2004 ONWSIAT 910
WORKPLACE SAFETY AND INSURANCE
APPEALS TRIBUNAL
DECISION NO. 592/04
[1]
This appeal was heard in Toronto on April 7, 2004 by a Panel consisting of:
J. Josefo
: Vice-Chair,
W.D. Jago : Member representative of employers,
D.C. Timms : Member representative of workers.
THE APPEAL PROCEEDINGS
[2]
The employer appeals the decision of Mr. J. Slinger, Acting Appeals Resolution Officer,
dated July 8, 2002. That decision concluded that the employer was correctly reclassified under
Rate Group 411, with premium adjustments to January 1, 2000.
[3]
The employer appeared and was represented by Mr. T. Ryan, a consultant.
Ms. N. Hamersley, student-at-law, attended as Tribunal counsel. Mr. M.R., the president of the
employer, attended to instruct Mr. Ryan, but did not testify. The Board was invited, but
ultimately declined, to make submissions as amicus curiae. Given that this is a classification
appeal, no worker was involved.
THE RECORD
[4]
The following exhibits were marked:
Exhibit #1: the Case Record dated May 27, 2003;
Exhibit #2: Addendum No. 1 prepared May 27, 2003;
Exhibit #3: Addendum No. 2 prepared March 18, 2004;
Exhibit #4: Addendum No. 3 prepared March 30, 2004;
Exhibit #5: the Classification-Retroactivity Casebook;
Exhibit #6: generic information on revenue issues materials.
[5]
At the hearing, Mr. Ryan provided us with a bound volume of written submissions. These
submissions were marked as Exhibits #7. In addition to the written submissions, both Mr. Ryan
and Tribunal counsel provided oral submissions. There was no testimonial evidence.
THE ISSUES AND BACKGROUND OF THE APPEAL
[6]
The issue is which rate group was the correct classification for this employer, prior to
February 2002. For many years the employer has been classified in Rate Group 403. Pursuant
to an audit decision in November 2000, the Board reclassified the employer into Rate Group 411.
The reclassification was made effective as of January 1, 2000.
Page: 2
Decision No. 592/04
[7]
Subsequently, Rate Groups 403 and 411 were amended. The employer does not dispute
that, had it remained in operation, it should have been classified in Rate Group 411 on a “go
forward” basis, following February 1, 2002, when the amendments to the respective rate groups
were published in the Employer Classification Manual.
[8]
Further background is found from the decision of the Acting Appeals Resolution Officer, in
part as follows:
Issue:
An audit decision letter of November 21, 2000 found that the employer had been
incorrectly classified in Rate Group (RG) 403 and should have been classified in RG 411.
The reclassification was made effective to January 1, 2000. The employer has appealed
the decision with respect to both the classification and the retroactivity issues.
Authority Reference:
1.
2.
Employer Classification Manual.
Policy Document #14-02-06.
Background:
[The employer] is engaged in the manufacturing of hoists used in the automobile repair
industry. The matter under appeal involves a classification issue that was the subject of a
major industry review in 2001. The industry review occurred in response to
inconsistencies in the application of the Employer Classification Manual as it relates to
the scope of RG 403 and RG 411.
The industry review, which is summarized in a report dated October 2001, involved a
review of all firms manufacturing hoisting and lifting equipment. The following are
relevant conclusions reached following the review:
Excluding personnel and freight carrying elevators and escalators, it is concluded
that all equipment manufactured by firms in the course of this review facilitate the
positioning of goods, materials and products and thereby automotive lifts, table lifts,
loading dock levellers and industrial lifting magnets are material handling
equipment.
The classification of these items is best described under Rate Group 411-01
CU 3192-001. Construction and Mining Machinery Operations.
The review also led to two recommendations relevant to [the employer]. First, the list of
products referred to in the “Scope” of RG 411 should be amended to include
“Automotive Lifts and Hoists”. Second, all firms covered in the review should be
confirmed in RG 411. The amendment of RG 411 and RG 403 (to specifically exclude
automotive and other vehicle hoists) was minuted November 5, 2001 but made effective
January 1, 2001.
The employer’s representative argued that for the period up to January 1, 2001, the
employer was correctly classified in RG 403. He noted that the firm had been
purposefully placed in that rate group effective January 1, 1993 following a
May 12, 1995 Board audit. He also noted that the audit had been conducted by a Senior
Board Auditor and approved by the Audit Manager, Mr. Leonard. Furthermore, he
pointed out that the ARO decision made on January 3, 2001 in …, another company
engaged in the manufacture of automobile hoists, found the business activities of that
company to be best covered by RG 403 rather than 411. It should be noted that the
ARO’s decision was made prior to the industry review and the amendments to the two
rate groups.
Page: 3
[9]
Decision No. 592/04
After an oral hearing, the Appeals Resolution Officer concluded as follows. The Panel
believes that the entire analysis of the Appeals Resolution Officer is helpful to situate this matter
in proper context, and accordingly we reproduce almost the entirety of his thorough decision:
Analysis of Evidence and Submissions:
1.
Classification
The question to be determined in this appeal is whether the employer’s business activities
are best described by Rate Group 411 (Construction and Mining Machinery Operations)
or RG 403 (Other Machinery and Equipment Operations). An assessment of this issue
has two parts given that amendments were made to both RG 403 and RG 411 effective
January 1, 2001. It is therefore necessary to determine first, whether the employer was
more appropriately covered by RG 403 or 411 as those RGs existed prior to 2001 and,
second, whether RG 403 or 411 should apply since the January 1, 2001 amendments.
The second question is more straightforward. It is clear that from the January 1, 2001
amendment the business activity engaged in by this employer is covered by RG 411.
Specifically, the employer manufactures mechanical two-post surface lifts/hoists used in
service stations, muffler shops, and other automobile service operations. RG 411, since
January 1, 2001 includes the production of “hoists and lifting machinery for all types of
transportation equipment eg. aircraft, automobiles, buses, subway carts, etc.” Therefore,
since January 1, 2001, this employer’s business activities fall within RG 411.
The situation prior to 2001 is not as clear-cut. The relevant portions of the respective rate
group, as they read prior to 2001, are set out below.
Rate Group 403
Other Machinery and Equipment Operations …
Scope: Business activities include manufacturing machinery and equipment which
is not elsewhere classified.
This classification includes the manufacture of …
• Maintenance, servicing and repair equipment for motor vehicles and
aircraft….
Rate Group 411
Construction and Mining Machinery Operations …
Scope: Business activities include manufacturing construction machinery, oil and
gas field equipment, petroleum refining machinery and parts, mining,
quarry, and ore dressing machinery and parts, and materials handling
equipment.
This category also includes the production of …
• Hoisting machinery (excluding personnel carrying devices) …
The employer’s representative argued that RG 403 correctly described the employer’s
business activities prior to the 2001 amendment. The employer had been in RG 411 until
it requested a review of its classification by the Board in 1995. Following a 1995 audit,
the employer was placed in RG 403. This was confirmed by a Senior Field Auditor and
supported by an Audit Manager. The representative argued that a piece of hoisting
equipment used in a garage was so integral to the servicing of automobiles that it
constituted “maintenance, servicing and repair equipment for motor vehicles” as
described in RG 403. He also noted that RG 403 referenced RG 737, a construction rate
group, which deals with service station equipment, while RG 411 made no reference to
RG 737. In his view, this further suggested an intended connection between the
Page: 4
Decision No. 592/04
manufacture of automobile equipment and RG 403. He also referenced the analysis
contained in the prior ARO’s decision in this regard.
There is no question that the wording of RGs 403 and 411 were problematic up to
January 1, 2001. The language in those RGs has obviously been interpreted by two
Senior staff in the Revenue Audit area in [the employer] and by an ARO in [another case]
to find that RG 403 constituted a “best fit”. It is also clear that the language has been
interpreted to place similar firms in RG 411. This is clearly why the industry review was
conducted and why the language in both RG 403 and 411 has now been amended.
Regardless of these past inconsistencies, it is my responsibility to assess the relative
merits of [the employer’s] appeal and determine whether the activity of manufacturing
automobile hoists up to January 1, 2001 was better described in RG 403, which referred
to “maintenance, servicing and repair equipment for automobiles”, or RG 411, which
included the production of “hoisting machinery (excluding personnel carrying devices)”.
In my view, RG 403 is intended to operate as a “default” or “catch all” rate group. This
is apparent from the scope description which refers to manufacturing machines and
equipment “not elsewhere classified”. This language creates a threshold to the
application of RG 403. RG 403 is only considered if no other rate group reasonably
covers the activity in question. The question to be determined then is whether there is
reason to default to RG 403 in relation to this employer’s business activities. The title of
RG 411 appears to restrict or confine its coverage to construction and mining machinery
operations. However, the general scope description refers to the manufacture of
“material handling equipment” as a separate business activity without restriction by
industry type. In addition, the list of items following the general description covers the
production of a variety of items which bear no relation to the construction or mining
industries. The list includes boat lifts and fork lift trucks, for example.
Based on the above analysis, I find that RG 411 is not restricted to specific industries,
notwithstanding its title. Furthermore, I find that reference to the production of “hoisting
machines”, in the absence of limits or exceptions by industry type, is broad enough to
cover the manufacture of automobile hoisting devices. As a result, even though a hoist
might be construed as a piece of auto repair equipment under RG 403, defaulting to
RG 403 is unnecessary since RG 411 reasonably describes the business activities in
question. On balance, therefore, the business activities of [the employer] fit best in
RG 411, as it read prior to 2001.
I should add that the representative suggested weight be placed on the cross-referencing
to rate groups in the construction industry to determine the intended scope of RG 403 and
411. He made reference to the analysis contained in the previous ARO decision in this
regard. I am not satisfied that attempting to draw distinctions by looking at construction
rate groups, which deal with very different business activities, is helpful in interpreting
the ECM. It could be a factor to consider where all other evidence is equal; however, as
indicated above, there is sufficient difference in the scope of the two manufacturing rate
groups in question to find that, on balance, the manufacture of automobile hoisting
devices is covered by RG 411.
2.
Retroactivity
Policy document #14-02-06 sets out the retroactivity rules for all cases where the
notification date occurred on or after May 15, 2000 and the decision was made on or after
July 1, 2000. The policy provides that premium adjustments are generally limited to the
period from the notification date back to the beginning of the calendar year which
includes the notification date. The policy also states that in the case of an audit, the
notification date is the date of the first scheduled audit visit.
In this case, the first scheduled audit visit (and the date of the actual audit) was
November 16, 2000. Applying the policy to these facts results in a premium adjustment
from January 1, 2000, the beginning of the calendar year in which notification was given.
Page: 5
Decision No. 592/04
Since that was the date used by the auditor for the premium adjustment, I find that the
policy on retroactivity was correctly applied.
[10]
The employer appeals from this decision.
THE REASONS
[11]
The Panel has considered the submissions made by Mr. Ryan, as well as submissions on
the applicable law and policy from Tribunal counsel. We have decided to allow the employer’s
appeal. Our reasons for so doing are as follows.
[12]
It appears clear that the employer, located in south-western Ontario, made lifts or hoists
that were used in the automotive service industry. Correspondence to the Board from the
employer dated October 6, 1993 notes that the employer is a “manufacturer and importer of
automotive, truck and bus lifts”. On the page next to that letter in Exhibit #1 is found a
marketing type reproduction of the employer’s “surface or inground lifts”.
[13]
[14]
It is also clear that in 1993 the employer was classified in Rate Group 411.
The employer’s classification changed to Rate Group 403, however, by 1995. The
May 11, 1995 memo from J.A. Webster, a senior field auditor, described the employer’s business
and the type of product it manufactured. The memo states in part as follows:
During audit years 1993, 1994 and to date in 1995, firm has been engaged in the business
of the manufacture of mechanical lifts (hoists) used in automotive service
establishments… Firm’s finished product is a mechanical lift, the type used in muffler
installation shops. Firm is then given Classification Unit D-3192-001, Rate Group
D-411-01, which is not correct. Classification Unit D-3199-000, Rate Group D-403-03 is
applicable to firm’s business activity, effective January 1, 1993…
[15]
This recommendation was approved by the audit manager on September 7, 1995.
Correspondence from Mr. Webster to the employer dated June 26, 1995 confirmed the change.
[16]
The employer remained in Rate Group 403 until another audit, conducted in 2000. The
memo from auditor K. Arabi dated November 16, 2000 described the employer’s business in part
as follows: “Firm’s business activity is the manufacture of surface, two-sided mechanical
lifts/hoists used in automotive repair shops and service stations…”.
[17]
In Mr. Arabi’s correspondence to the employer dated November 21, 2000, he concludes
that the lifts or hoists are machinery or equipment specifically mentioned in Rate Group 411-01.
It appears for this reason that the employer was reclassified in year 2000.
[18]
Continuing with the history of this matter, another Appeals Resolution Officer,
Mr. Peter Hall, in a decision dated January 3, 2001, found that an unrelated employer which
manufactures hoists used in automobile repair applications and classified in Rate Group 411-03
should in fact be classified in Rate Group 403, the same Rate Group as seeks the employer in the
appeal before this Panel.
Page: 6
Decision No. 592/04
[19]
Because of the conflicting decisions and what Acting Appeals Resolution Officer Slinger
notes as the “problematic” wording in Rate Groups 403 and 411, which led to difficulties in
interpretation, the Board undertook an industry review. That industry review led to an
amendment in the scope descriptions in the two rate groups.
[20]
The Panel believes that from the date these amendments were in effect, there should no
longer be any confusion as to which rate group applies for employers who manufacture hoists
used in automobile repair applications. Indeed, in our matter, the employer ceased operations at
the particular location at issue as of December 2001; and the question of what its classification
would be thereafter is somewhat moot.
[21]
Despite the well-reasoned conclusions of Mr. Slinger, the Panel is unable to agree with his
analysis. A comparison of the rate group descriptions at issue will demonstrate, we trust, the
reasons for our conclusions.
[22]
Rate Group D-411-01 as of March 15, 2001 (prior to the amendment) stated in part as
follows:
Scope: Business activities include manufacturing construction machinery, oil and
gas field equipment, petroleum refining machinery and parts, mining, quarry, and
ore dressing machinery and parts, and materials handling equipment.
This category also includes the production of:
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
boat lifts
concrete mixing equipment
construction machinery and equipment
conveyors and conveying systems and parts (excluding agricultural and personnel
carrying devices)
cranes, industrial
dredging equipment and earth boring machinery
excavating equipment
fork lift trucks and parts
gas, and oil field equipment (including pipeline pumping equipment and parts)
graders and scrapers, self-propelled
hoisting machinery (excluding personnel carrying devices) [emphasis added]
industrial trucks, tractors, trailers, stackers, and parts
loaders (excluding agricultural)
log handling equipment and parts
off-highway trucks
railway maintenance machinery such as rail, utility and tie cranes, switch brooms,
and tie spacers
road maintenance machinery and equipment
road rollers
rock drill bits and rock drilling machinery and parts
snow removal machinery and equipment
sweepers, street and warehouse
tree harvesting and handling equipment and parts.
Page: 7
[23]
Decision No. 592/04
We also reference the March 15, 2001 scope description from Rate Group D-403-03:
Scope: Business activities include manufacturing machinery and equipment which
is not elsewhere classified.
This classification includes the manufacture of:
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
air purification equipment
ball bearings, ground (including mounted)
building board making machinery
car washing equipment
cement mill machinery
chain saws and parts (excluding chains), gas and electric
chemical products machinery
clay products machinery
concrete products machinery
cooking and food-warming equipment, commercial (including ranges, ovens,
broilers)
dust collection equipment
food processing machinery
fuel dispensing pumps and parts
furnaces, industrial
handcarts
hedge trimmers, gas and electric
industrial cleaning equipment
internal combustion engines (small engines)
kilns, industrial
laundry equipment, commercial
lawn mowers, power (gas and electric)
maintenance, servicing and repair equipment for motor vehicles and aircraft
metalworking machinery
outboard motors
ovens, industrial
packaging machinery
paper making machinery
paper stock preparation machinery
pharmaceutical products machinery
plastics industry machinery
pollution equipment
power driven hand tools
printing industries machinery
pulp making machinery
pulp sheet making machinery
pushcarts
roller bearings, including mounted
rubber industries machinery
Page: 8
•
•
•
•
•
•
•
•
•
•
•
•
•
Decision No. 592/04
sewage treatment equipment
sleeve bearings, including mounted
snow blowers/throwers
special industrial machinery and equipment
strapping machinery
textile industries machinery
waste treatment equipment
water filtration equipment
water softening equipment
water treatment equipment
weaving machinery
wheel balancing machines
wheelbarrows.
[24]
In the scope description of Rate Group 411, and the list following immediately thereafter,
the key item is “hoisting machinery (excluding personnel carrying devices)”. It is because of this
bullet that the Board concluded that this specific reference to hoisting made Rate Group 411,
based on the year 2000 audit, the more appropriate classification for this employer.
[25]
Yet, when considering the actual nature of the employer’s operations and what this
employer manufactures, the Panel believe that Appeals Resolution Officer Hall, in the referenced
other decision pertaining to the classification of another similarly situated employer, came to the
correct conclusion based on the unamended versions of these two rate groups. Rate Group 403
states that, “this classification includes the manufacture of: ‘maintenance, servicing and repair
equipment for motor vehicles and air craft’ ”.
[26]
Far from this being a “catch all” category, we find that the classification specifically
includes and is stated to cover almost exactly what this employer did at the relevant time. The
employer made lifts or hoists to service automobiles. Rate Group 403 includes the manufacture
of these devices specifically within the scope of that rate group.
[27]
We also note that Rate Group 403 cross-referenced Rate Group 737-03. We find that the
cross-referencing from one rate group to another is helpful to our interpretation and relevant
when considering the Employer Classification Manual in the context of a policy as a whole.
[28]
Rate Group 737-03, “Other Trade Work” has a short description. It reads as follows:
Business activities are limited to the on-site hoisting, erection, installation, dismantling,
or repair of …
•
service station equipment such as hydraulic or mechanical hoisting equipment
(excluding fuel dispensing equipment and underground motor vehicle fuel storage
tanks)
[The Panel had omitted the other bullet points listed in this scope description, as they are
not relevant to these reasons]
Page: 9
Decision No. 592/04
[29]
Rate Group 737 specifically references hydraulic or mechanical hoisting equipment as the
only identified example of service station equipment when automobile repairs are considered in a
service station. This example is, we find, highly significant. The linkage between this rate group
and Rate Group 403, which describes exactly what this employer made, specifically, the
manufacture of maintenance, service and repair equipment for motor vehicles, leads us to
conclude that Rate Group 403 is the better fit.
[30]
We accept that the reference to “hoisting machinery” in Rate Group 411 makes it
understandable how either one of these rate groups could, prior to the amendments and prior to
the industry review, be considered as applicable in these circumstances. Certainly, the ambiguity
is what quite properly led the Board to conduct the industry review – to hopefully prevent these
types of situations from arising.
[31]
Yet, we read the reference to “hoisting machinery” within Rate Group 411 in the context of
that rate group. That rate group from its title addresses more of a specific group or subset of an
industry such as mining, construction machinery and other very specific enterprises, not
generally or particularly related to automobile repair.
[32]
Pursuant to Tribunal Decision 499/00I, the principle to be applied is which is the “best fit”
amongst any of the possible choices before us. For the reasons noted above, including the
wording of the two Rate Groups, and the linkage with the other one, RG 737, which specifically
addresses service stations, where autos are usually repaired, RG 403 is, from amongst the two
choices, the “best fit”. Accordingly, for all these reasons, we believe that the best fit, despite the
understandable ambiguity between these two rate groups, is Rate Group 403.
[33]
The subsequent issue is when should the newly amended Rate Group 411 apply to this
employer? In his decision, Acting Appeals Resolution Officer Slinger makes reference to the
industry review in 2001 and the January 1, 2001 amendment to the rate group.
[34]
It is clear that Rate Group 411 as of February 1, 2002 included the following bullet points:
•
•
•
automotive vehicle hoist
lifting equipment, and
machinery
[35]
Therefore, as indicated above, the Panel is confident that, as amended, Rate Group 411-01
would properly apply to an employer in the same situation as the employer in this appeal.
[36]
Yet, the amendment referenced above is dated February 1, 2002. There is no evidence that
this employer was aware of this amendment, and the concurrent amendment to Rate Group 403,
wherein automotive and other automotive lifts and hoists were specifically excluded, until the
date of the amendment being published in the Employer Classification Manual.
[37]
Whether the Panel finds that the amendment is effective January 1, 2002, the start of that
year, or February 1, 2002, when the amendments were published in the ECM is irrelevant to this
employer, because the employer ceased operations at the end of December 2001. What the Panel
is prepared to state is that, just as was stated by the Panel in Tribunal Decision No. 1738/02, an
employer cannot be held to a classification amendment if there was insufficient or no notice of it.
Page: 10
Decision No. 592/04
We note that Tribunal Decision No. 1738/02 addressed the same Rate Group, 411, and stated in
part as follows:
We do accept that there might be other mechanisms through which an employer’s
classification may be changed, even in the absence of Board audit or audit notice, when it
becomes known that a classification is in error. However Tribunal decisions have
generally determined that the issue of retroactive application of a classification change
must take into account when the employer is on notice with respect to the change.
Decision No. 195/00 and 195/00R found that an employer is entitled to rely on
information provided to it by the Board. We note that the distinction is important as a
matter of fairness. This employer has undertaken two appeals, to the ARO and to the
Tribunal, in reliance on the wording of the Board policy applicable at the time of the
audit. That is a costly undertaking. We infer that the employer became aware of the
amendment only in the course of preparation for this appeal. The implication of the
Board’s classification retroactivity policy as well as its rule with respect to the retroactive
date of amendments is intended to limit the negative effect on employers of retroactive
decision-making.
The amended form of the policy was included in the ECM on February 1, 2002, and that
is the earliest date that the employer would have had any reasonable opportunity to learn
of it. It is also the earliest date on which it could be considered Board policy. There was
no specific information sent to the employer that might have alerted it to this amendment
until the date of Board counsel’s letter of October 29, 2002 or the package of amended
documents obtained by TCO, contained in Addendum No. 2, dated September 26, 2002.
…
Some Tribunal decisions have found that a Board Minute might in some circumstances
constitute a policy for the purposes of section 126, when addressing a time period prior to
the effective date of OPM 11-01-12. (See Decision No. 585/98R, and decisions that have
followed that decision.) However we note that in those cases, the Minute in question had
generally been publicly communicated and the parties could be taken to be aware of it.
In this case, we are satisfied that the Board Minute of November 5, 2001 was not a policy
for the purposes of section 126. It had not been publicly communicated, and even the
Appeals Branch was not aware of it or did not consider it applicable. It had not been
incorporated into the ECM. In any event, given our analysis above, a finding that it was a
policy would not affect our decision, because the employer had not been informed about
it and because the Board’s policy on retroactive application of classification changes
requires notification to the employer.
[38]
This Panel agrees with the analysis set out above. For the purposes of this employer,
therefore, the classification amendment dated February 1, 2002 would not apply to them, because
the employer closed at the end of December 2001. Thus, until the employer closed, they
remained classified in Rate Group 403, as that rate group existed before amendment.
Page: 11
Decision No. 592/04
THE DECISION
[39]
The appeal is allowed. The employer is to be classified in Rate Group 403 until the
employer ceased operations at the end of December 2001.
DATED: May 11, 2004
SIGNED: J. Josefo, W.D. Jago, D.C. Timms