Executives may need personal coverage

David Marchione
Some years ago, while working for the Workplace Safety and Insurance Board in Ontario, I adjudicated a claim where the owner of a small construction company sustained a broken leg when he fell off a block wall to the ground. I had the unpleasant task of advising him that, as the owner and unlike his employees, he did not automatically have workers’ compensation coverage and that I could not authorize any health care or wage loss benefits for him, as he had not purchased any optional coverage for himself through the compensation board. Understandably, he was not pleased.

Companies often assume once they register for coverage with their respective provincial compensation board, all employees are entitled to the same coverage and benefits in case of a workplace injury or illness. Company owners, directors and executive officers often assume if they are providing labour, or working as part of the day-to-day business activities, they are entitled to compensation benefits in the event of a workplace accident. That is not always the case, as these individuals are generally not considered to be “workers” as defined by their respective compensation board.

While some jurisdictions, such as New Brunswick, Newfoundland and Labrador, Saskatchewan and the Yukon include directors and executive officers in the definition of “worker” if they are maintained on the company’s payroll, other jurisdictions, including British Columbia, Alberta, Ontario, Nova Scotia and the Northwest Territories and Nunavut exclude business owners, directors, executive officers and partners in a partnership from automatic coverage.

It is important each company confirm who is covered within its organization and who is exempt in order to ensure proper coverage for all who require it. This becomes especially important if the owners, directors or executive officers are “working” executives and providing labour services for the organization, as an injury may leave them without a source of income if they do not have other insurance coverage.

In those jurisdictions where certain individuals are excluded from automatic coverage, including owners, executive officers and directors, those individuals can opt in to the compensation scheme by purchasing individual coverage. Such coverage goes by different names, including personal optional protection (British Columbia), personal coverage (Alberta) or optional insurance (Ontario). Generally, this type of insurance can be purchased at the employer’s premium rate, and is based on the purchaser’s level of income up to the maximum insurable earnings in that province.

When a director or executive has purchased individual coverage through the compensation board, he is then considered to be a “worker” in the same manner as those who are automatically covered by the compensation scheme. In the case of a workplace injury, he may be entitled to health care and other benefits, and would be precluded from being able to bring an action against the employer and others.

It is important for organizations to confirm whether or not their executives are covered by their respective compensation boards for two reasons. First, if directors and executive officers are automatically covered, the organization must ensure their payroll is being reported to the compensation board accurately. This can help prevent a retroactive adjustment for unpaid premiums in the event of an audit by the compensation board or, in a worst-case scenario, potential charges under the applicable workers’ compensation legislation. Second, if directors and executive officers are not automatically covered, companies should ensure their earnings are not being included with payroll information to the compensation board. This will help avoid unnecessary overpayment of premiums.

David Marchione is an occupational health and safety consultant and paralegal at Fasken Martineau DuMoulin in Toronto.

This article originally appeared in the October/November 2015 issue of COS.