Province had early warning WorkSafeNB premiums would skyrocket

The Gallant government was warned in 2016 that flaws in a new provincial law would lead to skyrocketing WorkSafe New Brunswick premiums for employers, according to documents obtained by CBC News.

Then-labour minister Donald Arseneault was told in August 2016 that the wording in the 2014 legislation meant decisions by a new appeal tribunal could cost $100 million an amount WorkSafe would have to recover through premiums paid by employers.

The warning came in a presentation to Arseneault prepared by the board of WorkSafeNB.

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As predicted, premiums shot up up from $1.11 to $1.48 per $100 of payroll at the end of the year, a 33 per cent increase that shocked employers and triggered demands for government action. They jumped again to $1.70 at the end of 2017.

Arseneault introduced a bill to make minor fixes in the law in November 2016. A spokesperson said Monday it was designed to "address unintended consequences" of the law.

But that bill did not implement most of the key recommendations from the presentation.

Instead,Arseneault waited until May 2017 to appoint a task force to look at solutions to the increases despite the presentation's clear advice nine months earlier on what was needed.

The task force still has not issued a report, and any legislative changes it recommends won't be possible before the September election.

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Krista Ross, the CEO of the Fredericton Chamber of Commerce, said if Arseneault had acted "in that moment," it would have been too late to avoid the 2017 rate increases, but "we could have made changes at that time that could have made things better for the following year."

"There was time at that point to make legislative changes that would have changed things going forward."

The chamber and other business groups have warned that spiralling premiums, along with tax increases and other rising costs, will make it harder for employers to hire people.

Arseneault, who left politics last year, said the perspective in the PowerPointpresenation from the WorkSafe boardwas only one of several he had to consider.

"You've got to realize, that's one presentation by the board of WorkSafe New Brunswick," he said.

"Of course, they don't want to raise the rates. You're not seeing the other side, the presentation made by [appeal tribunal chair] Dan Theriault, where he justifies the decisions he has made."

Overruled board

Employers pay into the WorkSafe New Brunswick compensation fund to cover claims by workers injured on the job. If the fund is short on money, premiums must increase.

But starting in 2015, the new appeal tribunal began overruling board decisions, ordering benefits for claims the board had rejected. Many of the rulings applied retroactively to all similar claims.

The Aug. 30, 2016,PowerPoint presentation to Arseneault explained that the legislation creating the appeal tribunal, passed by the previous Progressive Conservative government, was "broad and permissive."

It said one flaw was that the tribunal had sweeping powers to rewrite board policies but no obligation to worry about whether the fund had enough money to cover the resulting costs.

Before the legislation, appeal decisions did not apply to other similar claims.

The new law and recent appeal decisions "have resulted in significant expenditures beyond the Board's control," the presentation says. "This will: increase 2017 assessment rates [and] impact stability of Accident fund."

Last year Theriault said WorkSafe had not exercised its right to attend appeal tribunal hearings to argue against higher benefits, or to challenge tribunal hearings in court.

Board wanted law clarified

In the PowerPoint, the board urged the Liberals to clarify the legislation so appeal tribunal decisions applied more narrowly. It also recommended making the appeal tribunal subject to board policies unless the policies were "unreasonable."

The PowerPoint echoes points made earlier in 2016 by an independent consultant reviewing the WorkSafe legislation.

Gordon McKinnon, a Winnipeg lawyer, wrote the appeal tribunal's power to overturn board policy meant the WorkSafe board could not "establish control" over compensation and premiums.

"This is not desirable," McKinnon said.

His report said the board, made up of worker and employer representatives, was "in a unique position to evaluate policy options and determine what is in the best interests of the compensation system, including both workers and the Accident Fund."

He recommended changing the act so it said clearly the tribunal was bound by WorkSafe board policies and letting the board block an appeal decision that contained legal errors.

Minister wanted bigger picture

But Arseneault said he did not want to introduce sweeping changes that might affect benefits without considering all points of view.

"I said we had looked at the bigger picture and everybody's going to have to swallow their pride and get to the table together," he said.

The task force he appointed includes worker and employer representatives. He also asked the auditor-general to look at WorkSafe's operations.

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"Before I was willing to look at potentially changing benefits, I needed to know that every dollar that came into WorkSafewas invested wisely," he said.

With the task force still working and no legislation possible before the Sept. 24 provincial election, employers face a third consecutive increase in January 2019 before any changes can be made.

Arseneault left politics last fall.

Department spokesperson Sarah Williams said in a statement that legislation in November 2016 improved WorkSafe's governance and appeals process but the task force is intended to deal with its "current financial situation, the governing legislation, and overall objectives and effectiveness of the system."

The current minister, Gilles Lepage, would not do an interview.

Board changed formula

At his May 2017 news conference announcing the task force, Arseneault urged WorkSafe, nominally an independent Crown corporation, to keep a lid on rate increases in 2018.

"I do not want to see that happen again, because it is a burden for employers," he said.

In the wake of Arseneault's comments, the WorkSafe board changed its formula for calculating premiums.

The board had a policy of charging premiums to cover 110 per cent of potential injury claims, giving itself a financial cushion. Last year, it changed it to 100 per cent, which translated into a smaller premium hike for 2018.

But that also exposed the fund to a greater risk that a spike in claims would drain the fund and require emergency premium hikes.

"It's kind of a calculated risk," board chair Dorine Pirie told a committee of MLAs last October.

Ross said while businesses appreciated the smaller premium increase this year, they're not comfortable with it because it may just mean even bigger rate hikes in the future.

"Having the false security of a lower rate isn't a good idea either," she said. "It's only good for the moment."