Introduction

Every year, thousands of Canadians are injured or become ill on the job. In many cases, the problems are minor — a worker might require a few stitches to mend a bleeding finger or a few days in bed to rest a strained back. In other cases, the injuries or ailments are more serious.

The brutal truth is that many of the people injured on the job may never be able to work again. Or they may be left unable to do the kind of work they did before their accidents. In either case, these workers suffer both physically and financially because their injuries seriously impair their earning potential.

Thankfully, here in Canada, most injured workers can count on the support of provincial Workers' Compensation Boards.

Since before the First World War, Worker's Compensation Boards have insured working Canadians against injury, illness and death. Financed primarily by employer premiums, the boards provide temporary and long-term disability pensions for injured and ailing Canadians. They also offer rehabilitation programs designed to get injured workers back on their feet and back into the workforce.

Few Canadians would question the valuable role played by Worker's Compensation Boards. There is absolutely no doubt that the boards have helped many injured workers avoid a painful slide into poverty. And they have strengthened the economy by rehabilitating and re-intregrating injured workers into the workforce.

Unfortunately, over the past five or ten years, many WCBs have been subjected to harsh criticism from employers who would like to see their premiums reduced and political leaders who worry about the cost of compensation programs.

Many of these critics have pointed to the large unfunded liabilities carried by most WCBs as proof that the system isn't working properly. And they have questioned the level of benefits paid to injured workers, often suggesting that disability pensions are too generous.

More and more, we hear these critics describe WCBs as overly bureaucratic "dinosaurs." And we hear them say that workers compensation programs would be "more efficient if they were run like a business."

It is in this climate of growing concern — one might even say hostility — that the Alberta Workers' Compensation Board has announced a new system for assessing WCB premiums. This new system, called Performance Pricing, is really just a refinement of the current assessment system, called Experience Rating. In both cases, the amount an employer pays in premiums is determined, at least in part, by that employer's "claims history." That is, if an employer files few claims, his premiums will go down, but if he files an usually high number of claims his premiums will go up.

The major differences between Experience Rating and Performance Pricing are that Performance Pricing will apply to more employers and that potential premium penalties and rebates will both be larger under the new Performance Pricing system.

In a discussion paper entitled, "Performance Pricing: Toward Injury Prevention and Accountability," the Alberta WCB presents Performance Pricing as an important step forward in the promotion of workplace safety. The document argues that Performance Pricing will "bring us closer to a user pay system of insurance coverage that encourages and rewards employer efforts to create safe work environments."

While we at the Alberta Federation of Labour are pleased that the WCB is aiming to improve workplace safety, we are not convinced that Performance Pricing will necessarily lead to "safer work environments."

In the body of this brief, we will outline our concerns about Performance Pricing and present our suggestions for alternative approaches to premium assessment. We will go into as much detail as possible, but our central argument can be stated briefly: we do not think Performance Pricing will work as well as promised because, in many cases, it will simply give employers increased incentive to under-report accidents and injuries, rather than actually improve workplace safety.

By making the decision to merely tinker with Experience Rating — as opposed to replacing it with a system that would remove all incentives to under-report injuries — it appears the WCB is continuing to put a greater priority on claims management than injury prevention. It also appears that the WCB is going too far out of its way to accommodate employer demands for reduced premiums.

The problem with incentives

Like the current Experience Rating model, the WCB's new Performance Pricing system is based on the assumption that financial incentives can be used to encourage "good corporate citizenship." By boosting both premium surcharges for "poor performers" and premium rebates for "top performers," the WCB hopes to give employers a concrete, financial incentive to improve workplace health and safety.

On the surface, this seems like a reasonable approach. After all, what makes a cost-conscious business manager spring into action more quickly than an attack on his bottom line?

We at the Alberta Federation of Labour have no doubt that these kind of incentives have the desired effect on many employers. We know that many Alberta business people — indeed the majority — take workplace health and safety seriously. For these responsible employers, the new system of increased rebates and surcharges will probably do what it is supposed to do — it will probably encourage improved health and safety practices.

But, judging from our experience with the current Experience Rating system, it is clear that Performance Pricing will also have numerous unintended — and undesirable — consequences.

The main problem is that there is more than one way to reduce WCB claims. In an ideal scenario, employers will reduce their accident rates — and thus their premiums — by actually implementing changes to improve workplace health and safety. This is the approach envisioned by the architects of both Experience Rating and Performance Pricing.

Unfortunately, not all employers will follow this script. Under the current Experience Rating system some employers have been able to qualify for premium rebates by under-reporting accidents and injuries. On paper, it looks like these employers are improving their health and safety practices. But in reality, all they are doing is cheating the system by denying injured or ill workers the support they are entitled to from the WCB.

It's hard to tell how widespread this kind of abuse is. But we have received reports from numerous unions — from AUPE and CUPE in the public sector to USWA and UFCW in the private sector — telling us that many employers are taking advantage of the incentive system. According to our members, employers are attempting to bring down their WCB claims statistics in the following ways:

1. By contesting and opposing claims instead of focusing on developing safer workplaces.
2. By introducing "in-house rehabilitation programs" to discourage workers from reporting injuries and illness.
3. By withholding relevant information regarding the proper procedure for filing claims.
4. And by actively discouraging workers from filing claims. This is a particularly serious problem when the workers involved are newly arrived immigrants or young people. These workers are less likely to know their rights and they are more easily intimidated by aggressive employers.

Questions about audits

On numerous occasions over the past few months, the WCB has promised to deal with the problem of unreported injuries by developing a more aggressive plan for auditing employers and their worksites.

Unfortunately, these promises have yet to be fleshed out. Without a detailed description of the "new and improved" auditing system, it is difficult to render a final verdict on Performance Pricing.

We can only make a truly informed judgement if we have answers to at least two important questions:

• Who will conduct the audits?
• How will the audits be conducted (i.e. paper audits versus more comprehensive audits)?

The problem with these associations is that they are not really based in the community. They are employer associations, plain and simple. Basically, industries are being given the right to monitor and evaluate their own operations.

Not surprisingly, the vast majority of unions in Alberta oppose these changes. We simply cannot support a system in which employers are free to regulate themselves.

Instead, we believe that government -- as the only accountable agent of the public -- has a fundamental responsibility to directly promote and enhance workplace health and safety, in the same way that it has a fundamental responsibility to ensure that all citizens have access to adequate health care.

That means that the government or the WCB should conduct the audits themselves. If this work is passed to private sector organizations -- organizations that may have a vested interest in shielding certain employers from scrutiny -- the government and the WCB will be abdicating one of their core responsibilities: they will be abandoning their responsibility to properly police workplace health and safety.

This leads us to our final points on auditing.

First, we think it's important to include workers and/or their unions in the auditing process. Currently, audits are usually conducted at the discretion of the employer. In most cases, the workers are given few, if any, opportunities for input. This approach is faulty because it undermines workers' confidence in the veracity of the audit. It also ignores the fact that workers probably possess more information about safety concerns at their worksites than anybody else. If workers are shut out of the audit process, this tremendously useful body of information will never see the light of day.

Finally, we must stress the need for rigorous, on-site audits, as opposed to paper audits. As we have seen in our discussion of incentives, company records do not always accurately reflect the real conditions at a given worksite. Paper audits (which put a priority on claims management as opposed to injury prevention) should never be allowed to replace more comprehensive audits where inspectors actually visit a worksite and talk directly with the people working there.

Bad theory, bad practice

As we have seen, despite the existence of an incentive system, many employers in Alberta continue to ignore health and safety rules and refuse to implement programs that would improve worksite safety. In it's discussion paper on Performance Pricing, the WCB seems to argue that the way to deal with this problem is to increase the incentives. But, frankly, in the case of "deadbeat employers" a stick is often more effective than a carrot.

From our point of view, the type of financial incentives that form the core of the Performance Pricing proposal are not enough to motivate all employers to make changes that improve worksite safety. The fact is, many employers, after weighing the costs of compliance against the cost of paying a premium surcharge, come to the conclusion that they can afford to flout the rules. They conclude that they can afford a few accidents.

This is the most glaring problem with both Experience Rating and the Performance Pricing proposal: both systems give employers the option of whether or not to comply with health and safety regulations. In effect, both Performance Pricing and Experience Rating extract the human element from all health and safety discussions. Whether or not a company launches a health and safety program becomes strictly a matter of economics: the costs of accidents are weighed against the cost of prevention.

We don't think employers should be free to make that kind of choice. With the health of many working Albertans hanging in the balance, workplace safety programs should not be voluntary.

The new "risk factor"

According to the Performance Pricing discussion paper, some efforts will be made to lessen the WCB's reliance on "claims history" as the primary tool for premium assessment. More specifically, the WCB has promised to introduce "risk-based" discounts or rebates. These rebates would be available to employers who implement high quality health and safety programs. Additional discounts would be given to employers who develop improved systems for claims management.

From our point of view, these risk-based discounts are a step in the right direction. If the goal is to reduce workplace injures, we think it makes more sense to reward employers who have actually invested in prevention than those who use fancy management tricks to paper over their safety problems.

However, the risk-based discounts proposed in the WCB discussion paper are too little, to late. By putting a mere five per cent limit on these discounts (as opposed to the 60 per cent ceiling for the claims-based rebates) it's clear that claims history will remain the primary tool for premium assessment.

To make the situation worse, even the meagre five per cent risk-based discount will be wiped out in cases where the employer qualifies for the maximum 60 per cent rebate based on his or her claims history. This suggests that the risk-based discounts are merely window dressing.

Alternatives and suggestions

It's clear to us that Performance Pricing does not remedy the most glaring problems of the current system for premium assessment. Both Performance Pricing and Experience Rating are flawed because they are based on the faulty assumption that premium rebates and other financial incentives will always encourage employers to improve their safety practices.

As we have argued, under a system based almost entirely on incentives, many employers will find ways to bring their claims statistics down without actually investing in prevention. Others will simply conclude that it's cheaper to pay higher premiums than to implement high-quality health and safety programs.

So, if Performance Pricing isn't the answer, what is? We at the Alberta Federation of Labour think an ideal system would be one where:

1. Employers are rewarded, not for reduced numbers of claims, but for a demonstrated commitment to workplace heath and safety (as evidenced by their willingness to develop and implement high-quality health and safety programs).
2. The WCB and the Department of Labour work together to vigorously enforce health and safety regulations. This would involve a significant increase in the number of inspections conducted around the province. It would also require that both the WCB and the government to take a tougher stand against violators.
3. Inspections and/or audits are conducted by impartial third parties -- preferably agents of the government -- who are not beholden to or under the influence of employers or employer associations.
4. Workers are actively encouraged to participate in the audit/ inspection process. The best vehicle for this kind of participation would be through joint labour-management health and safety committees, which we think should be made mandatory on all Alberta worksites. Of course, we realize that Performance Pricing -- in one form or another -- will probably be introduced here in Alberta. But, if it is, some kind of whistle-blower protection should be introduced, so employees can feel safe reporting employers who discourage claims or fail to report workplace injuries and accidents.

Another important aspect of the discussion on Performance Pricing is education. One of the reasons that some employers are able to get away with discouraging claims and failing to report accidents is that the workers involved don't know their rights.

We all know that a few posters on lunchroom bulletin boards are not enough. With this in mind we make the following proposals:

1. We believe that the WCB, in cooperation with the Department of Labour, should develop easy-to-read pamphlets outlining relevant information about compensation in Alberta. The WCB should encourage the government to introduce regulation requiring employers to distribute this information to all new employees.
2. We believe the WCB and the Department of Labour should work with the Education Department to develop curriculum materials for inclusion in high school CALM course regarding WCB and other important workplace issues.

Other suggestions

In addition to promoting worker education and reducing reliance on claims history when setting premium rates, we think the WCB should also consider taking the following actions:

1. The WCB should work more closely with employers and unions to facilitate the return of injured workers to their jobs. It's still rare to find employers who are willing to pave the way for injured workers to return to work. This has to change.
2. The WCB should provide the Alberta Workers' Health Centre with funding so it can conduct audits. If the WCB or the government is going to give up responsibility for audits, at least some of the work should be given to organizations that are trusted by workers and their unions.
3. The WCB should take a much more active role in opposing the move towards industry self-regulation. The WCB should also actively lobby the government and the Department of Labour to more vigorously enforce health and safety regulations. If that means treading on the toes of some people in the business community, so be it. It's more important to safeguard the health of working Albertans than the fragile egos of a few ideological free-marketers who claim the sky is fall every time they get even a faint whiff of government regulation.
4. Most importantly, the WCB should abandon the notion that it is an insurance program like any other. The fact is that the WCB is an insurance program -- but it is also much more than an insurance program. What works for private insurance firms -- like basing premiums strictly on claims history -- may not be appropriate for the WCB. The focus should be on providing injured workers the support they need and deserve, not on reducing premiums for employers.

In closing, we would simply like to reinforce our main point about the pitfalls of assessment scheme based on incentives. We simply do not believe that premium rebates and other financial incentives will encourage all employers to become more concerned about workplace health and safety.

The incentives currently offered under the Experience Rating system have not resulted in a flood of employers volunteering to establish health and safety programs. It would be naive to assume that Performance Pricing will have better results. In fact, given that the potential rebates are higher under Performance Pricing than Experience Rating, the new system may actually lead to more abuse and more under-reporting of accidents, not less.

We believe that the interests of both workers and responsible employers would be better served if the WCB moved away from its reliance on claims management as the primary tool for encouraging safer working environments. Instead, we urge both the WCB and the Department of Labour to adopt a more aggressive enforcement policy. If the WCB and the government crack down more forcefully on employers who violate health and safety regulations, we are convinced that the number and severity of work-related injuries, diseases and deaths will be reduced.