOURCES DEVELOPMENT
*Chair / Président: Vacant
*Vice-Chair / Vice-Président: Cooper, Mike (Kitchener-Wilmot ND)
Conway, Sean G. (Renfrew North/-Nord L)
*Fawcett, Joan M. (Northumberland L)
*Ferguson, Will, (Kitchener NDP)
Huget, Bob (Sarnia ND)
Jordan, Leo (Lanark-Renfrew PC)
*Klopp, Paul (Huron ND)
*Murdock, Sharon (Sudbury ND)
*Offer, Steven (Mississauga North/-Nord L)
*Turnbull, David (York Mills PC)
Waters, Daniel (Muskoka-Georgian Bay ND)
*Wood, Len (Cochrane North/-Nord ND)
*In attendance / présents
Substitutions present / Membres remplaçants présents:
Akande, Zanana L. (St Andrew-St Patrick ND) for Mr Huget
Hope, Randy R. (Chatham-Kent ND) for Mr Wood
Mahoney, Steven W. (Mississauga West/-Ouest L) for Mr Conway
White, Drummond (Durham Centre ND) for Mr Waters
Witmer, Elizabeth (Waterloo North/-Nord PC) for Mr Jordan
Clerk / Greffière: Manikel, Tannis
Staff / Personnel:
Richmond, Jerry, research officer, Legislative Research Service
Fenson, Avrum, research officer, Legislative Research Service
The committee met at 1405 in room 151.
RESIGNATION OF CHAIR
The Vice-Chair (Mr Mike Cooper): Our first order of business is, we have received the resignation of our Chair, Bob Huget, the member for Sarnia, who has now moved up to Minister without Portfolio. So I, as Vice-Chair, will be taking over, if there is no problem with that, even though I guess I should declare right now that I am parliamentary assistant to the Minister of Labour and this is a Labour bill, but I think in past practice as Chair of the standing committee on administration of justice, there shouldn't be any problem and I will remain impartial on this.
SUBCOMMITTEE REPORT
The Vice-Chair: We have a report of the subcommittee. The subcommittee discussed a number of requests to make oral presentations and agreed to the following: (1) The hours for the committee to meet will be extended to 6 pm while the committee is meeting in Toronto; (2) the committee will meet on Monday evening, August 29, in London; and (3) the time for each presentation will be limited to 20 minutes.
Ms Sharon Murdock (Sudbury): So moved.
The Vice-Chair: All in favour? Opposed? Carried.
WORKERS' COMPENSATION AND OCCUPATIONAL HEALTH AND SAFETY AMENDMENT ACT, 1994 / LOI DE 1994 MODIFIANT LA LOI SUR LES ACCIDENTS DU TRAVAIL ET LA LOI SUR LA SANTÉ ET LA SÉCURITÉ AU TRAVAIL
Consideration of Bill 165, An Act to amend the Workers' Compensation Act and the Occupational Health and Safety Act / Projet de loi 165, Loi modifiant la Loi sur les accidents du travail et la Loi sur la santé et la sécurité au travail.
MINISTRY OF LABOUR
The Vice-Chair: This meeting is to start the public hearings on Bill 165, and the first order of business is the Honourable Bob Mackenzie, Minister of Labour. Welcome.
Hon Bob Mackenzie (Minister of Labour): Thank you very much. Good afternoon and I appreciate the opportunity to appear before this committee to open public hearings into Bill 165. Today is an important step forward in our government's plans to reform and renew the Workers' Compensation Board.
Rather than try to evade the issue, as previous Ontario governments have successfully done for years, we're tackling the issue of WCB reform head on. It's been a long and complicated process, but we have stayed the course and now the stage is set for Ontario to reclaim a leadership role in workers' compensation issues.
The bill before us, Bill 165, is just one element -- although a very important element -- of a reform effort that has been gathering momentum for the last two years. The other two components are internal reform at the board itself and a forthcoming royal commission to look at longer-term issues.
Our goal is to point the Workers' Compensation Board towards a brighter and more secure future. This is a future where the workers can count on fair and reasonable compensation for workplace injuries and a future where employers get top return on their assessment dollars.
In our efforts so far, we have received a great deal of assistance and cooperation from labour and management. Our government will be calling on that same spirit in the weeks and months ahead as our reform agenda for the board moves into high gear.
I think we all share a sense that the actions and decisions we make over the next 12 to 18 months will be extremely critical. There is a sense that we are breaking new ground as well.
Never in its 80-year history has the board been the subject of such scrutiny and review. Never before has there been such unanimous agreement that the board is in critical need of reform and renewal.
In other provinces, and other countries, the approach has all too often been to reform the compensation system by attacking pensions and benefits. Benefits have been cut in Manitoba and New Brunswick and at least one Ontario political party is on record as favouring the same approach here.
I can state categorically today that Ontario's first-ever social democratic government will not reform workers' compensation solely on the backs of injured workers.
Nor are we prepared to tolerate, as previous Ontario administrations have for too long, the mounting financial pressures facing the system. We believe there simply has to be a third option.
The bill this committee will review over the next three weeks has its genesis in the work done by the Premier's Labour-Management Advisory Committee over the last year. It contains significant, upfront change in a host of areas, including steps to get the board's finances back on the right track. When combined with the internal changes under way at the board, and the royal commission, we believe we have struck the balance that is so necessary to drive reform forward.
Government cannot fix the Workers' Compensation Board by itself, of course. Our main responsibility is to oversee the operations of the board and the statutes that govern its operations. The primary responsibility for implementing reform and renewal will rest with the board itself; and with a revitalized board of directors, a new chair and a new president to manage day-to-day affairs, this is probably the board's best opportunity to make reform a reality.
Our government recognizes that beyond the individual stakeholders in the labour and business communities, a great public interest also exists in turning around the board's fortunes.
There is a growing feeling that the board is becoming a drain on Ontario's economy, on our ability to attract investment and jobs and spark business confidence. Whether or not these concerns are well founded, they cannot be denied. In this case, perception is reality. In moving ahead now with reform at the board, the government is recognizing and responding to these public concerns. So it is time now to understand how Bill 165, the royal commission and the internal reforms at the board all point towards this reform we are so determined to see.
Let me begin by reviewing the progress that the Workers' Compensation Board has been able to make on its own in recent months. We have appointed two veteran Canadian corporate executives to help the board through this important phase of its renewal.
A transition team under the leadership of former General Electric president William Blundell is guiding the board and preparing for the implementation of the many changes proposed in Bill 165. In terms of day-to-day management, interim CEO Kenneth Copeland, the former president of Digital Equipment of Canada, has given the board a strong sense of purpose.
Great strides have been made in improving service, detecting fraud and controlling administrative costs, and in the last few years the average duration of short-term claims has fallen by almost four weeks, from 16 to 12 weeks.
Last year, compensation costs were $100 million less than 1992, even factoring in the decline in injuries; and the unfunded liability, perhaps the most serious problem facing the board, is also showing improvement.
As members may well know, this is a problem that began in the 1970s and really mushroomed in the 1980s under previous Ontario administrations. By the time we took office in 1990, the liability was increasing at the rate of more than $1 billion a year. In 1991, our first full year in office, the unfunded liability actually rose almost $1.3 billion. But since then, its rate of increase has dropped sharply. Last year, a little over $400 million was added to the liability, a very far cry from just a few years earlier.
My point is that the situation has stabilized somewhat. And it's into this atmosphere of progress and optimism that we are introducing Bill 165, An Act to amend the Workers' Compensation Act and the Occupational Health and Safety Act.
Bill 165 has as its foundations many of the elements of the PLMAC accord of last March. It is intended to redress several immediate and short-term problems afflicting the compensation board, while leaving the door open in other areas for the royal commission to study at greater length.
We have drafted the bill with balance and fairness uppermost in mind, knowing that it would be impossible to satisfy everyone on every score. Our government is hoping that all stakeholders will now move beyond their specific range of concerns to see that a compromise is the only way the public interest can be served.
At this time, I would like to summarize for this committee the main elements of Bill 165. We have proposed:
-- That the act contain a purpose clause placing the goals of fair compensation, vocational rehabilitation and early return to work at the heart of the board's mandate.
-- A requirement that the board of directors be bipartite and act in a financially responsible manner.
-- A new emphasis on vocational rehabilitation and return to work.
-- A $200-a-month increase in pensions to approximately 40,000 older injured workers.
-- Adoption of the Friedland indexing formula. This formula will index future pensions, with some notable exceptions, to a maximum of 75% of the CPI less 1%, with a cap of 4%.
As you can see, Bill 165 addresses some of the perennial problems of the Workers' Compensation Board down through the decades, such as service, finances and administration.
Under Bill 165, labour and management will have the power to shape and implement board policies and practices to a greater degree than ever before. Both stakeholders will truly own the system, with all that implies, for an effective and responsive Workers' Compensation Board.
Government of course will remain involved because we have primary legislative responsibility for the board. Take a look, though, at the planned changes in the board's governance and you will see the extent to which the workplace parties now have the authority they have been seeking for many years.
The board of directors will be truly bipartite in nature with equal numbers of worker and employer representatives. Their primary responsibility will be to act in a financially responsible and accountable manner and in the best interests of the board.
We are asking the new board to concentrate on strategic issues such as the goals, directions and policies of the WCB. Hence, the board will have authority to hire a president/CEO to manage the day-to-day affairs of the Workers' Compensation Board.
The transition team headed by Mr Blundell has made many sound recommendations to the government to help lay the foundation for reform inside the board. The government has accepted these recommendations and has asked the board and the transition team to continue their preparatory work.
These changes, once implemented, will provide the board of directors with a definite understanding of its roles and responsibilities, especially in the all-important area of the board's finances. We will also emerge with a clearer separation of powers between the board and the government.
We are hoping that this revamped structure will allow some fresh thinking into the upper echelons of the board, and one of the areas where a new perspective is desperately needed is on the whole issue of vocational rehabilitation and early return to work.
It's my belief as minister that many workplaces continue to miss a golden opportunity to save money by getting their workers back on the job as quickly as possible. If we could improve our return-to-work figures by just 10%, I am quite convinced that the total savings would be in the billions.
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Many workplaces are committed to professional disability management. I'm hearing from more and more of them almost on a weekly basis, and they are building in return-to-work programs. Bill 165 aims to encourage those workplaces remaining on the sidelines to get active in this area. Our proposed amendments include:
-- That physicians, with the worker's consent, release prescribed medical information that will help employers and their employees plan for safe and early return to work.
-- Clarifying the role of the board in enforcing existing re-employment obligations.
-- Establishing a time-limited process for mediation and decision-making in matters that require resolution.
-- Improving the board's incentive programs by measuring a broader and more meaningful range of workplace programs and practices.
It has been pointed out that this last proposal, as written, casts some doubt as to whether cost would remain a criterion for the board's experience-rating programs. I am satisfied that our intention here was never to exclude cost as a factor, but simply to establish in very explicit terms that, in the future, experience-rating programs would be broadened to measure health and safety, vocational rehabilitation and return-to-work practices.
However, I accept that the current wording has caused some confusion. As a result, I am announcing today that the government intends to amend the section as written to include employer accident cost and frequency as criteria for experience-rating programs.
Several other jurisdictions around the world, most notably Australia, have recognized that successful rehabilitation and early return to work reduce costs significantly.
The status quo represents an enormous economic and moral waste of human potential and expertise. My fervent hope is that by enshrining vocational rehabilitation and return to work in the all-defining purpose clause of the Workers' Compensation Act, we can make further progress on both fronts here in Ontario.
As committee members know, however, it is not the return-to-work provisions in Bill 165 that have occasioned the most comment from WCB stakeholders. Rather, it is the financial aspects of the proposed amendments that have drawn the most attention. Depending on who is talking, we've gone too far or not far enough, so maybe now is the time to examine just what the financial impact of Bill 165 will be on the board's fiscal situation.
The government proposals, including adoption of the Friedland formula, return-to-work savings and the cost of new benefits for older injured workers, will save $18 billion over the next 20 years.
The funding ratio of the board, an accounting term used to describe the percentage of assets available to cover future costs, currently stands at about 37%. Under Bill 165, that ratio will improve to a more comfortable 55% over the next 20 years.
When you add to this the strong new financial orientation of the board of directors, including the development of a plan to actually start paying down the unfunded liability, you have significant potential for further savings.
I know that some concern has been expressed that financial responsibility has not been written into the purpose clause of the act. Our thinking is that financial responsibility is not a "purpose" but rather an obligation to be directly placed on the members of the board. Not everyone agrees. As a result, the government will welcome any comments and suggestions that may emerge during these hearings to improve the current wording.
One of the administrative changes in Bill 165 concerns the funding of the Industrial Disease Standards Panel. The committee will hear a submission later this week from the panel proposing a different funding model. This proposal would result in a rather sizeable base funding increase.
The government cannot approve an increase of this size in this manner. We have told the panel that we are interested in working with them to resolve their budgetary issues to the satisfaction of all concerned, so I would just ask the members of the committee to keep that in mind.
That concludes a look at the bill's major financial features.
What sometimes gets lost in all of this accounting is that a compensation system is more than numbers and assets and bottom lines. It is, in the end, mostly about people receiving and relying on benefits and pensions to make ends meet. When you look at it this way, the board has failed thousands of Ontario workers who are living in virtual poverty due to minimal benefits from another era.
So yes, we are indeed going to supplement the pensions of 40,000 older injured workers by $200 a month. These pensions, as well as survivors' and dependants' benefits, will enjoy full protection from inflation.
But don't be taken in by what you may have heard; this righting of past wrongs will hardly drive the Workers' Compensation Board into bankruptcy, and as one who has fought all of his working life for working people, I know personally how great a concession the Friedland formula represents for injured workers.
For working people who are receiving benefits, the impact will be real enough in the months and years ahead. We owe it to them to bring these reforms to fruition as quickly and smoothly as possible.
I want to say I've spoken out strongly today because I believe it is important to dispel the doubt and confusion that is lingering about the real impact of these reforms.
As Minister of Labour, I acknowledge that there is still serious disagreement about where the Workers' Compensation Board should be heading over the longer term. When you think of the changes that have swept the workplace in the last five or 10 years, let alone since 1914, the need for a critical and professional re-examination of the board's mandate becomes more and more obvious.
Ontario in 1914 was resource-rich and a budding manufacturing giant, but those activities are no longer the twin pillars of our economy. The service and financial sectors have grown by leaps and bounds. There is a pronounced trend to non-traditional work arrangements such as part-time and stay-at-home workers. In 1914, there were few women in the workplace and certainly no other income-replacement schemes and health insurance options. As the work we do changes, so do our injuries. The system has had to deal with a variety of occupational diseases and work-related injuries unthinkable and unimaginable in 1914.
These are some of the reasons behind the Premier's decision to establish a royal commission into the future of the Workers' Compensation Board. The makeup of this commission will be announced shortly. It will have a wide-ranging mandate to review the current system, examine alternatives and make recommendations based on its findings.
I realize that workers' compensation is an emotional issue where otherwise rational minds on all sides can wander off into flights of rhetoric. It is also an issue that has the ability to cut to the heart of all the old divisions and suspicions between management and labour that were certainly so entrenched in my working days.
My feeling is that our best hopes for reform will come to naught unless labour and management confront and cast aside those old perceptions of each other. If both parties can realize how intertwined their interests really are, we will be that much closer to building a new compensation system that is both balanced and fair.
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We believe the new atmosphere at the board, in conjunction with Bill 165 and the long-term review by the royal commission, herald a new era for the Workers' Compensation Board.
I'd like to say that, having served in this House for almost 20 years and about 14 or 13 of them as Labour critic, I don't know another issue that's caused us as many problems and as much dissent as the issue of workers' compensation. I really believe that while we will not make everybody happy, we are on the road here with this particular piece of legislation to some major changes that can see us start to turn this problem around.
I think the atmosphere at the board, as I said, in conjunction with Bill 165 and the long-term review by the royal commission really do herald a new era for the Workers' Compensation Board in the province of Ontario. I just hope that we can dedicate ourselves to refashioning for a new century that historic compromise that was originally made back in 1914.
I want to thank you very much for the opportunity to make the presentation here today.
The Vice-Chair: Thank you very much, Mr Minister. It's my understanding you'll be here for the remainder of the day. Mr Mahoney, the Liberal critic.
Mr Steven W. Mahoney (Mississauga West): Mr Minister, first of all, I'd like to welcome you back, particularly to the WCB wars. It seemed that the Premier perhaps had taken over the issue and there were rumours that you had gone away mad. I for one would never want you to go away mad.
Hon Mr Mackenzie: I'll take that with a grain of salt.
Mr Mahoney: I may want you to go away, but I wouldn't want you to go away mad. On the issue of workers' compensation, I think you raised some very valid points that we can all agree on. Out of the 130 MPPs in the province, it's my guesstimate that this is probably the number one issue in all of our constituency offices, perhaps trading places and leapfrogging with SCOE calls. But, generally speaking, workers' comp files in all of our constituency offices are quite full and quite active and quite ongoing.
As a result of that, when I became the Labour critic for our party, taking over from my colleague Mr Offer, we looked at trying to find some common solutions, believe it or not, Minister, in as non-partisan a way as possible to see if there were indeed some things that we could all agree upon.
We established an outreach tour. I've sent you a copy of the report. I note that -- I don't know if it's accidental or not -- some of the suggestions in that report have appeared in some media reports that you've made and even, to a certain degree, in some of the documentation. If we can take credit for that, that's great. But I think that really just proves the point that there is a lot of common ground around the issue of reforming workers' compensation.
I also found in the tour -- we went to eight Ontario municipalities, met with injured workers, with advocates, with lawyers, with consultants, with management people; we really opened it up generally to the public to come and talk to us -- that in every one of these outreach tour events, the similarities were quite profound.
The meeting would start out in the morning at 8 o'clock or 8:30 and you'd have the injured workers on one side of the room and they would be very tense, and you had the management people on the other side of the room. The tension between the two groups was quite palpable. A lot of mistrust existed.
By the end of the morning in every one of those meetings, it was quite astounding to see the number of issues where full agreement occurred. My colleagues were at some of those meetings. We were able to identify the areas where there's probably never going to be total agreement, whether it was benefit levels or whether it was premium increases. There were really fairly few areas of total disagreement between business and labour. It was very helpful for me and, I hope, for everyone who was involved in that process to recognize the number of issues of common concern.
You made reference in your address, Minister, to the royal commission headed by Justice Meredith in 1914 and the status of the economy in this province in those days and how it's changed. Interestingly enough, we entitled our report Back to the Future. The symbolism of that name came from the fact that in 1914 what Justice Meredith proposed was probably quite revolutionary for those times, probably quite controversial for those times, and yet when you look at it in the context of today, it was quite brilliant too, a system where the worker would give up his or her right to sue the employer for an accident that occurred on the job site in return for proper compensation, rehabilitation and return to work. It seems like an even better idea in 1994 than it probably did in 1914. That principle taught me that the one thing we should be striving to do is to seriously fix a system that is not only broken but clearly is also broke.
I find it curious that the Premier would announce, almost in the same breath, a reform package, in the form of Bill 165 and a royal commission yet to surface, or at least fully surface, with any concrete plans. I would have to say, Minister, to you and to the Premier and to the government: "What exactly are you doing? You're tinkering again." I think there's enough blame in workers' compensation, by the way, for all three political parties and all governments in the past history to share. I don't lay all of the problems of workers' comp at your feet. You do happen to have the limo, however, and you do happen to have the opportunity to put in place some real reforms that will indeed improve the system. With respect, sir, I don't think this bill will accomplish what I believe you personally hope to accomplish, and that is to change the culture at workers' compensation to bring it into political accountability and financial sustainability for the protection of the injured workers.
I was very interested -- and I don't know if this was a slip of the tongue, but somewhere in here the words didn't quite match. You added a word where you referred to -- here it is here. "I can state categorically today that Ontario's first-ever social democratic government will not reform the Workers' Compensation Board on the backs of injured workers" is how it reads. What you said, and Hansard will show, is "will not reform the Workers' Compensation Board solely on the backs of injured workers." The addition of the word "solely" to that statement, in my view, is quite significant, because the agreement that you entered into through the PLMAC process was one that fell apart very rapidly, mainly because the Premier bailed out on the agreement that was made with the management caucus of that group to use the funding that was generated from the Friedland formula to pay down the unfunded liability, to use that to cover the cost of funding the $200-a-month supplemental pension and to not de-index the pensions for those workers and yet to de-index the pensions for other workers.
Look at this: You've got the workers who are on pensions saying, "You're funding the $200 supplement by de-indexing my pension," and you've got management saying, "You're funding the $200 supplement by using the Friedland formula where we had a deal to pay down the unfunded liability and you're going to spend it again." That, frankly, is part of the problem, Minister, that kind of tinkering and then using it for what I can only assume is political expediency. Talk about the injustice of the workers who are getting the $200 supplement. I agree with you that there is an injustice there and it should be addressed, but why would you solve one problem with the management caucus of the labour-management advisory council, give that group some sense of confidence that you understood the problem to pay down the unfunded liability and then spend the money for what I can only assume is political expediency, so that you can say to those 40,000 workers, "Aren't we great guys"?
You're going to hear in this committee, I say to the members opposite, because I assume the minister won't be here for all of the presentations, from injured workers who are going to say: "Why are you making us pay for that? We agree the supplement should go." They're going to come and say: "We don't have a problem with that. We've asked for that. But why are you making us pay for that? Why can you not find the savings from within the compensation board system?" Anybody who's had anything whatsoever to do with the Workers' Compensation Board who suggests that we can't find the savings inside the system doesn't understand how deeply rooted the bureaucratic problems are.
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I'd ask my colleagues from all three parties: Does the WCB work for anyone? Does it work for the injured worker who's battling medical opinions, who's battling a decision made by an adjudicator who perhaps had three weeks of training -- not their fault. That's one of the most fascinating things about the workers' comp system: The most important, the most significant decision in an entire file is generally made by the most inexperienced people in the system. That's not their fault. Take a look, and I would encourage you to look, at the British Columbia model. An adjudicator in British Columbia goes under an apprenticeship training program for one year -- for one year -- before they are turned loose to handle files on their own. We give three weeks.
Why not take a serious look at improving the training of the adjudicators? I see nothing in this bill or in this approach or in this government's activities that even recognizes that that's a problem. You know why? They're afraid of offending somebody. They're afraid of trying to lay blame on the junior staff at the WCB. That's not what I'm saying at all.
The morale at the staff level at the board, Minister -- you maybe don't get close enough to it, but we sure hear from them; they sure phone my office and they ask for anonymity when they do so, for obvious reasons -- the morale is extremely low. They don't like being put into the confrontational positions that they find themselves in because they have to give a no decision or a qualified decision on a particular injury without the proper backup.
Then you get a medical opinion on that particular case, and the doctor never even sees the worker in many of the cases -- in most of the cases, if not all of the cases. Imagine deciding on the level of the injury, the level of the award, the level of the whole issue by opening a file folder. It's not fair to the doctor either. I would have hoped that there would have been some attempts to reform this system to more closely involve the medical community in the return-to-work decisions, in the voc rehab decisions, in the health and safety decisions, in the board decisions.
Minister, one of the recommendations that we make in our report around the issue of governance and restoring accountability is to involve the medical community. We suggested the OMA and the chiropractors, and we immediately got phone calls from the podiatrists and the psychologists and many of the other medical communities saying that they had been left off. You know what? They had, and probably inappropriately so. We've sat down with them and said we want to find a way where we can work with all of the people who provide medical service to WCB to involve them all. Be that through a system of nominees collectively put forward by these groups, or however we want to work that out, we are prepared to look at that kind of an amendment because we think, depending on where the injury is -- we know about the carpal tunnel syndrome problems, we know about the injuries of the 1990s around computers, around taking proper breaks, around all of those issues, and we need to address those in a much more sophisticated way.
Minister, I heard from doctors who came before the committee in Thunder Bay, in Ottawa, right around the province, who said they felt one of the biggest problems in the successful functioning of a workers' compensation board was that the medical community dealing with these issues did not have full and proper training and full and proper access to the items that would fix the patient's problem, the worker's problem. They admitted this. They in fact said: "We would like to be much more involved in the return-to-work decision but we're caught in a position" -- and think about this -- "where the injured worker goes to the family doctor. You go to the family doctor and you say, `I hurt my back.' He or she is your family doctor. They're not going to say, `You're malingering'; they're going to say, `We'll fill out the WCB claim.'"
They're not going to question. Why would they? Why would you put a family doctor into that kind of a confrontational situation? You're going to still have a report from a family doctor, but instead of it going to a junior adjudicator, why not go to a fully trained health and safety professional doctor who works solely in that field to make the proper adjudication on the case? I see nothing to address that particular flow in this bill, which is intended to reduce the length of time that an injured worker is off, to reduce the number of accidents.
Let me share another idea that we came up with. The average cost of a claim in Canada, coast to coast, is $12,000 -- average cost. There's a low in one of the eastern provinces of about $6,000 and the average cost of a claim in Ontario is $24,000. That tells you a couple of things right there. It tells you that we've got a big problem with our overhead costs, either the length of the claim, the cost of adjudicating it, but it also tells you that we have an opportunity to reduce the costs of the WCB, which will benefit everyone without impacting the benefit level, by dealing with that average cost.
The other thing that I determined was that 72%, I believe it is, of all claims are dealt with in the first two weeks of the injury occurring. Think about this: If indeed 72% of them are dealt with, why even file a claim for that first two weeks? Certainly you've got to put it on record within three days, and I understand that, but why open the file? Why start that $24,000 clock ticking on a claim when they're going to be back to work within two weeks? We've suggested, Minister, two weeks of voluntary self-insurance, agreed to by both the worker and the employer, where the worker would continue to get their salary while they work together with management, with the professional medical, with vocational rehab, with whomever, to determine whether there are opportunities for modified work, whether there are opportunities to cure the problem and go back to full level of employment. Of the claims, 72% are dealt with in two weeks.
Why are we opening files for two weeks and driving the cost of the Workers' Compensation Board? I don't think that's your fault; I don't think it's our fault; I don't think it's the Conservatives' fault. It has just happened, and we've allowed it to happen. What we have here is an opportunity to put in place some real reform in a piece of legislation. We don't need to wait, Minister, with due respect, for the results of a royal commission. Everybody who deals with workers' compensation knows where the land-mines are. They understand the problems. Many of them have differing solutions, one of the things I want to make very clear, because the minute you talk about changing the system of workers' compensation, all of a sudden you're against the injured worker. That's traditionally been the stance that your party has taken, and we hear it from some segments of organized labour, that we want to fix this on the backs of injured workers.
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I can tell you that my leader, Lyn McLeod, and my caucus do not want to do that. In fact, in our recommendations we do not recommend reducing the level of benefits. I want to just touch on that for a second. Everybody watch the W5 program? The thing that was most disgusting about the W5 program to me was that at least on six or seven or eight occasions they referred to the benefits that an injured worker gets as tax-free. Benefits are 90% of your take-home pay. Who pays taxes on their take-home pay? It's ridiculous, it's misleading, it's a red herring. In fact, if we want to get into taxing benefits and putting them back up to a lower level of gross and taking income tax off, we're just going to succeed in transferring much-needed dollar revenue from the provincial scene to the federal scene, to give them an opportunity to tax something, and I don't think we want to do that.
We strongly recommend leaving the benefits at 90%. Now, there are a lot of people in the business community who don't agree with that, who think that we should go the way of two other provinces, New Brunswick and Manitoba, in cutting benefits. Let me just share the experience that I had, to tell you why I came to the conclusion; and let me also admit, by the way, that when I started out on the outreach tour I thought cutting benefits was probably the way to go, but I came to the conclusion that it would be wrong to do that.
A couple of reasons: I heard from many people in the corporate sector who said, "We actually top up our injured workers' benefit to 100%." "Well, why would you do that?" They said: "Because we don't want someone who's been injured on the job working for us to suffer. We don't want them to have trouble making their mortgage payments or the cost of their families, their kids or whatever. We want them to get better, to come back to work." I heard that in all different-sized companies from executives all over the province, all over the country. I think it's a mistake that they do that, but they do it.
The fact that the corporation, the management side, is saying, "We don't want them to suffer," begs the question, "If you truly don't want them to suffer, the workers who are legitimately injured, why would you reduce the benefit?" The answer really came back to, "Because we want to attack the unfunded liability and because we want to take away the disincentive to return to work."
I tried to address those. I don't see any attempt to address those two problems effectively in this bill. Your predictions of taking the unfunded liability, or the funding level, from 37% currently to 55%, if that were so, if I had some confidence in that, I would say that's a step in the right direction.
One of the things we recommend is setting some goals on the unfunded liability, a more aggressive investment policy so that we can increase the $6 billion in assets. Think about how quickly $6 billion can actually increase if properly invested. The teachers' pension fund made 22% on its investments last year, a pretty outstanding performance. We need to be much more aggressive with the investment funds by involving -- and while I know there is some private sector involvement, there's also in-house involvement in determining where the funds are managed and there are also criteria given out to the private sector that restricts it from an ability to get the proper increase.
Let's try and increase the $6 billion in assets that exist, Minister, so that we increase on that side while we then take the $17.2 billion in debt, in commitments, in liabilities, and we reduce it. If you use Friedland alone to reduce it, you will knock that $17.2 billion down to about $14 billion or less right off the bat. You go from $6 billion over $17.2 billion to $6 billion over $14 billion. You're starting to head in the right direction of bringing some confidence towards this horrendous liability that exists.
The rhetoric around all of this stuff is most interesting, because you will hear that we have to fund the unfunded liability to zero tomorrow. We can't wait 20 years; it has to be zero. I hear the leader of the third party and others say, "We've got to eliminate the unfunded liability." Folks, it's $11.5 billion. Eliminating that tomorrow is not very reasonable, but there should be a very clear, a very hard-nosed policy towards increasing your assets and decreasing your liabilities until we at least get up into the 75% range, and ultimately we could head towards 100% funded.
But ask yourself, how many pension funds are funded 100%? I mean, the reality is that to fund this fund 100%, the need to do that, means that every injured worker in the entire province is going to cash in his chips today, now, and demand all their money, and we know that's not going to happen. What there is, is a need to get some confidence back in the way the WCB deals with that unfunded liability instead of labour saying, "It's not a problem," and dismissing it out of hand and business saying, "It's horrendous and, in fact, if this was in the private sector, the Workers' Compensation Board, we would be reading it alongside the name of Confederation Life, because they would not allow it to sit at that level of unfunded liability."
But we need to calm the rhetoric down and say, let's put a -- well, I'm serious. If you read the report, I say to the members, you will see that there is no bashing in here of any particular party or government. There is a serious, legitimate attempt to try to do four basic things: to restore accountability, through involving many more stakeholders in the province of Ontario, from the medical communities -- the list goes on -- many more than just labour and management. This is not a two-person show of just labour and management. There's a lot more at stake here.
We need to change the governance to restore accountability. We need to address service levels, and you do nothing in this bill to do that. This doesn't work for injured workers, it doesn't work for the people who pay the premiums, it doesn't work for the politicians who have to deal with the problems and the ongoing debate. It does certainly work for the lawyers and the advocates who make a lot of money out of dealing with these problems. I don't blame them; it's a very lucrative field. We've got to restore service levels to make it work.
We've got to attack fraud and restore effectiveness of this system and give a sense of confidence to the injured worker community, to organized labour, to big, medium and small business and to everybody; and to the taxpayer, because ultimately, at the end of the day, if this thing did fail, which a government would not let it do, it could indeed fall back to the taxpayer.
I say to anybody who wants to privatize this thing, answer me one question: What do you do with the $11.5-billion unfunded liability, growing at the rate of $1 million a day, if you privatize it? Shut it down, turn the lights off, and what do you do with that? I cannot get an answer to that.
Financial sustainability: I spent some time in my opening remarks addressing that, Minister. If you're right and you can get to 55% and establish a goal to go on, frankly I commend you for that. I don't have that confidence because I see you spending the money in inordinate ways, doing nothing whatsoever to reduce the cost, the overhead, the burden the WCB has created on the entire business community and, indeed, on injured workers.
I say to you, in closing, that it is my leader's desire, my desire, my caucus's desire to improve the Workers' Compensation Board. While I think the royal commission is a terrible waste of money, we have to be at the table, since you've called it. I and others will be presenting to that royal commission, in hopes that they will accept some of the findings and implement some of the solutions that we think make sense, to save what Justice Meredith thought was an extremely good system, a just system, a system that would accrue to the benefit of injured workers and the people who pay it.
Finally -- obviously you don't have time in 30 minutes, I guess, to get it all in -- the real key to all of this is to prevent accidents. I could go on for some time about the health and safety agency. We recommend it be shut down and made a department of the Workers' Compensation Board. It has shown that bipartism has become chaotic at that board. It is a board and agency that is nothing more than empowerment for organized labour. It must be shut down and the responsibilities, Minister, transferred to the people who pay the bills for health and safety.
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I fully am committed to the principles in Bill 208, a bill that was put forward under a former Liberal administration to improve health and safety in this province, which will ultimately reduce and eliminate accidents, which will ultimately reduce costs at the Workers' Compensation Board. Unfortunately, the boondoggle that has occurred with the health and safety agency has totally taken away from proper training, from the ability of business and labour to work together, and has created an atmosphere of mistrust and unhappiness within both of those communities.
We'll be making some amendments. I hope that you will look in all seriousness at some of the recommendations which I commend to you. It's hard to be nonpartisan in our business, but I'm trying as much as I can in relation to this issue because I think it is so critical for the future of this great province.
Mrs Elizabeth Witmer (Waterloo North): There was tremendous optimism in this province one year ago when the Premier indicated his desire to reform the workers' compensation system. I think there was a feeling at that time that if all the parties did work together, business and labour, and if they truly were committed to the process of listening and cooperating, there would be genuine reform happen in this province. Certainly, it is reform that is long overdue.
However, what we have before us today is not the reform that was desired by the people in this province. This bill will not maintain the cost of the system at a level that employers can afford, it will not ensure that there are even future benefits available for the workers and it will do nothing to improve the delivery of service to injured workers. We hear on a daily basis from our constituents about a workers' compensation system that does not meet their needs and we learn about the many frustrations that they face every day. Our staff patiently try to help the individuals because they can't get help from the large bureaucracy that's totally out of control.
I'm extremely disappointed that although the Premier had the opportunity to make genuine reform, he aborted the process that he had established to achieve reforms and instead hastily introduced Bill 165 on May 18 of this year.
This bill that we have before us today totally ignores the reform plans that were recommended by the Premier's very own handpicked business advisers and does not reflect the accord that was reached between business and labour. For the government to pretend that it does is false, because although labour supports this legislation, the business community has denounced Bill 165 and this morning, in a news conference, has asked that it be withdrawn and that people go back to the table.
Bill 165 does absolutely nothing to address the fiscal crisis of the system or the lack of financial responsibility or accountability that presently exists. Unfortunately, the only thing that this bill does do is to place the NDP political agenda ahead of the total workers' compensation system.
Not surprisingly, the agenda in Bill 165 very strongly resembles the original labour agenda. As a result, the confidence and the trust of employers in this government has been very severely eroded. They originally did believe there was a place for them at the table and that their voice would be heard as well and that the resulting reforms would be those that had been agreed to by both sides.
The only option that this government has at the present time, if they're going to restore any credibility to a damaged process, is to withdraw this bill and return to the discussion table.
I'm going to deal with some of the major concerns with Bill 165 and I hope that in the process the minister's staff will listen to the questions I raise, and I hope there will be an opportunity for some responses as well.
I'd like to deal first with the unfunded liability. The unfunded liability is serious. We know that it's going to increase to, some say, $13 billion and some say $50 billion, from its current $11.5 billion by the year 2014 and 2030. This government, still today, fails to recognize that the Workers' Compensation Board in Ontario is in crisis. The system today, folks, is already technically bankrupt because it owes workers more than $11 billion more than it has money to pay them. The debt continues to grow at a whopping rate of $2 million a day, and last year the WCB lost $504 million, and that was despite the high rate hikes that we heard about this morning from some of the employers at the news conference.
Without the fundamental reform suggested by the management representatives of the PLMAC, there will eventually not be enough money to pay the injured workers unless the taxpayers in this province pay the money. We know that the Canadian Tax Foundation, in July of this year, stated that the WCB liabilities are hidden provincial deficits. Yes, the minister wondered whether it was a drain on the economy. I can assure you it is, and when you add that in, it pushes our total net debt in Ontario to $130 billion.
We also know that the bond rating services have identified the unfunded liability as a cause for concern with respect to our provincial credit rating. Thus, the unfunded liability negatively influences our ability to attract investments and jobs and spark business confidence. I'm sure we've all heard about businesses that have planned to invest in this province, but once they determine their rate of assessment and they hear about our unfunded liability, I can tell you they take a look at another province or they take a look at the United States. It does happen.
So the unfunded liability is a very, very serious problem and this government has totally refused to deal with that issue whatsoever. We know that a decade ago, employers were concerned about the unfunded liability. We know at that time they agreed to rate increases of 15% for three years, followed by increases of 10% for the next three years, based on the fact that by the year 2014 this unfunded liability would be reduced to zero. That is simply not happening.
Even though the accident rate has decreased and employers are doing everything possible to make their workplaces safer, we still see an increasing unfunded liability. This Bill 165 achieves no savings today. In fact, by the year 2014 it's going to increase to $13 billion for sure.
The "purposes" clause: The "purposes" clause is another major cause of concern. Originally, there was to be a financial responsibility framework proposed, and that had been agreed to by business and it had been agreed to by labour. However, that's not there.
The "purposes" clause we have before us today does not include the financial responsibility framework; it does not require fair consideration of the interests of business and the public in Ontario. Instead, it focuses the administration of the act exclusively on worker interests without any regard to the impact they have on business or on the Ontario economy.
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The "purposes" clause and the financial responsibility framework we know were intended to inject a balance into the system, between securing benefits for injured workers and the need for financial responsibility and accountability at all levels within the system, and I repeat: all levels. These two elements, the "purposes" clause and the financial responsibility framework, were seen to be the cornerstones of the reform package. As I say, they were to inject a balance between securing benefits for injured workers and the need for financial responsibility and accountability at all levels within the system.
Indeed, labour and business agreed that a financial responsibility framework for the decision-making and operation of the system was necessary and that ultimate accountability for the system did rest with the government. It was agreed that the "purposes" clause should require that any proposed change to benefits, services, programs or policies under the act be thoroughly analysed in order to evaluate the overall consequences of the proposed changes on workers and employers and report the same to the provincial government. None of this today is reflected in the "purposes" clause before us, and the financial responsibility and the accountability required of the board of directors will not achieve the objective that business and labour clearly felt was necessary to effectively operate the system.
As currently drafted, the bill does not require the cost to be taken into account when new provisions or policies are considered by the government or the WCB. If you apply this to issues such as stress and chronic pain, it means that the WCB will evaluate the changes with no regard whatsoever for the system to fund these improvements.
I know the government's going to say: "Well, there are provisions in the bill that are going to require the board of directors to act in a financially responsible and accountable manner. That should be sufficient to satisfy the agreement that the financial responsibility framework is within the purpose of the act." However, if you take a look at section 12 of this bill, that applies only to the board of directors. The section imposes no such responsibility on the WCB administration or on the government.
Now, that is important, because it is proposed within this bill that the government has the power now to issue policy directions on matters relating to the board's exercise of its powers and performance of its duties under the act. This is going to encompass virtually all of the WCB's activities.
My question is, why did the government not recognize the critical role that employers play in the system? Why does the "purposes" clause consider the workers' perspective only? Finally, why did the government choose to ignore the inclusion of a financially responsible framework in the "purposes" clause as agreed to by business and labour? What's here does not apply to the government or to the administration.
I'd like to go to experience rating. We all know that the development of experience rating in Ontario has represented one of the best examples of joint policy development between business and government. It is an intelligent balance between employer accountability and the basic insurance principles of workers' compensation. Originally, when we took a look at the wording, it appeared that the government was going to eliminate the existing experience rating programs. We know that in the accord it said they were to be "augmented" with greater incentives for return-to-work opportunities.
The minister has indicated today that there will be some changes made and that he's going to measure the health and safety, the vocational rehabilitation and return-to-work practices as well as measure the employer accident cost and frequency as criteria. I'm not sure exactly what's happening here. Is this going to mean more red tape for the employer community? Is it going to mean more administration involved in the WCB? Is this going to move the program from a program that measures and rewards results to a program that is going to measure and reward process? Unfortunately, that would be a grave mistake.
I really would appreciate knowing, what is the government's intention regarding this proven, workable program that presently is the only remaining program through which employers can control their ever-increasing WCB costs? I think it's important to note that presently almost all industries are covered under one of the experience rating programs, and they have been a very major factor in reducing accident frequency in Ontario by more than 30% since 1988, so I certainly hope that the government does not intend to abandon the program as it presently is structured.
Benefit increase: The government was to find alternative sources of funding and determine the needs of the groups identified for benefit increases and the exemptions from indexing. This unfortunately was ignored, and the government has allowed the saving to be watered down from the amount settled on between business and labour. The additional benefits for older workers in receipt of the subsection 147(4) supplement were to be paid as an addition to the supplement, and therefore only until age 65.
The government had been asked to determine needs and how the improvement could be funded. The intent was to maintain the integrity of the savings generated by the accord that would be consistent with the "purposes" clause and the financial responsibility framework. The additional benefit for older workers in receipt of a subsection 147(4) supplement was to be paid as an addition to the supplement.
Now, the parties did agree that if the $200-per-month increase was necessary, it was to be paid in the form of the supplement, not for life. If you pay the additional benefit, it's unfair to the employers who are being asked to fund what is now a social program and to the other workers with pensions who had been motivated enough to return to the workforce. Moreover, this benefit improvement is going to cost approximately $96 million a year in cash, and if we remember the negative cash flow that the WCB had last year, this is going to represent an increase to the unfunded liability by $1.5 billion immediately and $5.6 billion by 2014. I ask the government, where will the additional money come from?
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The royal commission: There is agreement that there is a need for a royal commission. We all know that the present system does not respond to the needs of the injured worker, the employee or the employer, and certainly there was a tremendous amount of optimism regarding the royal commission. However, that optimism has also faded because there has been some premature indication that a prominent labour leader is going to be appointed to head up the royal commission. Certainly, if that happens, there will not be an impartial review. If the system is to be reviewed and if we are to identify what needs to be changed, it is absolutely essential that you have neither a prominent business leader nor a prominent labour leader chairing the royal commission.
When I have asked the government and when I have asked the Ministry of Labour and when I have called the WCB for confirming or denying whether or not a prominent labour leader was going to be appointed, no one has denied that. At this point in time I would suggest to the government that if there is any hope whatsoever as to the royal commission achieving its objective, keep in mind the need for an impartial chair of the committee, a person who is to be perceived as balanced and objective and acceptable to both business and worker communities.
The government authority to impose policy: This bill gives the government the authority to issue policy direction to the board of directors for up to one year after the bill comes into force. This is totally unbelievable. This undermines the very principle of independent administration. That was one of the cornerstones of the system that was designed by Justice Meredith 80 years ago. This power is totally unprecedented and it is most extraordinary for an agency with which the government is attempting to establish a more arm's-length relationship.
In fact, last week I received a letter from the Minister of Labour where I had brought to his attention an issue regarding the WCB, and in the letter he said, "Well, as you know, we have an arm's-length relationship with the WCB." I can tell you that this authority that's being given to the government to issue policy direction to the board of directors for up to one year is going to jeopardize any attempt to develop a truly arm's-length relationship between the government and the WCB.
It will enable the government to direct the WCB to do virtually anything, even though it may no longer have the protection of the crown. At the same time, the government is under no obligation, as I've stated earlier, to act in a financially responsible and accountable manner, and is under no accountability to any body or any agency for its actions. This is, I would say, a most ludicrous situation.
This provision was not proposed in the accord and it is certainly further evidence that this government is acting in its own interests to ensure that its political agenda is going to be fulfilled, particularly in the last year of its mandate. I ask you, what is the basis for the proposal in light of the concerns that I have just raised?
Return to work: The re-employment provisions of Bill 165 are inconsistent with the accord. They do not reflect the understanding reached by business and labour on this very complex issue. The accord recommended that the current act be enforced by the WCB and that positive initiatives be pursued to encourage and promote re-employment, and I repeat: that positive initiatives be pursued. Bill 165 distorts the spirit of that agreement. The government has failed to provide any explanation as to why the wording of the current act does not provide the WCB with the necessary authority to enforce the re-employment obligations. The mediation provisions were not recommended or agreed to in the accord, and they will impose yet more bureaucracy in an already overcrowded and complex system.
Through these provisions, the bill is moving the WCB away from the role of being an adjudicative body to an agency that is focusing on return to work and mediation as its primary function. This was not part of the PLMAC accord.
The WCB's primary mandate is, one, to determine entitlement to benefits and services under the act and then to provide those services, not the other way around. It is not in the WCB's mandate, nor was it proposed in the accord, that the WCB's vocational rehabilitation focus should change from one of rehabilitating the worker to the point of employability to securing the worker with employment, which this government bill appears to be attempting to do.
Also, the penalties that are proposed for employers who do not participate in the vocational rehabilitation programs were not a part of the accord either. Yet again, the government unilaterally has proposed the penalties for its own reasons. The accord attempted to promote positive incentives and cooperation as a way of improving the effectiveness of these programs, not imposing penalties on employers for non-cooperation in programs that are of questionable value and effectiveness.
This bill doesn't address the real problem: the problem with the shortage of services available to employers, the regional disparities that exist in availability of medical and vocational rehabilitation services for injured workers, or the lack of internal services and programs within the WCB to assist employers in developing effective return-to-work programs.
These are just a few of the concerns and questions about Bill 165. Time does not allow for further debate. However, I join with the others and I call on the government to withdraw this bill because it totally ignores the depth of problems facing the WCB. What we have here is that in the future there will be another government that will have to deal with the task of reforming the system. This government, in this bill, has failed to recognize that the system faces insolvency and that workers' benefits and Ontario businesses are at risk.
I urge the government to return to the discussion table and incorporate the business recommendations. It is time to put the interests of workers, employers and injured workers ahead of the political agenda.
The Vice-Chair: Thank you, Mrs Witmer. I'd like to call forward now the deputy minister, Jim Thomas, who will do about a 20-minute presentation and then we'll go to questions. Could anybody who's speaking please identify himself or herself for the record.
Mr Will Ferguson (Kitchener): Mr Chair, I have one question I'd like to ask. I've listened to the minister's position and to the Liberal Party's position as well as the Conservative Party's position. I have heard Mr Mahoney's alternative put forth and I think it's a well-thought-out alternative. I've heard Mrs Witmer's presentation as well. What I'd like to ask Mrs Witmer, because I'm a little confused about --
The Vice-Chair: We're not into that, Mr Ferguson. That will have to wait. Mr Thomas.
Mr Jim Thomas: My name is Jim Thomas. I'm actually Secretary of the Management Board, but I was the Deputy Minister of Labour when these reforms started up and I am a vice-chair of the transition team on workers' comp. On my left is Mitch Toker, who is a policy analyst in the Ministry of Labour, and on my right is Marg Rappolt, who is the director of policy in workers' compensation matters at the ministry. We'd be happy to attempt to answer any questions you might have after I finish speaking.
I think that most of my comments will address the issues raised by Mrs Witmer, and they don't, I'm sure we can take further questions on that after.
I'm very pleased to be able to provide a technical overview of Bill 165 for committee members this afternoon. I think this is one of the most important pieces of labour legislation considered by a committee over the last several years. I'd like to focus my remarks in several areas. First, I want to review with you some background leading up to the tabling of this bill.
As you know, Bill 165 is founded on many months of discussion and consideration by business and labour leaders in this province. I think it's important to understand the government's purpose in pursuing workers' compensation reform at this time and its approach to developing this very important piece of legislation.
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Secondly, I will briefly provide an overview of the Workers' Compensation Board, its operations and its financial situation, and I suspect you'll be hearing a lot of different interpretations over the course of your hearings on how the workers' compensation system does work and about its financial situation. I want to table with you a clear picture of the board's financial status and an equally clear description of the financial impact of Bill 165.
Next, I will be reviewing the specific changes proposed in Bill 165. My remarks will address Bill 165 amendments as they relate to the four key themes that underpin the legislation.
Finally, I would like to share with you the significant progress made to date by the workers' compensation transition team in developing the principles and laying the foundation for the effective implementation of these important new directions.
First, the purpose and approach to workers' comp reform: Workers' compensation, as already pointed out, is traditionally a difficult and controversial area of public policy. The government embarked on its workers' compensation reform process understanding this and recognizing that the key players in the system, business and labour, at times see differing primary objectives for the system. Government strongly felt that there was an overriding interest in the ongoing sustainability of a fair and financially responsible workers' compensation system. The government was confident that in the face of this overriding public interest, business and labour should work together in developing consensus approaches to reform.
This was the task given to the Premier's Labour-Management Advisory Committee in the spring of 1993. The Premier met with business and labour members of that group early in the process and explained the government's expectations. He noted that "government would like to see a process where the PLMAC could, through research, discussion and consultation, produce a set of consensus recommendations which address the most pressing fiscal and equity issues in the system. Government's ultimate interest in the process is to ensure the health of the workers' compensation system; and to do it in as consensual a way as possible."
Over the summer and the early fall, very good progress was made in analysing the key short- to medium-term pressures facing the system. These included discussions on governance of the Workers' Compensation Board, the financial responsibility of the system and the need to improve return-to-work strategies for both workers and business. In the spring of 1994, the PLMAC reached a tentative agreement on a reform package which offered excellent guidance to the government on the range of issues discussed above.
In the agreement, several unresolved issues were turned over to the government for its consideration and action. In the end, business and labour could not continue to support a consensus set of reforms. However, the government used the framework put together by business and labour representatives as the foundation for its program for change. There's some question, in listening to the earlier comments, as to the extent to which the government has followed the PLMAC framework agreement. We certainly have copies of that agreement and would be happy, if people would like us to do so, to indicate the extent to which we have followed or not followed that agreement.
On April 14, 1994, the Premier announced the government's workers' compensation reform agenda, which included a series of immediate measures as well as a royal commission to study and report on the longer-term questions facing the system. The immediate measures included improving board governance and the financial integrity of the board; building on the good progress under way at the board in the areas of rehab and returning to work; and providing increased pensions for a group of older injured workers who are the most financially vulnerable.
The Premier also established a transition team headed by Mr William Blundell, former president and CEO of General Electric Canada, to assist government in implementing its reform agenda. The transition team also includes senior government officials and the interim vice-chair of administration of the Workers' Compensation Board, Mr Kenneth Copeland. Representatives from business and labour, as well as the head of the office of the worker adviser, have had standing invitations to participate in transition team discussions.
Participants have offered extremely valuable advice and the team recently has given to government its recommendations on how most successfully to implement reform, and government has adopted these key recommendations. I will return to a discussion of these later in my address. Let me then turn to the Workers' Compensation Act and the board.
Ontario's first Workers' Compensation Act was introduced in 1914. We all know that the act introduced an historic compromise where workers gave up the right to sue their employers and in return were guaranteed protection against income loss due to industrial disease or injury, irrespective of fault. It was designed as a publicly administered, compulsory system and, with the exception of a few specifically defined employers, was a collective liability system. Workers' benefits were funded exclusively by employers.
Since that time, the legislation has undergone several significant changes. Early on, these changes focused largely on increases to benefit levels, moving from the initial 55% of gross earnings to the present 90% of net in the legislative amendments of 1984. In addition, there were important administrative changes such as the creation of an independent appeals tribunal. The most significant change to the design of the system came about as a result of the 1989 amendments, Bill 162, which introduced a dual award system compensating workers with permanent partial disabilities for both their future loss of earnings as well as loss of enjoyment of life.
With all these changes, the mandate of the Workers' Compensation Board has remained relatively constant. The board is responsible for providing a complex and integrated range of benefits and services to workers and employers. In 1993, the board had a 4,700 person staff, with a total administrative budget of $343 million. Its total operating budget was $3.3 billion, including its benefits expenses as well as its administrative and legislative obligations.
The board is also responsible for covering the future costs of current claims and maintains assets to fund these costs. To the extent that the future costs of claims exceed assets, there is an unfunded liability. The board first registered an unfunded liability in the late 1970s when assessment rates were not increased to fully account for inflation adjustments to benefits. In the early 1980s, the unfunded liability rose rapidly due to a number of factors, including retroactive adjustments to benefit levels in response to inflation and a changing mix of awards to include a higher percentage of permanent disability. The board's unfunded liability is, therefore, not a new phenomenon, but its continued growth is of critical concern.
The board's second quarter report for 1994 records the unfunded liability as of June 30 at $11.7 billion. This reflects an asset-to-liability ratio of 36.7%. While few would disagree that the unfunded liability must be addressed, it should be noted that 1993 saw the lowest increase in the unfunded liability in 10 years.
It is this scenario that caused the government to introduce bold financial reforms to the system. The savings from the proposed reform package fall short of the suggestions of some in the business community who are calling for an immediate elimination of the unfunded liability. Rather, the reforms reflect the government's objective to restore the financial health of the system and make the system more responsive to the needs of injured workers.
The savings associated with the government's reform package are very significant, and I would like to spend a brief time reviewing them for the committee.
First, the total savings from this reform package, projected over a period of 20 years, are $18 billion. This takes into consideration the financial implications of all elements of the reform: the very significant savings resulting from the adoption of the new indexing formula; projected savings from return-to-work measures; as well as the cost pressures associated with increased benefits for some older injured workers.
The $18-billion costing I referred to above was determined by a PLMAC working group involving business and labour last summer. It is based on assumptions addressing the revenue base and expenditures of the system for a 20-year period. Based on the model developed, it was concluded that if the financial situation of the board were left unattended, the unfunded liability would rise to $31 billion as of the year 2014. The projected $18- billion savings would reduce this figure to $13 billion and, as such, would increase the board's asset-to-liability ratio to a projected 55%.
So by the year 2014, if the government were not to proceed with these reforms, the unfunded liability would be some $18 billion higher than it would otherwise. These changes represent real savings to the system, primarily as a result of some very difficult decisions affecting the indexing of injured workers' benefits. I think it's fair to say that Bill 165 is the most financially responsible piece of workers' compensation legislation that has ever been introduced for consideration by the Legislature. I believe it is the first time that it is a bill that has a benefit reduction.
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I should note also that the projected savings to the unfunded liability, even in the first year following the proposed enactment of the bill, are approximately $800 million. These savings are not yet factored into the board's unfunded liability calculations. So, for example, the $11.7-billion projection as of the end of June 1994 does not yet include the financial impact of this legislation.
I suspect you'll be hearing many different interpretations of these numbers over the course of the hearings. Other significantly higher projections for the unfunded liability have been released, primarily reflecting different assumptions about the board's future benefit obligations.
I think it's important to note that regardless of other projections espoused, the legislation before you demonstrates a very significant commitment to financial reform and an unprecedented move to restore confidence and trust in the financial integrity of the system.
In May of this year, the government appointed Kenneth Copeland as vice-chair of admin and CEO on an interim basis to manage the WCB during the transition process and to prepare the board for the implementation of the government's reform. Mr Copeland and his administration will shortly be bringing to the board of directors a balanced package of financial improvements which will address the financial sustainability and integrity of the system.
Let me now turn to a technical review of the bill. The four key areas of reform are board governance, improvements in return to work and rehab, benefits for injured workers and financial responsibility. The bill also introduces a purpose clause. I will be addressing the proposed changes to the Workers' Compensation Act as they fall under these themes.
Firstly, the purpose clause: Section 1 of the bill introduces a purpose clause which establishes that the overriding goals of the Workers' Compensation Act are to provide fair compensation, health care benefits and rehab services and to facilitate return to work. Section 12 also amends the act to require the board of directors to act in a financially responsible manner and in the best interests of the corporation.
Currently, there is neither a purpose clause nor a duty on the board of directors to act in a financially responsible manner as set out in the Workers' Compensation Act. Purpose clauses generally speak to government's intentions in enacting legislation. The purpose clause should answer the question, "Why do we have this legislation?" So in the case of the Workers' Compensation Act, the overriding purposes of the legislation are to provide fair compensation, health care benefits, rehabilitation services and facilitate return to work.
The purpose clause is not the place in the legislation where directives are given regarding how the services are to be provided. It is most appropriate that the directives on how to achieve the goals be placed in the substantive sections of the act. The amendments proposed in section 12 of the bill explicitly establish new obligations on the board of directors to act in a financially responsible and accountable manner.
Section 15 of the bill requires the board of directors to monitor developments in understanding the relationships between work injury, occupational disease and the workers' compensation system, so that advances in health sciences are reflected in a way that is consistent with the purposes of the act and to improve the efficiency and the effectiveness of the system. It also requires the board of directors to evaluate the consequences of proposed changes in benefits, services, programs and policies to ensure that the purposes of the act are achieved.
Government is aware that business representatives have expressed concerns about the wording of this section. They have suggested that the approach does not capture the concepts proposed in the PLMAC agreement. Business representatives have noted that the obligation placed on the WCB to monitor advances in understanding and evaluating consequences "consistent with the purposes of the act" may tip the balance in legislative interpretation in favour of extending entitlement, for example.
Government is particularly interested in hearing alternative approaches in this area of the bill and will necessarily consider changes to improve this section following discussions in public hearings.
The second area is governance, and here I'm dealing with sections 11 and 12 of Bill 165. These are the sections which introduce a bipartite governance structure under the Workers' Compensation Act and change the role of the board of directors vis-à-vis that of the administration of the board.
The new board of directors will be made up of four directors representative of workers; four directors representative of employers; two vice-chairs, one representing employers and the other workers; and two directors representative of the public, nominated on the joint recommendation of worker and employer members.
The chair of the board is to be appointed by the government on the joint recommendation of the employer and worker board of directors' members. In addition, the chair of the Workers' Compensation Appeals Tribunal continues to sit as a non-voting member of the board of directors.
This section clarifies that the board of directors' role is that of governing the board, and deletes the reference in the act to the board of directors' role in managing the corporation. The new board of directors will hire a president who will be the chief executive officer of the board and who shall manage the affairs of the board under the supervision of the board of directors.
Section 12 of the bill speaks to the roles and duties of the board of directors. The act is amended so that the board of directors is required to "act in a financially responsible and accountable manner in exercising its powers and performing its duties." It is also required to act "in good faith with a view to the best interests of the board" and "exercise the care, diligence and skill of a reasonably prudent person." These latter changes reflect the duties and standards of care set out in section 134 of the Ontario Business Corporations Act.
The third area is rehabilitation and return to work. This is the most important area addressed in the bill. These are the sections which would fundamentally change the focus of the Workers' Compensation Act. The government has introduced measures that in fact reflect a changing emphasis well under way at Ontario's Workers' Compensation Board, as well as boards in many other jurisdictions.
The Workers' Compensation Board has taken many steps already to enhance its capacity in the area of rehabilitation and return to work, recognizing that the success of a contemporary workers' compensation scheme is no longer exclusively related to the efficient, fair delivery of benefits to injured workers or dependants. Rather, it is the facilitation of integrated, effective return to work and rehabilitation strategies at the front end of claims management that is perhaps the most critical objective of the system. The workplace parties have the overriding interest and therefore the overriding responsibility to effect successful rehabilitation and return to work. Their participation in and control over rehabilitation and return-to-work efforts are fundamental principles flowing from the bill.
Section 8 of Bill 165 amends section 51 of the act so that a physician who receives a request from a worker or an employer must provide medical information relevant to the worker's return to work, provided the worker consents. Section 14 amends the regulation-making section of the act so that the WCB could prescribe by regulation the required medical information; for example, through the creation of a form.
These amendments are intended to expedite the return-to-work process by providing the workplace parties with immediate access to medical information relevant to the worker's medical restrictions and functional abilities. This provision should facilitate early and safe return to work.
Section 9 of Bill 165 introduces many amendments to the rehab section of the act, which is section 53. Subsection 9(1) amends the act so that the section applies in respect of both workers and employers. Subsection (2) requires the board promptly, after contacting the worker, to contact the employer for the purpose of identifying the employer's need for voc rehab services. Subsection 9(3) requires the board to provide voc rehab services to both the worker and the employer when the board considers it appropriate to do so. Services for employers might include, for example, consultation on appropriate workplace accommodation.
Subsection 9(5) requires the board to consult with the employer in the design of a worker's voc rehab program. The remaining changes in this section clarify the approach to job search assistance for the worker, which should involve the worker, the employer and the board.
There is also a duty of cooperation placed on the employer with respect to voc rehab services. Sections 27 and 31 amend sections 103 and 137 of the act respectively, and provide that the WCB can levy an additional assessment on schedule 1 employers and an additional amount on schedule 2 employers if the WCB finds the employer has failed to cooperate in voc rehab. This amendment is in keeping with the power the board already has to penalize workers who are uncooperative in voc rehab, and that's section 37 of the act. It is the intention of the board to determine through consultations with workers and employers what constitutes a failure to cooperate and what are appropriate penalties.
Section 10 of the bill amends the return-to-work provisions of the act, which is section 54, so that the board may now determine on its own initiative whether the employer has fulfilled its return-to-work obligations to the worker. This is an area of the present legislation that is currently ambiguous. Business and labour PLMAC representatives recommended that this aspect of return to work be clarified. This is the only modification being proposed in the return-to-work section of the act.
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Sections 20 and 21 of the bill address the board's role in mediating disputes regarding voc rehab and return to work. These sections in effect codify in law practices now under way at the board and reflect contemporary and successful trends in dispute resolution in other compensation systems across the country and the world.
Section 21 amends the act by adding section 72.1. Under this provision, the board would have to provide mediation services when either the worker or the employer object to a WCB decision concerning cooperation, availability or participation in a voc rehab or medical program, or a dispute regarding return-to-work obligations. After receiving the objection or application, the parties would have 30 days to complete mediation. Mediation is completed either through a resolution and withdrawal of the objection or application; or when no resolution is possible, the matter will proceed to a final determination.
Subsection 72.1(4) of the act will require that reinstatement hearings be conducted and decisions rendered within 30 days after mediation ceases. The proposed subsection also permits the board to extend this period.
The Minister of Labour has already noted that section 28 of the bill has been controversial, in that it has led to uncertainty regarding the status of existing experience rating programs administered by the Workers' Compensation Board. The WCB currently has authority to administer experience rating programs under subsection 117(3) of the act. Experience rating programs operate so that if an employer has a good accident record, its WCB assessment may be reduced by issuing a refund. If it has a bad record, the assessment may be increased by levying a surcharge.
The new subsection 103.1(1) allows the board to establish experience rating programs designed to reduce accident frequency and promote good health and safety, vocational rehabilitation and return to work practices of employers. Subsection 103.1(2) introduces new criteria to augment the current programs so that criteria such as the employer's health and safety, voc rehab and return-to-work practices be considered in addition to the base criteria of accident cost and frequency.
The ministry is tabling today for the committee's consideration the government's motion to amend section 28 of Bill 165. The amendment is to help clarify the government's position that the existing experience rating programs at the WCB will be retained, but modified or augmented in a practical fashion to include factors in addition to accident cost and frequency.
We have made available, I believe, to the committee an addendum, which I'd like to table, if I might, Mr Chair, which would set out the proposed amendment, and if I might, for the purposes of the record, read it into the record. There are two pages. The first is the document called addendum. This amendment is to help clarify the government's position that the existing experience rating programs at the WCB will be retained but modified or augmented in a practical fashion to include factors in addition to accident cost and frequency. I have copies of the proposed amendment available for committee members. The proposed motion would be:
I move that subsection 103.1(2) of the act, as set out in section 28 of the bill, be struck out and the following substituted:
"Determination of refund or surcharge
"(2) The amount of a refund or surcharge under a program shall be determined by the board based on the work injury frequency of an employer, the accident cost of the employer or both.
"Variation
"(3) The amount of a refund or surcharge may be varied by the board upon consideration of,
"(a) the health and safety practices and other programs of the employer to reduce injuries and occupational diseases;
"(b) vocational rehabilitation practices and programs of the employer;
"(c) practices and programs of the employer to assist workers to return to work; or
"(d) such other matters as the board considers appropriate."
The next area is benefits for older workers.
Benefits for older injured workers: As part of the business and labour discussions in the PLMAC process, it was noted that some older injured workers may require special treatment with respect to their pensions. These are individuals injured prior to 1990, many of whom are unemployable and have small pensions. Business and labour could not agree on how to address this concern and, therefore, suggested that if there were a need, "Government should address the situation."
Section 32 of Bill 165 amends section 147 of the act so that the board is required to pay an additional $200 a month to a worker receiving an amount awarded for permanent partial disability if the worker is entitled to a supplement under subsection (4) or if the worker would be entitled to one but isn't by virtue of his turning 65. In order to qualify for a subsection 147(4) supplement, the worker must not be able to benefit from a voc rehab program or fails to have an earnings capacity which approximates his or her pre-injury net average earnings following the voc rehab program. The maximum monthly supplement under this section is now $387 a month, which is the old age security benefit level as of August 1994.
Currently, there are approximately 36,000 workers receiving subsection 147(4) supplements, and approximately 4,000 workers who would be entitled to it but for turning 65.
The next area is financial responsibility in Bill 165. Bill 165 achieves financial responsibility in several ways. As noted earlier in my remarks, section 12 of the bill places new obligations on the board of directors in how it exercises its powers and performs its duties. In addition, section 17 of the bill requires that there be a memorandum of understanding between the WCB and the Minister of Labour that establishes and records the accountability framework within which the WCB shall operate.
Later on, I will also review with you the recommendations of the transition team, as approved by the government, with respect to further measures to guarantee financial accountability and public trust of the Workers' Compensation Board.
Section 33 of the bill introduces a new indexing formula for benefits under the act, one that has profound financial implications for the corporation. Under the proposal, each January 1 the WCB would apply the following indexation factor to compensation under the act: 75% of CPI, less 1%, capped at 4%. This indexing factor is commonly known as the Friedland indexing factor and was part of the agreement reached by business and labour throughout the PLMAC deliberations.
There are exceptions provided to the above. A 100%, full CPI indexing factor will continue to be provided in the case of compensation to survivors and dependants; workers receiving the maximum amount of future loss of earnings benefits and permanent disability benefits; and those who qualify for the proposed subsection 147(4) $200 increase in pensions -- that group of 40,000. Within the PLMAC process, business and labour agreed that these groups needed special consideration for indexing and, again, that the government must make a determination as to how these people should be treated.
The final area under the technical briefing, before I talk about the transition team for a minute, are a few other substantive amendments. First, section 16 of Bill 165 introduces a provision whereby the Minister of Labour would have the authority to issue policy directions to the WCB on matters relating to the board's exercise of its powers and performance of its duties under the act. This power is to remain in place for one year after proclamation of Bill 165. A similar provision now exists in legislation governing two other important government agencies: the Ontario Training and Adjustment Board and Ontario Hydro. In both these cases, however, the government's authority is not time-limited.
It is the purpose of this section that the government retain this special authority with respect to the WCB for one year only following enactment of the bill so as to ensure a smooth transition from the existing board of directors' structure to the new bipartite model and to guarantee the effective implementation of the directions established in this legislation.
Secondly, I would like to review the changes proposed in the sections dealing with the Industrial Disease Standards Panel. Section 2 of Bill 165 amends the Workers' Compensation Act so that the words "industrial disease" are replaced by "occupational disease" wherever they appear throughout the legislation. Similarly, it is proposed that the name of the IDSP would be changed to the Occupational Disease Standards Panel. This change reflects the fact that contemporary work-related diseases occur in many occupations other than those which are of an industrial nature.
Section 24 of the bill proposes a change in the funding relationship of the IDSP. The IDSP is a schedule 1 agency of government that is subject to the financial guidelines and constraints of all such schedule 1 agencies. It is presently funded through the Ministry of Labour with a chargeback to the Workers' Compensation Board. The proposed amendment shifts this arrangement so that the IDSP would no longer form part of the Ministry of Labour estimates process, but rather would receive its research funding directly from the bipartite WCB board of directors. The government intends to continue working with the IDSP to address some of its budget concerns and finalizing an MOU to establish appropriate accountability measures.
There are two substantive administrative amendments which I will draw to your attention. First, section 22 removes the liability of the crown for acts of negligence by the WCB or its employees and rests this liability with the WCB itself. This change is consistent with the arm's-length relationship the corporation shares with the government. Members of the board of directors, WCB employees and persons who are engaged by the WCB and who perform a judicial function will continue to be protected from financial liabilities for any acts of omissions in the discharge of such duties.
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Section 3 of Bill 165 clarifies that when a worker is already receiving workers' compensation benefits from another jurisdiction for the same accident, the WCB would be prohibited from paying workers' compensation to the worker or his dependants. The proposed change is to protect against double-recovery situations.
Finally, I would like to speak to the committee briefly about the progress being made by the workers' compensation transition team in developing the principles and laying the foundation for the effective installation of reform over the next year. The transition team was asked to focus its attention in three areas: the governance of the board and the roles of the government and the board of directors in this process, the implementation of financial responsibility for the board, and the installation of return-to-work and voc rehab reforms. The transition team issued a report to government recently addressing these areas and government adopted all key recommendations.
First, it was recommended and approved that the government of Ontario maintains the ultimate accountability for the workers' compensation system through the Workers' Compensation Act. The legislation will continue to define the jurisdiction of the board and that of government. For example, it is the act which sets out those issues which must be amended through legislative change and those matters that can be further defined through the policy discretion of the board of directors of the WCB. Where there is uncertainty regarding the jurisdiction of the board, the board and the government shall discuss and determine appropriate decision-making roles.
The board of directors will retain its authority to review and make recommendations for legislative change to the government, and government must seriously consider such recommendations. Similarly, and parallelly, it will be the responsibility of government to submit proposals for legislative amendment to the WCB for its review and comment prior to proceeding. The MOU between the WCB and the Minister of Labour will reflect these roles and responsibilities.
The government approved that as a condition of appointment to the WCB board of directors, prospective board members commit to the following principles: first, that the board of directors' primary responsibility is to act in the best interests of the WCB; secondly, that the board of directors must act on consensus decisions wherever possible, and should develop protocols and procedures that define a process for consensus decision-making; and third, that the board of directors should focus on the strategic goals and policies of the organization, and the CEO and his or her staff will be responsible for managing and implementing these goals and policies.
With respect to the financial accountability of the WCB, the government approved adoption of the following principles.
First, responsibility of the unfunded liability rests with the WCB, not with the government.
Secondly, the WCB board of directors has responsibility for developing and implementing a funding strategy to reduce, based on sound actuarial principles, the unfunded liability. The MOU between the Minister of Labour and the WCB will require the WCB to report to the minister on its funding strategy, and the WCB's annual report will document the success or failure of the WCB in implementing its strategy.
Thirdly, a special subcommittee of the WCB board of directors will be struck to oversee the development and monitor implementation of the new funding strategy. The findings of the subcommittee will be reviewed annually by the board's external auditors.
Fourthly, the government will replace board of directors members if the financial review shows the board's ongoing failure to achieve its funding strategy goals.
Finally, the government accepted a report on directions in return-to-work and voc rehabilitation prepared by the transition team and agreed that the WCB should begin discussions through an expanded voc rehab advisory committee to prepare for implementation of these reforms.
The new directions set out in this bill have far-reaching implications for the workers' compensation system in Ontario. The government is committed to meaningful reform that improves the system for both employers and workers. I think this is achieved through this balanced program for change.
I would be pleased to take questions from the members on any of the points I have raised this afternoon. Thank you very much.
The Vice-Chair: Thank you. I think we'll proceed in rotation with 20-minute blocks, if that's agreeable to the committee. Mr Offer.
Mr Steven Offer (Mississauga North): Thank you for your presentation. I have a few questions that revolve around the financial implications of these particular proposals, and I'm hopeful that you might be able to provide some clarification for me.
In the document which was presented as fact sheet number 3, it talks on the back about a little bit of a breakdown as to the financial impact and it refers to, in the final number, $18.1 billion. It speaks to that as potential savings. Everyone has spoken about savings under this legislation without that little descriptive word "potential," and I'm wondering if you might be able to tell me what are the criteria that are required in order to meet the savings as expressed in the minister's statement.
Mr Thomas: With respect to the first line, Mr Offer, the savings from the Friedland formula, what would have to unfold would be that the increase in CPI, the increase in wages, the various actuarial assumptions that business and labour agreed to as part of the PLMAC discussions would have to unfold roughly as predicted by business and labour to achieve the $21.6 billion. Therefore, there are obviously scenarios that you could imagine in which the savings would be more or would be less, depending on how the actuarial assumptions unfold.
Mr Offer: Would you be able to provide these predictions to us?
Mr Thomas: Yes. I could talk to them now. I'm not sure that's helpful. If you wish, we can provide you with them.
Mr Offer: Not right now, but I just hope we can get something of the criteria which are used in order to verify the $18.1 billion in saving, because if those potentials do not come about, then the numbers in the end are affected.
The next question that I have --
Mr Thomas: If I could respond to that, Mr Offer, the sheet that we can get you will deal with the assumptions around CPI, employment growth, nominal wage increases and things like that, so we can get you that. On the savings from return to work, I think the assumption that's in there is that the return-to-work reforms will generate improvement in returning to work of two weeks; the duration period will reduce by two weeks. If it's reduced by less than that, it's less than $2.1 billion. If it reduces by more than that, it's more than $2.1 billion over the 20-year period.
Mr Offer: So the savings from return to work basically are -- I'm trying to put some understanding behind all this. Does that mean it's assumed that people are going to get back to work two weeks earlier?
Mr Thomas: Yes, two weeks earlier than they currently are, on average.
Mr Offer: Okay. You indicated in your statement that there are currently some changes done in getting injured workers back to work. Are they built in to these numbers already?
Mr Thomas: No, they're assumed, those changes. Whatever is currently --
Mr Offer: I'm saying if nothing took place as proposed under the bill, there are certain things that are going on at the WCB that I think have as their purpose trying to get some of the injured workers back to work, the vocational rehab and a variety of other measures, as quickly as possible. Is that factored in here?
Mr Thomas: No. That is why I would say that the potential savings are potentially a floor, in that to the extent that the WCB is able to achieve a financial improvement package, which the board of directors under Mr Copeland's leadership is currently working on, to the extent that they are able to do that, to the extent that they are able to do better than two weeks on return to work or improve return to work, without any of these reforms in place, you improve on the $18-billion savings.
Mr Offer: I believe one of the things that was earlier stated is that much of the return to work will be dependent upon a sharing of information between the employer and WCB, the medical reports and things of this nature. Premised in the proposals is "provided the worker consents." What happens if the worker doesn't consent?
Mr Thomas: If the worker doesn't consent, then the medical report will not be produced.
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Mr Offer: Will that affect the savings from return to work?
Mr Thomas: No.
Mr Offer: Will that have any financial impact?
Mr Thomas: Well, the expectation is that a certain portion of workers will consent and a certain portion will not. That is one of the return-to-work improvements that will generate, we expect, a two-week improvement.
Mr Offer: You've spoken about failing to cooperate by employers in vocational rehab. Will the withholding of consent by a worker be viewed as a failing to cooperate?
Mr Thomas: I don't know. Failure to --
Mr Offer: On page 10, you speak about "providing the worker consents." The question that I have is, if the worker does not consent, as indicated, is there any penalty that the WCB will exact on the injured worker?
Ms Marguerite Rappolt: Section 37 is the section that deals with worker cooperation now and I wouldn't think the failure to consent would influence at all the determination of cooperation under section 37.
Mr Offer: The question I'm trying to ask is, "provided the worker consents." If the worker doesn't consent, is the WCB just going to allow it, fine, and just let it go? Then the question is, why would a worker share his or her medical information if there's no incentive one way or the other?
Mr Thomas: Oh, but there is an incentive. The incentive is that if the availability of medical information on the worker's condition can be of assistance in helping to establish a rehab program for the worker and rehab services for the employer, there's an incentive on the worker to disclose, or to permit the disclosure.
Mr Offer: But apart from a wish or a desire, there's nothing else that the legislation will do to get the worker and the, in terms of sharing -- I don't want to belabour the point.
Mr Thomas: No, that's fine. But no, the legislation does not contain specific sanctions on workers who do not consent.
Mr Mahoney: Just as a supplementary to that particular point, one of the problems in trying to reform WCB has been the perception that there's not a balance or that the playing field has been tipped, particularly in favour of organized labour. Why would you put a sanction in this act against management for failure to participate in rehabilitation in some way, but you won't put a sanction against the worker who fails to participate by disclosing or agreeing to the disclosure of the medical information? Why would you be punitive against business and do nothing against an uncooperative injured worker?
Mr Thomas: Well, there already is a sanction in the act that operates against workers who do not cooperate, and that is in paragraph 37(2)(b). Where a worker does not return to work, it talks about the compensation payable for temporary partial disability:
"Where the worker does not return to work, a weekly payment [will be] in the same amount as would be payable if the worker were temporarily totally disabled, unless the worker,
"(i) fails to cooperate in or is not available for a medical or vocational rehabilitation program which would, in the board's opinion, aid in getting the worker back to work...."
So that section is the sanction against worker failure to cooperate in a voc rehab program. The parallel would be the one that I've described for the employer in terms of a penalty around failure to cooperate in a voc rehab service.
Mr Mahoney: The punitive action against the worker would be for a worker who refused to show up for rehab, fundamentally, in that section. It doesn't address the issue of agreeing to the release of medical information which is being released to facilitate return to work, modified work, some kind of cooperative effort between the medical community, the worker and the employer. If the worker refuses to be part of that, that doesn't mean he or she won't show up for rehab, which is what you're referring to. They're just saying, "No, you can't see my medical file."
Mr Thomas: The other point I might make which may assist you is that the issues you're raising around consent, around what constitutes failure to cooperate on the part of the employer and what sort of sanctions would unfold, are things that are directly in the return-to-work paper that the transition team put together that will be developed by the board in consultation with both employers and workers under the advisory committee of the board. These are things that have not been fully developed in terms of the implementation strategy.
Mr Offer: Just a few other questions dealing with the bipartite proposals: In terms of representation on the labour side, what efforts have been made in attempting to have the interests of the worker who does not happen to be part of organized labour part of that representation proposal?
Mr Thomas: Ever since the PLMAC leaders on both the business and labour side were asked to assist with the workers' comp reform, it's been understood, and I think up front, that the interests of workers were subsumed within the representation by people from the Ontario Federation of Labour, who I know have set up a network of consultation with injured workers and injured worker groups. I believe the OFL will be making a representation to the committee, and it might be a question to pursue with them as well.
Mr Mahoney: A number of questions: You made a specific reference, though, to the increase in unfunded liability being the lowest in 10 years, so the increase has gone down but it's still an increase. And of course, I suppose understandably, the government tries to take some credit for that, in a bizarre way. To what extent would the recession or the lost jobs in the economy have effect?
Mr Thomas: I can undertake to try and get an answer to that for you, Mr Mahoney. I think it could work both ways. I think a recession in a dual-award system can create some unforeseen negative problems.
Mr Mahoney: Such as someone might rather be on 90% of net than 55% of net under unemployment insurance? Is that what you're suggesting?
Mr Thomas: No, no. It's just that my understanding is that recessionary effects have had several impacts and I think I'd prefer to get back to you with an answer on that, if I could.
Mr Mahoney: The group that predicted the rate of inflation for the next 20 years, if we're putting a lot of confidence in that, they should perhaps be placed into senior positions within the treasury department of the ministry. That would be quite remarkable to predict that successfully for 20 years.
I want to ask you a question about the governance side of things. You talk about great changes to this. Really, the only change that I see, and correct me if I'm wrong, is two directors representative of the public nominated on the joint recommendation of the worker and employer members. The rest of the structure of the board is fundamentally the same as it is today. So you're adding two people who are agreeable to labour and management, which really in essence just expands the size of the board.
A second part of the question would deal with WCAT and appeals. It's my estimation that including appeals to MPPs' offices, including reappeals to the various levels of decision-making opportunities within the process, you can appeal a decision about 14 times before you get to WCAT.
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Have you thought or has anyone in the ministry thought about how we might reduce the level of appeals, get to WCAT quicker and not have WCAT sitting as a non-voting member on the board, but rather as a quasi-judicial body where you would simply take the appeal process through without political interference from members of the Legislature in any way whatsoever: just streamline it, get a decision, get to WCAT?
Mr Thomas: With respect to your first point, I would agree that in terms of the bill, the changes effectively look like the ones you've talked about, but I would argue that in fact there's a fairly profound change in the governance arrangements at the Workers' Compensation Board. I think it is not a minor change to say that the board of directors is no longer responsible for governing and managing.
I think the lines between what the board of directors' job has been and what the administrator's job has been have been quite blurred. A great deal of time and effort was spent by government, the WCB, the transition team, a number of people, in trying to sort out a model that looks much more like a typical public sector organization or private sector organization in which the board is responsible for setting the directions and looking for what the results are of the organization and they turn it over to a CEO to run the place. So there's a fairly substantial change in attempting to clarify the responsibilities of the board of directors versus the responsibilities of the administration.
Also, the fact that the government is turning over to the board of directors the task of finding a mutually agreeable, or agreed-upon, chair, and that they are responsible for finding the president of the organization reflects --
Mr Mahoney: Who would appoint the chair, if I might?
Mr Thomas: The government will appoint the chair on the joint recommendation of the five business and five labour representatives.
Mr Mahoney: On that point, though, it's really the mandate of the board that's changed dramatically, as opposed to the makeup of the board. I mean, it's four and four; it's bipartite; it's vice-chair, management, vice-chair, labour. We're adding two supposedly independent-thinking citizens out there who are going to come from, somehow, a recommendation by management and labour. So we're adding two people to create the optics that we're going independent. The structure of the board doesn't really fundamentally change. The appointment's still made by the government and the chair is still appointed by the government.
Mr Thomas: First of all, on the public-interest member issue, I think it is not a modest change to put two public-interest members on a board of directors. My discussions with people from other jurisdictions where they've gone to a public-member representation would confirm that, that it changes the dynamics of the board, it changes the way the board operates. I think I've said all I can say about the importance of distinguishing between managing the corporation and making decisions as a board, and that is a fairly substantial difference.
I have a sense that with a legislated structure in place, the government is going to be compelled to give fairly high weight to the recommendations for appointment for a chair that come forward and are mutually agreed upon by business and labour.
Mr Mahoney: Mr Chair, I know I'm out of time, but I didn't get an answer on the WCAT.
Mr Thomas: Oh, I'm sorry. On the WCAT --
Mr Mahoney: That's why I asked them together.
Mr Thomas: On the WCAT question, the issue of responsibility for the workers' compensation system was a long-standing discussion point that carried on throughout the PLMAC negotiations and discussions. I know that in the end, business and labour on the PLMAC framework were not able to agree on what to do about tackling the larger system issue around governance, particularly WCAT. That can be seen from the chart of governance of the workers' compensation system that was appended to their framework. So that issue remains one that the commission will need to look at. It remains something that has not been fully dealt with, and I will acknowledge that as something that is a continuing issue that requires discussion.
Mrs Witmer: Most of my questions have not been answered, but I'd like to go to the back of your paper. You talk about the transition team and you talk about the discussion papers, and now you address the fact that the government has accepted some of the principles from those papers. First of all, could you just refresh my memory? Who is on the transition team?
Mr Thomas: The transition team consists of Mr Bill Blundell as the chair of the transition team; I am the vice-chair of the transition team; David Agnew, the secretary of cabinet, is on the team; Ken Copeland, the interim CEO, is on it, as well as Pat Phillips, who is from the Minister of Labour's office. Those are the, if you will, standing members of the transition team. In addition, there are permanent invitations to attend all meetings of the transition team that have been sent out to Gord Wilson of the OFL, the business representatives on PLMAC and Alec Farquhar, who is the director of the office of the worker adviser, to attend meetings as sort of representative of stakeholder interests.
Mrs Witmer: The last group that you mentioned, then, do they have input into the recommendations? You said there's an invitation to attend.
Mr Thomas: Yes, they've all had opportunity for input.
Mrs Witmer: Has the PLMAC participated?
Mr Thomas: They participated until they withdrew.
Mrs Witmer: So have they had an opportunity to look at the three discussion papers you have circulated?
Mr Thomas: I'm not exactly sure what stage the transition team papers were at when they stopped coming. I'm sure that they reviewed the return-to-work paper because I remember very vividly a meeting in my office with representatives from the PLMAC business caucus on the return-to-work paper in which we spent some time going over it. I'd have to get back to you, though, on what the level of their involvement has been with respect to being able to -- they've had the opportunity to participate in consultations around all of the papers. I do know they've had extensive discussions with me around the return-to-work paper, or at least a version of it when it was in its draft stage, Ms Witmer.
Mrs Witmer: So the PLMAC had some input in the return-to-work discussion paper, but you're suggesting they didn't have any involvement in the governance or the financial reform paper.
Mr Thomas: No, I'm not saying that. I'm saying I don't remember what involvement they had in it when they stopped coming.
Mrs Witmer: Would you have specifically circulated the papers to those people?
Mr Thomas: My recollection is that we did, but I'd like to be sure of that before I say yes. I wouldn't mind getting back to you, unless my colleagues on either side of me who have also been involved in this have any better recollection.
Mr Mitchell Toker: I would only add that there were versions of papers on governance and financial responsibility, much, much earlier drafts, that had been reviewed by the transition team. There was also a workshop on the issue of governance where business representatives attended.
Mrs Witmer: I would like a specific response to my question as to whether those papers were circulated to the members of the PLMAC and also what input those people had as to adopting the principles that we have before us. If those individuals were not involved, then I'm concerned about the principles, because they certainly don't reflect any consensus between business and labour. They are certainly quite one-sided, and I don't feel very comfortable with some of the principles that have been adopted here. I don't think they say very much at all. In fact, if we take a look at the one concerning -- what is it? -- board members, they must "act on consensus decisions wherever possible." Well, I'll tell you, if you leave that open-ended like that, you're bound to have problems.
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If you take a look at the financial accountability, they must reduce the unfunded liability. Again, it's pretty open-ended. The board's going to be replaced if they don't achieve their funding strategy goals.
I'm pretty disappointed, I guess, with the principles that have been adopted, and I would like to have some assurance that both sides, labour and management, had an opportunity for input and that if we're going to be dealing with the reform of the WCB, that balance is reflected, or we're not going to have any meaningful reform.
The minister sat in here today and he said that there was a need for both sides to get involved in the process, and what I'm hearing today is that both sides haven't been involved in the process. Yet the government has already approved the principles that we see before us today. Would you just tell me how the government went about approving these principles? How were they presented and who did the approval?
Mr Thomas: Well, Mrs Witmer, I guess there are two levels of answer I'd like to give you. One of them is, with respect to governance, as you speak, my memory is being refreshed and I do remember a one-day workshop in which we used a very, very well-known expert on governance, John Carver, who's written books on it, who came in and spent the day facilitating a workshop on how a board of directors and an administration and a government would sort out their respective roles and responsibilities. I know there was a paper that was used during that session, and I believe it was a version of the final governance paper.
Attending that meeting were a variety of people from a number of backgrounds, including the current interim chair of the Workers' Compensation Board, the then vice-chairs of business and labour for the Workers' Compensation Board, other board members, administration, senior officials, people from the Ministry of Labour, the secretary of cabinet, Bill Blundell, the Provincial Auditor; a variety of people who came to talk about how do we make governance work better. That was the workshop that really gave rise to most of the recommendations, I think, that you see around governance. So that's my first response.
I do know, therefore, that the PLMAC people were still involved in the process at that point, because a number of them were at that session. In fact, we had invited all of the people, I think, who made up the group that was supporting the CEOs. There were five of them, I think.
The other thing I should say to you is that if you're asking me, did they have an opportunity for input, the answer is absolutely. In other words, there have been standing invitations to the transition team meetings. So anything we've discussed as a transition team, we have held open a standing invitation to people from PLMAC and to labour and to the office of the worker adviser person to come to those meetings. So at that level invitations were there, so the opportunity was there, which is probably a different answer than the answer to your question, did they actually have input into the very final product?
Mrs Witmer: And did they receive copies of the discussion papers?
Hon Mr Mackenzie: I think there's also the question, if you'll permit me, Mrs Witmer, that when you're putting a team together and trying to come up with some answers, there is certainly -- I hadn't remembered the workshop the deputy just raised, but if people also decide they're not going to attend a session, that raises another serious question as well.
Mrs Witmer: Would it be possible for us to receive copies of those discussion papers, the three that were circulated?
Mr Thomas: Yes, we'll get those for you.
Mrs Witmer: I'd appreciate seeing a copy of the papers that were originally circulated.
I'd like to go back to what you said, Mr Thomas. You said when you spoke about the purpose clause that you recognized there was some concern about the purpose clause and you were interested in hearing alternative approaches in this area.
That really surprises me, because I pointed out to you in my remarks that it was my belief that labour and business had agreed that a financially responsible framework for the decision-making and operation of the system was necessary and that that needed to be injected into the purpose clause in some way in order to make sure there was balance in the system between securing benefits for injured workers and the need for financial responsibility and accountability at all levels within the system, and that was to be the cornerstone of the reform package.
If that did happen, I ask you, why was that not included and why are you now saying you'd be interested in hearing alternative approaches? Why did you not follow through on what labour and business had agreed to originally?
Mr Thomas: Because, as I did try to say in my commentary, we had advice from our legislative drafting people that a purpose clause is supposed to set out, what is the legislation trying to achieve, what is its fundamental substantive reason for being -- in this case, compensation, rehabilitation, return to work etc -- and that it is not in the purpose clause, therefore, that one places the issues around how one gets to that substantive objective. In other words, whether one acts in a financially responsible way or whatever is something that needs to be set out somewhere in the act, because (a) it makes sense and (b) it also was part of the PLMAC agreement. There are those who would argue that putting it in the main body of the act, putting obligations around, "Did you act in the best interests?" and the other things, that putting it there gives it more teeth than putting it in a purpose clause, which is simply a canon of interpretation.
So I think there's a strong argument for section 12 amendments being where they are, but I do agree that there is an issue that arises around our attempt to capture the evaluating the consequences piece in section 15, and that's the part I was saying we were looking for some assistance on. In other words, to have just taken the PLMAC words and put them into a purpose clause would have been to put a lot of things in a purpose clause that ought to end up in the substantive body of the legislation. Having said that, we did try to put everything into the bill.
Mrs Witmer: Well, I guess I ask you, why would you not include it within the purpose clause and also include it within section 12? There was nothing to prevent the government from doing that.
Mr Thomas: Oh, there is, because then you've gone right against what the legislative drafters tell us are the rules around writing a purpose clause. I mean, the rules around writing a purpose clause are to make sure we end up with the purposes of the act. To put it in both places is to put the financial "How do we do it?" into the purpose clause.
Mrs Witmer: Well, as I indicated to you before, as presently worded, there's absolutely no recognition of the very important role the employers play in the system and unfortunately the purpose clause as presently worded really only considers the worker's perspective. Also, section 12 applies only to the board of directors and there is no financial responsibility at the present time in your bill on the administration of the WCB or the government. Yet, as I told you, it's the government that's going to have the ability to issue policy directions under the act. So I can tell you there is certainly some reason for concern around the present wording that the government has selected to put in and what you have selected to omit.
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What about the experience rating? I'm still not sure what it is that you are proposing now to do. You indicated on page 12, in the middle, "Subsection 103.1(2) introduces new criteria to augment the current programs," and then in the next paragraph you say, "The amendment is to help clarify the government's position that the existing experience rating programs at the WCB will be retained, but modified or augmented...." So what is it? It still appears to me that you're going to change the program, rather than just augmenting the program. You're saying you're going to modify.
Mr Thomas: The concern that we heard from the business community, which we I think have responded to directly and positively, is a concern that the way in which we have worded the bill under 103.1 fails to make any mention of accident cost and frequency and goes right into, in determining whether a refund or surcharge is available, the board shall consider various practices like health and safety.
The concern that got raised as a result of that, if I can characterize the business concern correctly, is that it looks as though through our language we have abolished the experience rating program as we know it, which was -- is -- a program based on accident cost, and we've also abolished the CAD-7 program, the construction one, which is based on accident, I guess, cost and frequency, and we've replaced it with a program that focuses only on workplace practices or WCB practices.
Now, that was the concern we were trying to deal with, and what we are trying to say in the motion to amend is that under subsection (2) we are still using the work injury frequency or the accident cost or both. That continues to be the way in which the amount of a refund or surcharge shall be determined. So we're trying to make it very clear to everyone, and particularly to those in the business community who are concerned about our bill's wording, that we are prepared to say categorically that the experience rating programs based on accident, frequency or cost continue to be ones that are based on accident, frequency or cost but that in addition you can alter or vary the amount of the refund or surcharge based on a number of workplace practices, which I understand and which we understand to be the intent -- and this is based on some fairly lengthy discussions with some people from the business community who are actively involved in the PLMAC process. We understand this addresses the concern that they have.
So, Ms Witmer, subsection (2) says we're going to continue to determine the amount of refund or surcharge the way we've been doing with NEER and CAD-7, but we're going to be able to vary it, vary the amount of the surcharge or refund, based on other employer practices and behaviours as set out in (a) to (d).
Mrs Witmer: Does that mean then that the WCB is going to go in and audit the health and safety practices of the employer to determine if they're consistent with whatever criteria you choose to establish?
Mr Thomas: In the PLMAC framework, the problem that you're alluding to, which is an important problem, was also recognized by the people on PLMAC, who talked about this (a), (b), (c) and (d) thing that I've referred to as a template of best practices. They talk about a template of best practices, including such elements as health and safety programs, return-to-work programs etc, and they say that:
"The elements of such a template of best practices would need to be determined by the WCB in consultation with business and labour. The mechanics of how the elements would be weighted and applied also need to be developed. Under this new incentive program, while all employers would be measured against the template of best practices, adoption of the elements would be voluntary."
So that issue around the mechanics and how it happens and how they get measured and whether you audit and how you audit and who audits, those are all absolutely important questions that are captured in the return-to-work paper the transition team in the government approved and has turned over to the board to implement by way of consultation with business and labour through this expanded advisory committee of the board. So there are opportunities for the business and labour communities to be involved in the development of the actual practices and determining whether it will be an audit, and if so, how it would happen and that kind of thing. I'll be right up front: That is not something that is developed in the legislation. That is something that gets developed through the advisory committee and through the board implementing it.
One thing I will say is that this is a reform in which there has been some fairly extensive consultation with the staff at the board, so I think we are putting to you a high degree of confidence that the board is aware of the administrative issues associated with trying to make this work and knows it's going to have to work with business and labour to answer all the good questions you're raising about how it will actually happen.
All I wanted to make sure was that I had explained to the committee as clearly as I could the fact that this is intended to address directly the concerns that business was raising about the abolition of the experience rating programs. They made it very, very clear to me that a lot of employers have used the experience rating programs effectively and they have modified their workplace practices and to just throw them out, which is what they read into our language but was not what we intended, would be a mistake, and that's why we are intending to introduce this motion at third reading.
Ms Murdock: Actually, that sort of leads in well, because in my riding I have Inco, with the United Steelworkers of America, who have worked together, union and management, on a return-to-work scheme that has actually saved Inco over $3 million in terms of NEER awards. So they are a success story as to how the return-to-work programs actually do work for the benefit of both management and labour.
I wanted to get a clarification from you from the Liberal questions, because my understanding on the medical form -- and I understand too that there has been some concern in terms of the worker's permission as to what information would be given out. But I understood and I think the intent of it is that it's a process to be worked out for the prognosis in relation to return to work rather than the diagnosis of what's wrong with the worker and that a form has yet to be devised and that in any case -- I mean, based on my work with the Workers' Compensation Act prior to election, the board right now can get any medical information it wants basically, which it could still do. It's just that if the expediting portion of the return-to-work thing works, then really the worker wants to get back to work fast. If this portion works, then they would end up giving permission on those return-to-work prognoses.
Mr Thomas: That's right, and the intent of the section is to make sure, you're right, that what is captured is information that would assist in getting the worker back to work and that it is acquired in a way that everyone agrees is a fair way to be acquired, and probably according to a prescribed form, which is why we have a power to do that.
Ms Murdock: And that's Mr Mahoney's concern about the form itself -- or he didn't use that, but that the form is yet to be devised and is going to be done with all the stakeholders, including worker, employer, rehab specialists and so on.
Mr Thomas: Yes. That whole issue is set out in the return-to-work paper.
Ms Murdock: I just wanted that on the record for clarification purposes.
The other thing I wanted on the record for clarification purposes was the role differentiation. Under the existing legislation, the chair and vice-chair controlled things and basically had the ability -- well, the chair had the right -- to vote and how that worked in terms of what they did and that there was no role differentiation between administration processes and policy processes and that this will definitely change that.
I'm just wondering, does the opposition realize that we're doing this in blocks of time till 6 o'clock? Did you still have more time? You didn't. I see. Okay.
Mr Thomas: I'm just trying to get the wording. Under section 56 of the current act, Ms Murdock, it says, "There shall be constituted for the management and government of the corporation and for the exercise of the powers" of "board of directors," so it sets out that the board of directors currently is responsible for managing and governing the corporation. It goes on, and I don't know if I can find it, and sets out that the chair and the vice-chair are appointed by government as opposed to the president being hired by the new board.
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Ms Murdock: It will be dramatically changed.
Mr Thomas: So the roles will be quite different.
Ms Murdock: Lastly and very quickly, I know how we send out agendas for whatever meetings we're going to have, telling everyone what's going to be on the agenda and what's going to be discussed. I presume you did that when you were having all the discussions around the return-to-work, governance issues with the PLMAC members and so on?
Mr Thomas: Absolutely. We've notified the PLMAC members. We've sent them agendas of all the transition team meetings. We continued to send them the agendas after they indicated that they were no longer going to participate.
Ms Murdock: And that they chose not to come any longer. My recollection of the press release was around the first week of August. Is that right, around there?
Mr Thomas: We certainly had nothing to do with them not attending.
Mr Randy R. Hope (Chatham-Kent): I have a couple of questions, mostly dealing with some of the comments after the minister's, but my first one: This morning, some business representatives accused the Premier of ignoring the recommendations put forward by the business caucus of the Premier's Labour-Management Advisory Committee. I'd like to know once again, for the record, how similar are Bill 165's amendments to the recommendations outlined in the PLMAC framework?
Mr Thomas: I guess I'm in the committee's hands. One thing that I could do, if it would be of assistance to the committee, would be to provide the committee members with a copy of the PLMAC reform framework and quickly indicate where it is that the various provisions in the framework can be found in the bill, or not. If that would be of any assistance I could do that, or I could take you through it orally.
Mr Hope: Would it be possible then, so that we can get a better understanding, and for everyone's best interests, that we have maybe a flow chart form where one column is what the PLMAC was recommending and what Bill 165 incorporates so that there is a comparison, a very clear comparator of what recommendations were being made and what was actually implemented in Bill 165?
Mr Thomas: Certainly, but to make that helpful it might be useful if I at least filed with the committee the framework agreement, and then while you're waiting for us to do the table you can have that document to see for yourself the extent to which you think the government has followed or not followed the framework.
Mr Hope: The other question which I have: You mentioned back in 1972. I was wondering what the rate of benefit increases were from 1972 to 1994. I don't expect an answer from you right away.
Mr Thomas: Let me get back to you on that.
Mr Hope: At the same time I would like to know, in the same period of time, from 1972 to 1994, the unfunded liability percentage increase. It was my understanding, and I could be wrong, that during that time Davis had kept the competitive market with the eastern provinces, so he was increasing the benefit rate but wasn't charging the aspects to it. That information would be very important as we pursue these conversations in the general public about fiscal responsibility and about the NDP, and I think it's important to lay out the framework of what is there.
The other question I wanted to ask refers to Mr Mahoney's comments after the minister had spoken. He made mention of BC and he talked about our training programs and the inaccuracy of our training programs for our workers who deal with workers' compensation, and he went on to the medical profession and its relationship to workers' compensation.
Is it not so that with this legislation, the CEO will now be able to implement good policies, that you don't need the legislation to implement good training programs, that the CEO of the new structure would have that ability to implement better training programs, maybe use the BC model for training programs? Isn't that the appropriate place versus the legislative model?
Mr Thomas: It would be surprising to set out a legislative requirement or obligation around level of training. I don't think that exists in the Public Service Act for the Ontario government employees, and yet there's an expectation that a deputy minister will make sure that staff in his or her ministry get appropriate levels of training. I think that the board has been free and is free and will continue to be free to implement the degrees of training that it thinks are necessary.
Mr Hope: My one final question, and I'm going to cut it short so some of my colleagues could -- the Conservative Party was very shy in its comments on where it stands, what it would like to see. It was talking about a lot of negatives. My understanding is that they would like to see the total impact carried on the benefits of individuals, the reduction of benefits.
To get rid of the unfunded liability, what would be the assessment percentage that an injured worker would receive under the Tory philosophy of taking the unfunded liability from the benefit program?
Mr Thomas: Are you asking, how much would the benefits need to be reduced, or how much would the employer assessment rates need to be increased?
Mr Hope: How much would they need to be reduced from the benefits of the individual?
Mr Thomas: We'll have to give some thought to how we could answer that.
Mr Hope: To the best of your ability, I would appreciate a comment, because they've been lax in providing how their position would be. My understanding of their position was very clear: to reduce the benefit levels to individuals.
Mr Thomas: I do know that the PLMAC business proposal last fall set out kind of a menu of changes around entitlement and benefit reductions that I think, in their totality, would have reduced the unfunded liability to zero by 2014. So we might have to start there, and that might be the information we can get you. I don't know what I could do to get you -- you'd basically have to stop people's pensions in order to take it to zero.
Hon Mr Mackenzie: If I can cut in for just a minute here, there's a little bit of danger in this question, if you'll forgive me for saying it. We can try to give you what kinds of reductions or what kinds of increases and assessments would be necessary, but just the way it was asked, I wouldn't want the deputy trying to respond to what the Tories would or wouldn't do. I think that would be a little bit unfair to him too.
Mr Thomas: But what I should undertake to do is to make sure that the committee knows what the business caucus proposal was that was the most recent attempt to address the issue through benefit changes.
Mr Ferguson: Just picking up on Mr Hope's question, I'm sure we're going to hear within the next few weeks the call to balance the unfunded liability sooner than the year 2014. I think it would be very instructive and very useful for the committee to have that information at hand as to what the benefit level would be, if that's the way it is to be completed; even over the next five years what would have to be done in order to ensure that we achieve the 55% of unfunded liability.
While I'm on the 55%, and I don't want to press the panic bar on this, but for the life of me, when I talk to my constituents, they're not concerned about the unfunded liability. They're concerned about being treated fairly if they're injured on the job, and employers are concerned about fair and equitable premiums relative to their experience rating with accidents in the workplace -- two common concerns I hear.
Could you explain to me how the 55% figure was arrived at and why it isn't 70% or 80% or why it isn't 30% or 40%?
Mr Thomas: On the asset ratio?
Mr Ferguson: On the unfunded liability.
Mr Thomas: Let me deal first with your first question, which builds on Mr Hope's question, if I could, Mr Ferguson. I have to express some uneasiness around trying to put together the scenarios that you're asking us to do around what it would take in terms of benefit reductions to achieve a certain number. There are so many ways to do it. There are so many assumptions that one could make. I guess I'm worried about how we could construct it. We need to think about that before I commit and we may have to get back to you on what we can or can't do there. So we'll just leave it --
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Mr Ferguson: I've already heard from some employers who are suggesting that the government isn't moving quickly enough. So in order to accommodate the suggestion, at least, I think we should put together a scenario of what it would take in order to increase the unfunded liability from the current 37% to 55% within a shorter time period. I would suggest that five years for some may still be too long, but that would be I think a reasonable figure to try to arrive at. What would it take in order to balance the books within the next five years?
Mr Thomas: We will think about how we can respond to that. I'm not trying to avoid the question, Mr Ferguson. I'm just trying to think how we could answer it. On the 55% question, we have the analysis -- I don't have it with me -- that shows certain assumptions around what happens to the assets over 20 years and what happens to the liabilities under the Friedland formula scenario that allow us to project with some confidence that if the universe unfolds the way we're forecasting, the ratio will increase to 55%. We can get you that information. Now, whether we can show what it would be like to do it in five years or whatever, again, I just need to have a bit of latitude, if I might, to figure out what information we can get you that would respond to the concerns that you're raising.
Mr Paul Klopp (Huron): I guess it ties in a little bit with what Randy had talked about earlier, the comments from the third party, this issue around the amount of debt that's been piled up over time. I'd been led to believe there was about $400 million worth of debt -- unfunded liability I guess is the term that we're using -- maybe about 1980, and then of course it has increased to the billions of dollars that we see now. The comment was made that the employers actually wanted to have rates go up 10% to 20% a decade ago, or 10% to 15%, and their payoff was that the unfunded liability would be down by the year 2014. I believe that was what was alluded to. And then the comment was made, "Well, of course, we've still got this debt."
Did the government of the time or the Worker's Compensation Board at the time agree with the employers and increase the rates back in the 1980s, or what did they do? I'm a little unclear. What happened, and why do we have this large unfunded liability at this point in time?
Mr Thomas: I'm not sure if I can answer your analysis question. The only information I can give you that might be of some assistance is on this chart I have here which I'd be happy to provide for the committee members that goes back to 1984 and shows that, just to give you some benchmarks, in 1984 the unfunded liability was $2.7 billion; in 1986 it had grown to $6.2 billion; in 1988 it grew to $7.3 billion; in 1990 it was $9.1 billion; in 1992 it was $11 billion; and as of June 1994 it's $11.7 billion, and we have the intervening years, but just to give you a sense of the increase. Therefore, the funding ratio has dropped over the last five or six years from about 40% down to about 36% as the unfunded liability has risen.
I probably don't have a satisfactory answer, Mr Klopp, as to what the various factors were that contributed to its growth, which I think is your question.
Mr Klopp: Yes. There was a second part to my question, though. It was alluded to that the employers asked for major increases because they realized, from a business point of view, that they would be willing to do that, and it was told to the Workers' Compensation Board at the time. Did the Workers' Compensation Board, through the government or whatever, actually follow through with those increases back a decade ago?
Mrs Witmer: Yes, they did.
Mr Thomas: We can get you more information on this. There was a funding strategy, I believe, that was constructed by the Workers' Compensation Board a decade ago, and it was to discharge the unfunded liability as it then existed, the $2.7 billion or whatever it is, over 30 years. There was a history of almost every year, from 1984 until just about the present, and it may not be every year, but roughly every year there was a failure to meet the funding strategy.
So there was a recalculation and there was a redefinition of what the assessment rate would need to be, and that's how the board got into target assessment rates, which weren't achieved. So now we have a target assessment rate that's higher than the average assessment rate, but if we were running it at the target assessment rate, it would discharge the unfunded liability by 2014. That's the theory, Mr Klopp.
So what we're saying in the directions, by the way, what the government is saying in its directions is that the board needs to construct on the basis of the Friedland formula and all the things that have happened through the reforms; the board needs to construct a new funding strategy and to make sure there's a subcommittee of the board that does that and manages that and monitors that and tries to make sure that the funding strategy not only is a sensible one but is one that can be achieved and is achieved on an annual basis.
It's a matter of debate, the extent to which the failure to achieve the funding strategy was an administrative cost problem, an assessment rate problem or a benefit level problem. Of course, that will continue to be an ongoing source of argument and disagreement, but I just simply thought I'd help to trace you through at least the theory of it over the last decade.
The Vice-Chair: I'd like to take this opportunity to thank the minister and the former deputy minister and ministry staff for being here. I understand ministry staff will be here through the whole course of the hearings.
This committee stands adjourned until 10 am tomorrow.
The committee adjourned at 1707.