CONTENTS
Wednesday 15 September 1993
Workers' Compensation Board
Odoardo Di Santo, chair
Brian King, vice-chair, administration
Glenn Cooper, chief financial officer
Linda Angove, project director, long-term facilities strategy and board secretary
Linda Jolley, senior vice-president, strategic policy and analysis
STANDING COMMITTEE ON GOVERNMENT AGENCIES
*Chair / Présidente: Marland, Margaret (Mississauga South/-Sud PC)
*Vice-Chair / Vice-Président: McLean, Allan K. (Simcoe East/-Est PC)
*Bradley, James J. (St Catharines L)
*Carter, Jenny (Peterborough ND)
*Cleary, John C. (Cornwall L)
Curling, Alvin (Scarborough North/-Nord L)
Frankford, Robert (Scarborough East/-Est ND)
Harrington, Margaret H. (Niagara Falls ND)
Mammoliti, George (Yorkview ND)
*Marchese, Rosario (Fort York ND)
*Waters, Daniel (Muskoka-Georgian Bay/Muskoka-Baie-Georgienne ND)
*Witmer, Elizabeth (Waterloo North/-Nord PC)
*In attendance / présents
Substitutions present/ Membres remplaçants présents:
Cooper, Mike (Kitchener-Wilmot ND) for Mr Frankford
Haslam, Karen (Perth ND) for Ms Harrington
Hope, Randy R. (Chatham-Kent ND) for Mr Marchese
Mahoney, Steven W. (Mississauga West/-Ouest L) for Mr Curling
Murdock, Sharon (Sudbury ND) for Mr Mammoliti
Clerk / Greffière: Mellor, Lynn
Staff / Personnel: Yeager, Lewis, research officer, Legislative Research Service
The committee met at 1014 in the Huron Room, Macdonald Block, Toronto.
WORKERS' COMPENSATION BOARD
The Vice-Chair (Mr Allan K. McLean): I understand that the Chair and some other members are on the Gardiner in a traffic jam, so Dan Waters has suggested that we proceed with the unfunded liability and have a briefing from the chairman about that, if that's agreeable to the committee. We can proceed, Mr Di Santo.
Mr Odoardo Di Santo: Thank you, Mr Chair. I will be introducing our chief financial officer, Mr Glenn Cooper, who will report on the unfunded liability.
I want to premise just briefly that we are very concerned about the unfunded liability because it is a potential problem for the board. If one reads the media reports, there's an impression that this board is out of control, and every once in a while those statements are made.
I'd like just to inform the committee that from 1985 to 1993, the situation has not deteriorated. In 1985 the board was funded for 32%; in other words, if the board had to pay all the pensions and all other obligations we had, we could pay 32 cents for each dollar. In 1993 we can pay 38 cents for a dollar.
Does that mean we can just relax and do nothing? No. That is not the case. It's like when we talk about a glass: Is it half empty or is it half full?
In 1993 we have made a very serious attempt. We came before the standing committee on resources development in 1991 and we made a commitment that we would do a number of things. We would do an operational report, we had a task force, we have an action plan, and we are rationalizing our internal operations, making them more efficient. And we are showing the savings, we are showing the savings year after year, despite the fact that we had a flat-lined budget, which means that in real dollars we've spent less money to produce better service. We were able in 1993 to scale down the deficit from $1.2 billion in 1991 to probably $400 million. We don't know the final figures because we are in September, but it will be in the neighbourhood of $400 million.
If you read the Globe and Mail the other day, the headline said the unfunded liability grew by $400 million. Of course the Globe and Mail could have said the board slashed the deficit by $800 million: That's exactly the situation; that's what we did. We were able to reduce the deficit substantially in two years, and we are committed to do that next year.
We are concerned with the funding of the board, not only with the unfunded liability, because that's a misnomer. If you talk only about unfunded liability, you talk only about one aspect of the funding of the board. What we have to look at, what the government has to look at and, with all respect, what the Legislature has to look at is, how we are going to fund the board? That was the question we posed in February 1992, when we released a paper on how to fund the board; we released a WCB funding strategy.
After analysing the present situation and of course going back to 1984 -- that was the crucial year when this situation was for the first time faced in a coherent way by the government and by the Workers' Compensation Board, when the government called Wyatt, a consultant, and Wyatt outlined a strategy how to retire the unfunded liability in 30 years, from the year 1984 to the year 2014. If we don't look at that strategy, not only do we not understand how the funding of the board is working but we do not understand why the unfunded liability is increasing.
We will make available to you a funding strategy paper, and you will see in the paper that when Wyatt developed the strategy, they were assuming that the liability would increase from $4.3 billion in 1985 to more than $40 billion in 30 years. In the meantime, the assets would increase by the same amount and in 2014 you would balance liability and assets, so the liability would disappear.
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But what many people do not understand, and obviously the media never understand because they never do any research, is the fact that the unfunded liability, regardless of the growth of the assets, would increase until the year 1998, and of course to retire the unfunded liability was based on a gradual increase of the assessment rates. The assessment rates would have been $3.18 in 1991, $3.20 in 1992, $3.44 in 1993, $3.68 in 1994 and $3.88 in 1995. Despite the fact that Wyatt had forecast this growth in rates, the unfunded liability would have grown until the year 1998.
The whole strategy was based on normal economic cycles. What we had in 1990 was a protracted and very serious recession, and we are still not out of the recession because the economy is not performing. We told you yesterday that in three years' time we lost 284,000 jobs in the sectors that most contribute to the board: manufacturing, mining, forestry and construction.
Therefore, the board of directors, which is representative of the stakeholders, the workers and employers, came to the conclusion that, given the severity of the recession, we could not afford to increase the rates according to the Wyatt report, the strategy adopted in 1984. In fact, the rates not only did not increase but they declined, and in 1993 the rates are $2.96, because we came to the conclusion that industry, the manufacturing sector, which has been ravaged by the recession and by free trade, with all the shutting down in southwestern Ontario --
Mr James J. Bradley (St Catharines): Is that due to free trade?
Mr Di Santo: Well, most of the branch plants, according to Statistics Canada, that have been repatriated. In your riding, I think Campbell Soup shut down because it has a plant in New York state. It's not only due to free trade but also due to the recession, obviously, because the recession has been a major factor in affecting the manufacturing sector; also, I must say, due to other reasons, because the economy is changing and some sectors that were crucial in the development of the economy in the past are not as important any longer as they used to be.
For those reasons, we thought it was unacceptable to the Ontario employers to escalate the rates at the level that had been developed in the strategy; therefore, we did not increase the rates but decreased the actual rates. Despite that, we achieved what I think is a phenomenal result: We were able to have the lowest increase in the 10 years since 1984.
On this premise, I'd now like to ask Mr Cooper to outline for you the unfunded liability.
Mr Glenn Cooper: My name is Glenn Cooper. I'm chief financial officer of the Workers' Compensation Board. I think our chairman has reviewed for you the last 10 years of the history of the unfunded liability. Perhaps I will explain in a little more detail what an unfunded liability is and some of the progress the management has made in trying to control the unfunded liability.
First of all, the unfunded liability represents only a calculation in respect of those employers in the province which are collectively liable. There are some employers in the province which are individually liable for their own liabilities, and we assess them and pay the awards to the injured workers. But for the collectively liable employers, we have to set assessment rates to pay off our claims.
The unfunded liability represents the difference between our assets and liabilities. Our assets are today approximately $6 billion. They represent investments held to pay off future claims. Our liabilities are approximately $17 billion. Those liabilities represent what we anticipate the future payments for existing claims today will be.
As you know, injured workers can receive a pension for life, and most of that $17 billion is lifetime pensions. Approximately $10 billion of the $17 billion represents pensions that will be payable for life to injured workers. These have already been adjudicated. It's been mentioned earlier this week that there are approximately 170,000 injured workers receiving these pension payments, and these are the largest payments we make on a monthly basis. As I say, they total about $10 billion, and they are fully indexed for inflation. Our estimate of the present cost of all our future claims is $17 billion. The difference between those liabilities of $17 billion and our assets of $6 billion is the unfunded liability, which today is approximately $11 billion.
With the $11 billion, as Mr Di Santo outlined to you, there is a strategy to pay that off by the year 2014 that was adopted back in 1984. The strategy called for a significant increase in assessment rates. At the time of the study in 1984, assessment rates were found to be 45% too low. They had to increase by 45% to match what the cost was of current claims coming through the system, the administrative cost of running the board and to cover the funding of the unfunded liability. As Odoardo said, at that time the unfunded liability was estimated at about $4.3 billion.
Obviously, rates couldn't be increased by 45% in one year, so what we saw was gradual increases in rates. In fact, in no one year did rates increase by more than 15%.
With all of this, and legislative changes through the 1980s, the unfunded liability has grown to $11 billion. In no year did the assessment rate go up more than 15%, and in fact in many years it was lower than that. The highest the assessment rate ever was was $3.18 per $100 of payroll, or 3.18%, and as was mentioned earlier this morning, the rate will be approximately $2.96 in 1993.
I want to now turn my comments to what has transpired in the last few years. As the new administration came to the board in 1991, we saw that a recession was occurring in the province. In early 1991, people thought the recession would be relatively short-lived. As time went on during 1991, people realized that this was not a short recession, that many structural changes were taking place in the economy. Both the manufacturing and construction sectors and the primary resource sectors, which represent about 75% of our revenue base, were being particularly hard hit by this recession. It was our view that some of this would not return quickly. In fact, it caused us to re-examine the funding strategy of the board.
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In February 1992, after consultation with a number of the stakeholders, we issued a funding strategy paper, which again we've sent out to stakeholders for consultations, on some of our views. The questions we raised were:
Whereas the board was faced with at that time, at the end of 1991, an unfunded liability of about $10.3 billion, we expected, what is a fair way to fund that? I think most people agree that you would like to be fully funded, in other words, that your assets would be equal to your liabilities, but when you're in situation where your liabilities exceed your assets by $10.3 billion, what is the correct way to put that in balance, or do you really have to put it in balance? The question is, who has got to pay for that?
All of our revenue comes from employers of the province except for our investment earnings, which is a very small part of our revenue. Would it be fair that that $10.3 billion be paid by the employers of this province over the next 20 years, up to, say, 2014, when the original funding strategy said we would be fully funded? Do you have to be fully funded? As was said earlier this morning, if we were fully funded in the year 2014, we would have about $40 billion of assets and $40 billion of liabilities. Do we really need $40 billion of assets? We have $6 billion now. If we have enough funds on hand to pay claims as they come due, is that enough? These are some of the questions we issued for stakeholders back in early 1992.
We received a number of responses to our paper. The paper has been discussed by our board of directors, as well as the comments we've received. It is now under review by our board of directors in their strategic planning exercise. Also, the Premier's council, I'm sure, is reviewing some of the funding issues we have raised.
One message was clear when we went out to consultation on our funding issues. Our stakeholders felt we could be more efficient in managing our business, and we agreed. In 1992, we reduced the increase in the unfunded liability by about $600 million. The unfunded liability went up $1.259 billion in 1991 but only $661 million in 1992, and, as Mr Di Santo said earlier this morning, we anticipate that about $400 million will be the increase in 1993.
We have significantly reduced the growth of that unfunded liability. This has been done without increasing assessment rates; assessment rates are down. As I said earlier, they peaked at about $3.18 for $100 of payroll and they are approximately $2.96 now, so that's almost a 10% reduction in rates.
We have reduced our costs, both administrative costs and benefit costs. We're not being tighter on claims to injured workers. What we're doing is being more effective in integrating injured workers back into the workforce. If we can be more effective in returning injured workers to employment at an earlier date, that will reduce our benefit costs, and that's one of the things that Bill 162 was attempting to accomplish: helping injured workers integrate back into the workforce.
Mr Di Santo: We are in the hands of the committee. At the beginning it was agreed that, as not all members were here, we would make introductory remarks. If you wish, Mr Cooper can finish or you can ask questions. We are in the hands of the committee.
The Chair (Mrs Margaret Marland): Thank you, Mr Di Santo. We appreciated having the briefing when all members were not yet ready to ask questions. Now that it is 25 minutes before 11, maybe we will start the rotation, and some of the completion of the comments may come as some of the answers to the questions also.
Mr Di Santo: Perhaps if it's possible, we'll wrap up in a couple of minutes.
Mr Glenn Cooper: I was just about finished with my comments. We are now into planning for 1994. We see 1993 as another significant reduction in the increase of the unfunded liability and we expect that 1994 will see a similar decrease, so we are making significant progress in reducing the annual increase in our unfunded liability. We expect that there will be a number of comments coming out of our strategic planning exercise from the board of directors that will help us further control the increase in the unfunded liability. I'll leave it there.
Mrs Elizabeth Witmer (Waterloo North): Thank you very much for your presentation. I'd just like you to briefly tell me, as we're dealing with the unfunded liability today and it stands at $11 billion-plus: You've indicated it's going to decrease, yet we have heard that it could increase to $31.5 billion by the year 2014 and Mr Di Santo said it could be $40 billion. What is it, in a nutshell, that you're going to be doing that is going to prevent that from happening?
Mr Di Santo: Can I clarify? I think we are talking of two different things. You said that the unfunded liability can increase to $31 billion.
Mrs Witmer: That's right. That was discussed at the Premier's council.
Mr Di Santo: I want to rectify that. What I said was that based on the Wyatt report on the strategy developed in 1984, the liabilities will increase up to $40 billion and the assets would increase up to $40 billion in the year 2014, and at that point there will be no unfunded liability because assets and liabilities will be the same.
Mrs Witmer: Okay, but let's get back to what the Premier's council discussed at its meeting on September 7, where it said that assuming no new programs and with conservative cost assumptions, it can increase and will increase to $31.5 billion by the year 2014. This projection is based on data provided by the board, and I want to know, what actions does the board intend to take in order to stop this unacceptable escalation in the unfunded liability?
Mr Di Santo: Mrs Witmer, I think we have to understand that this assumption that was developed for the Premier's council is based on the fact that we do nothing between now and the year 1999. In fact, if you look at the figure itself, $31 billion, now we are at $11 billion. For $20 billion in six years, we should increase how much? That's $2.5 half billion a year, which is totally unrealistic, because we are telling you, with the modest measures that we are adopting in the board with the cost-effective measures, we are increasing only by $400 million the unfunded liability in 1993. So this is an assumption that is based on the fact that we do nothing; in other words, that we don't do rehabilitation, we don't do any rationalization of our services.
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Mrs Witmer: And also that you don't do any new programs, and I know there are some new programs being anticipated.
Mr Di Santo: There are no new programs, madam.
Mrs Witmer: Take a look at what's being suggested in the expansion of entitlement: chronic stress.
Mr Di Santo: In my introductory remarks, I think I said that when we came to the board, we had a discussion paper and the Honourable Mr Stanbury and Mr Goodison had public hearings, and the board of directors has decided that we do nothing. No decision has been made, so there is no new program that is being developed at this point in time. The question was referred to the strategy planning, where the board of directors, as a representative of the major stakeholders, is dealing with the question, but there is no new program at this point being developed.
Mrs Witmer: So the only thing you would like to see at this point is universal insurance and a flat rate.
Mr Di Santo: Don't put words in my mouth, because that may very well be wishful thinking. The only thing I'd like to see at this point is what we have been doing until now. We came before the Legislature, we report to the Legislature. We were told by the standing committee to do a number of things, an operational review, and we did it. We are coming to you now and we are telling you that we have an action plan, and we think that with the action plan we will be able to introduce into the system cost-effective measures that will allow us to reduce the unfunded liability. We are telling you that we are committed to reducing our administration expenses, and we will show in the budget next year that we will do that.
Also, I must say that there are some decisions that go beyond our purview, and those are decisions that are political decisions that have to be made by the government; not only by the government but the social parties, by employees --
Mrs Witmer: Don't expect the government, because the government keeps saying it's arm's length from you and doesn't want anything to do with the WCB. They don't want to be held accountable.
Mr Steven W. Mahoney (Mississauga West): That's what they say.
Mrs Witmer: That's what they tell us when we ask questions in the House.
Mr Mahoney: Bob Mackenzie says it in writing.
Mr Di Santo: I cannot take part in this, Madam Chairman, because it's a lively exchange between parties.
The Chair: I think we should let the chairman continue. It's nice to have the friendly exchange --
Mr Di Santo: I won't take sides, because despite what Mr Mahoney said yesterday, we are humble servants of the Legislature, so we are here.
Mr Mahoney: What did I say yesterday?
Mrs Witmer: I would just like some clarification. The clarification I want is that I heard you make some reference to the chronic stress issue. Are you telling me that the status of the workplace stress proposal has been abandoned? What is the status there?
Mr Di Santo: It has been referred to the strategic planning, which is a group of representatives of the employers and the workers on the board of directors, and they are dealing with those issues.
Mrs Witmer: So it hasn't been put on the back burner; it's still a real possibility.
Mr Di Santo: I don't know if it's a possibility; it's a decision that the board of directors has to make. But no decision has been made at this point; in other words, from the point of view of the administration, we have no new program in place. Next year there will be no new program. That's what we can commit to you.
As far as the other problems are concerned, the funding, you know very well what has been discussed at the Premier's council. Those are issues that require a consensus of the parties. I don't think any government of any colour at this point in time can make decisions favouring one group against another group, because it's impossible. The workplace belongs to the workers and belongs to employers, so they have to find a consensus on how to deal with the strategic issues, and that's what's happening.
As I said yesterday, you have some of the major players in Ontario. You have the major union representatives, you have the chairman of General Motors, you have the chairman of Canada Trust, you have the chairman of Stelco, you have the chairman of Noranda. They are the members of the Premier's council and they are dealing with those issues.
Mrs Witmer: Do you know what's interesting about that? I believe there's a glaring omission. The omission is, where is the small business representative on that council?
Mr Di Santo: Madam, I neither set up the council nor am I a member of the council. You're asking the wrong person.
Mrs Witmer: That's right. I hope whatever decisions that council makes will reflect the interest of the small business community as well as the large business community. You can tell me what you want to about the unfunded liability, but I will tell you, the possible expansion to the $31.5 billion really terrorizes the business community, and I hear you saying that you still might implement the workplace stress proposal.
Mr Di Santo: I didn't say that.
Mrs Witmer: You said it's still under consideration. We know that could add $178 million to the cost to the WCB. It's that type of uncertainty that strikes fear into the heart of the employer and the employee community.
Mr Di Santo: With all respect, I didn't say that and I want to put very clearly in the record that I didn't say we are going to implement or that we are in the process of implementing or that we are considering. I said that we had hearings. We had a totally opposite reaction from the workers' side and employers' side which didn't allow the board of directors to find any possible consensus on that issue. That's why the question has been sent to the strategic planning, and the strategic planning has to consider whether in the next number of years the board of directors has to deal with those questions and how it has to deal with those questions. I have my personal bias, but that's not my decision. It's a decision of the two workplace representatives: workers and employers.
Mrs Witmer: I can appreciate that, but I can tell you, it's issues like this that continue to alarm the community, the employers in particular who are paying a lot of money in payroll costs to subsidize the WCB. They have asked that a complete moratorium be put on new policies, and I don't see that happening. I think there's still a tremendous problem.
I'd like to go on to another issue. It has to do with the unfunded liability, but in a different way. As you know, the board was able to save some $10 million due to social contract savings. It has been reported that under the terms of the social contract legislation, the board would be required to give the government this $10 million, and I understand that the board would prefer that the $10 million be put towards the unfunded liability. Obviously, that is the only fair thing to do, because it's the employer community that funds the WCB, not the government, yet the government is suggesting that this $10 million be handed over to the Treasurer. Can you tell me if that issue has been clarified and resolved with the Treasurer?
Mr Di Santo: Mrs Witmer, I read the same reports. Of course the basis of that report was that the social contract basically involved all public sectors, the broader public sector, and the board is one of the components of that sector, but we have not received any official request from the treasury.
Mrs Witmer: You have had nothing in writing?
Mr Di Santo: Nothing.
Mrs Witmer: You have had no verbal communication?
Mr Di Santo: I came back from holidays just last week, so I haven't had the chance to communicate with the Minister of Labour until this moment.
Mrs Witmer: Has Mr King communicated with the minister on that particular issue, or any other member of the WCB staff? Has there been any communication with the minister regarding this $10 million?
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Mr Brian King: I met with the Deputy Minister of Labour to point out concerns we might have if there was any regulatory change brought in that would have required the WCB to forward $10 million to the consolidated fund, and the Deputy Minister of Labour brought that matter to the attention of the minister.
We are not required to pay $10 million to the consolidated fund. Neither the statute which brought in the social contract nor any regulation I have yet seen would require us to pay $10 million. If regulation is brought in to require it, our board of directors has given us instruction to seek external legal advice as to our status as a board on such a matter. But there has been no direction, that I'm aware of, to myself or to any member of the staff of the WCB, on turning $10 million over to the consolidated fund.
Mrs Witmer: Would it be your plan then, Mr King, given that I've heard you say that no one has asked you directly for that money, that this would be applied towards the unfunded liability, the $10-million saving?
Mr King: If we are not required to pay $10 million to the consolidated fund, it would merely mean $10 million that wouldn't lead to an increase in the unfunded liability. Yes, that's correct.
Mrs Witmer: Then it would be discharged in that respect.
I'd just like to review again, what is the average assessment rate this year?
Mr Di Santo: It's $2.96.
Mrs Witmer: And last year it was --
Interjection.
The Chair: Sorry, we couldn't hear that answer.
Mr Glenn Cooper: The average assessment rate in 1992 was $2.95. In 1993 we expect it was about $2.96.
Mrs Witmer: And where do you anticipate that to go by the end of the year 2000?
Mr Glenn Cooper: There is no forecast of the assessment rate to the year 2000 at this time. The board of directors sets the assessment rate on an annual basis. If we were trying to achieve full funding by the year 2014, the assessment rate would have to be about $3.40 today. The earlier projection you talked about, $31 billion in the year 2014, had a flat assessment rate, no increase in the assessment rate. It also had an increase in the injury frequency rate. That's how you get up to that type of number, and it means moving the clock back to having a $1-billion-a-year annual increase in the unfunded liability. That is not our forecast; that was just a scenario that was asked for.
Mr Di Santo: If I may add, I have to clarify that every year we arrive at the new rates not independently but in consultation with the employers, and we have full consultation. In fact, we already have the preliminary discussion paper out for 1994 and we will meet with the external consultation group, with each group of employers, and we will arrive at a certain rate after having had the benefit of the input of the employers. We don't do that in isolation based on our projections of the unfunded liability or what we think, in abstract, the needs of the board will be.
Mrs Witmer: Mr Di Santo, do you anticipate the employer contribution increasing in 1994?
Mr Di Santo: Well, if the inflation is the same and the circumstances are the same, we don't anticipate a large increase unless the board of directors collectively, consensually, determines that we have to do something else with the unfunded liability. But under the circumstances, I don't see how we can dramatically increase rates, because the economy is still sluggish and we have the same problems we had at the beginning of the year. I don't see the circumstances changing and therefore --
Mrs Witmer: So you're saying that the rate will probably be the same.
Mr Di Santo: I cannot say that because, as I premised, we arrive at rates after consultation with all the groups. We have to talk with the employers before we come to some conclusions. But the premise is, given that we have the same circumstances, that there'll be no major change.
Mrs Witmer: No major change? So I'm led to understand there probably will be a minor change. I have to tell you, I don't know how you can anticipate even a minor change. If you take a look at the other 10 provinces and the territories, we are already assessed much higher. It is already diminishing our ability to compete: There are individuals who do not select Ontario because of the rate of assessment they're going to have to pay as far as the WCB costs are concerned.
We talk about the unfunded liability. I get all these excuses and people telling me there's really not a problem, "We've got it under control," and yet I hear you say that the rates might increase. You don't realize that if the rates increase, we're going to have less investment in this province. People don't have to come to Ontario. This is one more barrier, along with employment equity, along with pay equity, along with workplace health and safety. All the regulation is killing this province.
Mr Di Santo: I want to correct the record. I never said there will be an increase. I never said that and I want to clarify that. I said that since the circumstances are the same and the economy is performing more or less the same way, we don't think there will be major changes. In fact, as I said before, we have out a preliminary 1994 discussion paper. If you wish, we can give you the discussion paper. In the discussion paper we are forecasting that in 1994 the target rate will be lower than in 1993. But I don't want to tell you that the rates will be lower, because the next thing that will be said is, "The chairman said that in 1994 the rates will be lower."
I don't know at this point what the rates will be, because we have to discuss with the employers and we have to take into consideration a very large number of factors. As Mr Cooper said, the three major sectors that are contributing to our fund account for 75% of our finances. If there is a slippage in one of those funds, we require more funds to pay for all our obligations, so somehow we have to take those funds from the system, from the economy. At this point in time I cannot tell you what rates will be, but I'm not telling you that there will be an increase because I don't know.
Mr Rosario Marchese (Fort York): I'm going to change the subject a bit, because I have an interest in raising some other questions. I will get back at some other point to the whole issue of the new rate group classification scheme and employers who are covered or not covered, because I have something else I want to speak about right now.
I would like to ask Mr Di Santo or Mr King, whoever wishes, to briefly give us a sense of what kinds of changes we've had from 1978 to the present in terms of Workers' Compensation Board strategies, policy changes, organizational changes. I would like a cursory explanation of that. I could read it myself from the standing committee on resources development, but I prefer for the record to have one of you talk about that.
Mr King: This is again a very large and complex question, but I will try to simplify it down to its lowest common denominator.
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The workers' compensation system, as envisaged by Chief Justice Meredith in the early 1900s, was to compensate workers who were injured arising out of and in the course of their employment.
As we entered into the latter half of the 20th century, what we began to notice in the workplace was a beginning of a subtle shift in the type of injuries that were occurring. Prior to the 1970s, machines were falling on workers, if I can use that metaphor, and the average workers' compensation claim involved a traumatic injury, a sudden occurrence at a point in time. We, as administrators of compensation systems, can do a very good job in adjudicating a case like that. We can do it very quickly and skilled rehabilitation professionals can do a pretty good prediction of what to do to help rehabilitate an injured worker who has lost an arm because of a work injury.
What we began seeing with the shift in work and the workplace changes that occurred was away from machines falling on workers and workers filing claims for injury or disablement arising out of the employment. For us laypeople, what that means is that someone who works for eight hours a day at a keyboard was suddenly discovering that their wrists and their elbows were becoming very painful. It was leading to new disabilities and new impairments that we call repetitive strain traumas.
Mr Marchese: Mr King, I want to focus it a little more. I understand what you're getting at, and it's a particular problem that adjudicators face in terms of changing workplace accidents and how to deal with them. I specifically wanted you to touch on since 1978. In 1978 an actuarial report was prepared by Wyatt Co and in the 1980s Professor Weiler did some informal reports, and based on that we had Bill 101 in 1984 and Bill 162 in 1989. A number of reports done since 1978 have caused major structural changes at the WCB in terms of how we adjudicate, and what all that has caused in terms of problems for adjudicators and everybody else connected in the system. I wanted you to touch on that because my next question will follow up on that.
Mr King: I was always taught, although not having been present, that the follow-up question in question period was the more important one than the initial question. Professor Weiler began writing about reshaping the workers' compensation system in the early 1980s.
As a point of interest, Professor Weiler came out and visited some of the other provinces in Canada to find out what they were doing, and believe it or not, some of the other provinces in Canada actually were quite a bit ahead of Ontario when it came to reforming their workers' compensation system.
Basically, Professor Weiler and the reshaping of compensation had three or four major impacts. The first one was to put more stress on occupational disease. Occupational disease in Ontario had been limited, for the most part, to the schedules to the law, to the regulations under the act that listed which diseases should be covered. Regulations are always behind reality. Anyone who has followed the asbestos exposure problem will know that this year we have finally got regulatory change in the area of asbestos when everyone knew at least 20 years ago, and I believe those who are good historians would argue that we have known for hundreds if not thousands of years. The first thing Professor Weiler did was focus more attention on occupational disease.
The second thing he did was to externalize the appeal process to the Workers' Compensation Appeals Tribunal, establishing this independent body which challenged the Workers' Compensation Board, challenged it to its very roots, to begin to adjudicate and to explain itself in a more legalistic way and to develop policies so that there could be a coherent and equal treatment of claims across the entire province.
A third area that was brought in in the 1980s was the present model of corporate governance. We moved from the previous board model, which was more a corporate board that had a chair and those who supported the overall thrust of the government in the area of worker's compensation, to a corporate governance model which included half employer and half worker members of the board of directors who set up a bipartite board, which meant that many things that had been debated on a consensual basis were now debated on an adversarial or a bipartite basis.
But the biggest change effected came under Bill 162. I don't think anyone yet understands the magnitude of the consequences of Bill 162, even though it was probably the most rigorous debate in the history of workers' compensation in the world. I mean that those of us outside of Ontario were fully aware of the nature of the drama that was unfolding in Ontario. To put it into its most simple form, Bill 162 said that the old method of using a meat chart to rate someone's disability is a bygone-era methodology; that to equate an injured worker's loss to a loss of a part of their body, to that famous or infamous meat chart, is no good in the days of modern rehabilitation, in the days of modern electronic communication.
You will find, for instance, many people who have what would have been considered very severely disabling conditions present in the workplace and contributing fully. The old meat chart would have said, "Give up on someone who is in a wheelchair; they are 100% disabled." Bill 162 said: "We do not give up on those who are disabled; they can be active members of our workforce. We will pay for the disability or the impairment. We will pay for the fact that someone has been left in a wheelchair through a non-economic loss award. We will then measure the effect of the injury on the worker's earnings and that becomes the future economic loss award."
Ontario gave up a system which paid a pension for the lifetime of a worker related to that meat chart but didn't necessarily pay for their wage loss, for a system of dual awards. That old system said to the concert pianist who lost a finger, "You get 1%," because that's what the meat chart said, but the concert pianist who loses one finger has lost their occupation.
On the other hand, the old meat chart said to the manual labourer -- is there a more correct term than "manual labourer"? -- to the physical labourer who lost a hand, "You get your 20% or 25% pension and you can't work any more."
I think intuitively people would agree that the wage-loss model is a fairer way, but all of the fine-tuning may not have been done to Bill 162, because we have yet outstanding debates like deeming and other issues.
Mr Marchese: Mr King, I know there is so much to be said on all the specifics. The point I wanted to get to was that in this document, the Report of the Standing Committee on Resources Development, it says, "The key changes to workers' compensation wrought by Bill 101 lay not in the benefits but in the administrative restructuring." Then it says, "Bill 162 represents the most profound change to the Ontario's workers' compensation system."
I want to lead to my point, because part of what happens out of all that is that the stakeholders' perceptions of the WCB service levels need to be understood. "Witnesses who appeared before the committee agreed overwhelmingly on the single cause of service delivery problems at the WCB:" that it is or was "widespread change in too short a time frame.
"Perception of the Problem: Continuous Change...There was widespread consensus that too much change can be destabilizing.
"Committee members heard that the WCB has experienced massive policy change beginning with the passage of Bill 101 in 1984" and continues with Bill 162 into the 1990s.
"The committee members were told that all these changes combined with the total revamping of the WCB's internal systems have caused considerable upheaval," and on page 13 it says:
"Over the past few years, the WCB has experienced a metamorphosis. Practically every aspect of the organization and its services have been affected by legislative amendments and internal transformations of the board's structure, organization, staffing and service delivery models. As a direct result of the magnitude, speed, lack of research and coordination of these changes, the Workers' Compensation Board is now unable to provide the level of service to the injured workers and employers of Ontario that it is legislated to provide."
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I continue to worry, Mr King, based on what I read and what we heard, that as we talk about changes, as we talk about what more needs to be done, we will make it more difficult to deliver the service we want. My worry, therefore, leads to the next question, the question Ms Witmer raised the other day to Mr Di Santo, who's not here right now: Would you favour having a royal commission? I didn't quite understand what the parameters were of that royal commission, but when I look at all the changes from 1978 to 1993 and when I hear someone proposing yet another royal commission, I wonder on what basis. What issues do we want to cover? Haven't we covered one hell of a lot of ground that we should begin to implement effectively to ensure that the service workers need is effective? Do you have an opinion on that?
Mr King: I always have an opinion on everything, unfortunately at times.
I arrived in Ontario in April 1991. We had passed out some information yesterday on telephone service. I think what happened is that in the fall of 1990 and into the spring of 1991, the metaphorical wheels fell off workers' compensation. A combination of factors all came together, which you have referred to in summary, but think for a minute.
The Workers' Compensation Board moved from a paper office where paper files were moved by human beings to a totally paperless environment, where you suddenly had a thousand paperless imagining screens in front of workers, workers who weren't given any training on that technology. The technology was subject to breakdown because it was so new. The delay factors and response time were monumental. I gave you some figures of the improvement between 1992 and 1993. If I went back to 1990 when it was introduced, you would've been horrified by the availability factors.
In addition to that paperless office, the entire board was reorganized; you suddenly found regional decentralized offices. For instance, the Windsor office was established in the 1990-91 time frame and very few people from head office or our regional offices were prepared to move to Windsor -- I can't for the life of me figure why -- so you suddenly had to have a bunch of new hired people in Windsor come together and try to run a compensation system. That caused incredible chaos.
We had the introduction of the computerized benefits payments system that had that incredible error rate I referred to yesterday or the day before, which led to a lot of phone calls from people who weren't getting the proper amounts of money. The telephone system broke down to the point where the Workers' Compensation Board of Ontario wasn't answering the phone one out of four times when someone called. It was a very chaotic situation.
A new bill had been passed, the most complex compensation act in the world, called Bill 162. Literally every week a new policy was being produced by the policy implementation branch. There was an incredible influx of new managers to try to manage the new system, the new environment in Ontario.
In effect, the Ontario compensation system moved from what management theory calls an entrepreneurial model, where a sort of small business environment can handle all the questions, to one of a decentralized model requiring policies and procedures, because you suddenly had to manage in the modern world. I don't think anyone would deny that the metaphorical wheels fell off. It's too strong to say the Ontario board was near a nervous breakdown when Mr Di Santo and I arrived in the spring of 1991, but the organization was on edge at that point in time. Everyone would admit it was on the very edge of the brink.
We made a point of saying that there will be no massive influx of new policy. It had been mentioned in earlier questions that people didn't want new policies. I can tell you that we do a quarterly report for our board of directors on new policies at the compensation board and it's less than half a page per quarter of new policies that you have been seeing. Every new policy has an impact analysis which says: "How much is this going to cost the system? What is this going to do to the administration of compensation?"
Mr Marchese: Mr King, I need to interrupt you. You're saying all the things I want to hear --
Mr King: Maybe not.
Mr Marchese: You did. It's quite a good answer and I know more can be said. I just want to say in this forum, in relation to the question I posed, that I see the Workers' Compensation Board under continual metamorphosis. I've seen that from 1978 to 1993. My view of that, therefore, is that the system needs to stabilize and do the work it needs to do, and I personally do not support a royal commission.
I leave time for my colleague.
Ms Sharon Murdock (Sudbury): In relation to Mrs Witmer's comments earlier, I want to point out the increasing rates to the employers and how workers' compensation would have evolved had everything stayed in place. If you look at pre-1984 estimates, they were obviously underestimated, because they were 45% too low, as you stated. If they had continued to follow the 1984 debt strategy, God knows what the rate would be. In fact, it was our debt strategy, or your debt strategy, however you want to look at that; it's actually reducing.
The question I have is on classification of companies in terms of their rate assessment. In particular, coming down here on Monday, CBC Radio had a news item on Inco -- it's not called International Nickel any more -- and the Steelworkers, Local 6500, which were joining together and making a joint presentation to the board in relation to the fact that despite their health and safety programs, which have reduced accidents significantly, and despite their modified work program, which they have really improved immensely and which is used as an example throughout Ontario and Canada, their premiums are still $30 million approximately per year. The Steelworkers are joining with the company to ask why, and I would like you to answer that for me.
The Chair: In half a minute.
Mr Di Santo: Half a minute? This requires quite a lengthy answer, but I'd just like to say that in the case of the mining industry, it is true that they are paying more. For instance, in the case of Inco, I don't have the figures right in my mind but last year I think they paid $21 million; in 1993, they are paying $29 million. But that is not because of the increase in rates. In fact, as we explained yesterday, with the new reclassification, we went to 219 rate groups, and with the new reclassification in the mining industry the average rate has been declining as opposed to increasing.
There are other factors that intervene. One of the factors is that every year -- that's in Bill 162, so it's a legislation obligation that we have -- the ceiling grows and will grow up to 175% of the average industrial index. For miners and for workers in high-paid industries, the ceiling goes up every year. What is it today?
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Mr Glenn Cooper: It's about $51,000.
Mr Di Santo: In 1993, the ceiling is $51,000, unless there was --
Mr Glen Cooper: It didn't go up much in 1993; in 1992, it went up a lot.
Ms Murdock: Mr Di Santo, maybe when we get the next round, you can just finish off.
Mr Di Santo: Yes, because it's a very complex issue.
The Chair: Thank you, Ms Murdock. I appreciate that, in fairness, and we certainly can return to that subject. Mr Cleary.
Mr John C. Cleary (Cornwall): I have a couple of questions for Mr Di Santo. I know of a case where a worker was injured on the job in 1965, and as a result received benefits under workers' compensation. After about eight or nine months of receiving benefits, it was determined that he was fit to return to perform light duties. However, because the former employer did not have any light duties, he ended up returning to the previous job. Unfortunately, he was not able to perform his duties and was terminated.
Left without employment because of the injury that occurred the previous December, he requested that his workers' compensation benefit be restored. Specifically, over the last 25 or so years, he's made numerous and frustrating requests to secure disability benefits under workers' compensation, but to no avail. The constituent says it is outstanding, that the Workers' Compensation Board did not recognize his 1965 injury, particularly as his medical prognosis now has changed from L1 to L3 to L5, which the doctor says would seem to indicate a degenerative injury.
At this point, he is waiting to appeal to the highest Workers' Compensation Appeals Tribunal. The problem, however, is the difficulty in securing representation. No one except the workers' advisory board is interested in taking on the case. However, should he accept the workers' advisory representation, he will have to wait up to two years before his appeal can be heard, but should he proceed without the workers' advisory board representation, then his appeal could be heard within two months.
The obvious catch is that the workers' advisory board staff, Ministry of Labour staff and even the Workers' Compensation Board staff all admit that without representation the constituent does not have much of a chance of winning the case. This situation indicates an inordinate waiting period of bureaucracy.
I ask the chairman of the compensation board what the normal period is to receive a workers' compensation appeal and what advice he has for this individual who has been waiting for many years.
Mr Di Santo: Mr Cleary, I understand the case of your constituent. I don't know if we can discuss it here because it's a personal case and it would not be fair to him and to the other members of the committee to discuss it. But in general terms, I'd like to say that I don't think you're blaming anyone here, but it's unfortunately one of those situations where without representation he may risk losing his case, and to get representation is very difficult for objective circumstances. Personally, I encourage having representation because I think every worker has a right to be properly represented so he can get justice.
We are reviewing the Workers' Compensation Board here as an institution, and I want to point out that this is exactly the problem that exists with our system. Until Bill 162, passed in 1988, there was no right to re-employment at all in the legislation, so your constituent who got hurt in 1965 obviously did not have that right. In Ontario, we have 170,000 people in that condition who were injured before 1990 and are receiving a pension of some kind. The unemployment rate among those workers is probably the highest in Ontario, 40%.
There is a real issue of poverty. There are thousands of injured workers who because of the legislation at that time, because of the impossibility of being re-employed, slipped slowly into a condition of poverty. That's why this is one of the issues I feel very strongly about, and I think something has to be done for those workers, because there is no remedy in legislation now.
In the future, we have to avoid those cases happening. We may find a representative for your constituent, but we don't solve the problem. The problem is that until we find a solution, until we link the Workers' Compensation Board to the broader society and give workers who get injured on the job or people with disabilities who cannot compete with the other people on the open market some assurance that they have some right to employment, those cases will keep repeating and repeating.
In your particular case, if you give us his name, we'll try to deal with it. I don't know what other help I can give you here at this hearing.
Mr Cleary: Mr Di Santo, maybe you could answer my question. Is the two years a normal time to have to wait?
Mr Di Santo: The office of the worker adviser is not an office of the Workers' Compensation Board, so it would be unfair for me to make any inference on the way it operates. I don't know how long the waiting time is. I know that in some offices, they have a long waiting list; in some offices, they have a shorter waiting list. That's a totally independent operation. You're a member of the agencies committee. It's a schedule 1 agency. There's no relationship at all with the board.
Mr Cleary: So what is your advice for him, to wait the two years if that's the case?
Mr Di Santo: Is the hearing before the tribunal or before the board?
Mr Cleary: He says he'd have to wait up to two years before his appeal could be heard, to go to the workers' advisory board to represent him. He'd have to wait up to two years.
Mr Di Santo: I understand. We cannot intervene with the office of the worker adviser because it's an independent body. If he wants an appeal at an earlier date, we can give him an appeal within the board, but we cannot tell the worker adviser to represent him because it's an independent agency.
Mr Cleary: I have another one here for you, another incident: A constituent contacted the Workers' Compensation Board in October; that's 11 months ago. In May of this year, seven months later, he had not heard anything from the Workers' Compensation Board. He contacted our office to find out what was going on, and in May of this year, my staff was informed by the Workers' Compensation Board Ottawa office that this constituent's case was being handled by the complex case unit in Toronto.
On May 31, 1993, after having traced his case status with the complex case unit, we were advised that he should not have applied in Ontario as he had previously been employed in the province of Quebec. Essentially, this constituent waited seven months anticipating that he would be receiving benefits any day.
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Amazingly enough, however, the Workers' Compensation Board let seven months elapse without contacting this individual, who was furious, and he tells me it now tells him where he should rightfully apply -- seven months without receiving income, only to have a door slammed in his face. I was wondering if the chairman could explain how this could have happened and what he is doing to ensure that this situation does not happen again?
Mr Di Santo: I don't know the particulars of the case and I'm unable to tell you why it happened, obviously, but if it was with the complex case unit, it means it was not an ordinary accident. I deduct that from what you're saying. If you give us the case I can respond to you in any way you want, but I can give you assurance that we will inquire and will let you know. You have to give us his name or his claim number and we'll look into it.
Mr Cleary: I can guarantee you that you'll have both cases.
Mr Di Santo: Okay, thank you.
Mr Mahoney: Just to follow along this line, I do want to ask some questions about the unfunded liability, but I had distributed yesterday a letter from Frank Miclash, the MPP for Kenora, with copies of letters from Dr Eisener of the Dingwall Medical Group in Dryden, Ontario. Everyone, I think, was given a copy by the clerk; she did distribute them. Maybe this should go to Mr King, because you talk about the improvement in the service level for responding to phone calls and letters.
The letter from Frank Miclash is dated September 13, so it's hot off the press. It encloses copies, you will note, of the doctor's letters going back to October 7, 1991, a follow-up on May 7, 1992, and again on April 26, 1993, followed then by a letter to Mr Miclash on September 7, 1993. This is right during the period when you and the current chairman arrived on the scene in Ontario.
You've told us about the implementation of improvements to responding to letters. How could it be that a doctor's letter -- and in my experience with workers' comp, for a doctor to take this kind of initiative, to actually write letters rather than leaving it to the patient to write the letters, I find unusual. Perhaps that happens more in the north than it does in my riding, I don't know; generally the patients-clients are left to their own devices or abilities to communicate with the WCB. But here we have a doctor saying he's had a C-spine injury as far back as 1983, saying it has deteriorated to the point that he needs clear assistance, and he can't even get a letter back acknowledging the fact that he wrote three letters, Mr King. It seems to fly in the face of your statements that you've got this communication aspect of workers' compensation up and running.
Mr King: There is simply no reasonable excuse for not responding in a timely way to three letters. There is simply no reasonable excuse to not responding to the first letter that was received in this particular case. If we did not have the claim number, no one should be allowed to use the excuse, "You sent the wrong claim number in." We should be writing back and saying: "We don't seem to be able to identify this individual. Would you please help us." I will make no excuses whatsoever for what was clearly and obviously an unacceptable communication and an unacceptable service delivery on this particular case.
Mr Mahoney: Thank you for that. I appreciate your candour and I assume that Mr Beauregard or Mr Eisener, the doctor, will get some quick communication.
Mr King: You have my personal assurance.
Mr Mahoney: Thanks very much. Did you have a supplementary? Go ahead.
Mr Bradley: I'll wait until you conclude your --
Mr Mahoney: Well, that might be a while. Are you on this issue of communication?
Mr Bradley: No, so you go ahead. I have another problem.
Mr Mahoney: All right. I want to go back to the Premier's council. Mr Di Santo, you talked about the Premier's council with some optimism, that it was in some way going to -- well, you seemed to think it was a good thing and that it was advising the Premier.
Mr Bradley: Is Buzz still on that or not?
Mr Mahoney: Is it not a good thing, the Premier's council?
Mr Di Santo: I didn't say anything.
Mr Mahoney: I guess I was just reading between the lines. Do you think the Premier's council is a good thing, Mr Di Santo?
Mr Di Santo: Is that a question?
Mr Mahoney: It sounded like one to me.
Mr Di Santo: As I said before, the workplace is changing dramatically; there is restructuring in our economy. I've been convinced and I am convinced that it is very important that the workplace partners take charge of the workplace. For that reason, I think that every forum where they can get together and discuss the problems is an opportunity.
Mr Mahoney: You can understand my concern. I'm a little bit surprised that you're not expressing some concern. This council was set up with some, I think, laudatory goals for it to take a lead role in looking at reform of the workers' compensation system. The fact that it was set up in an uneven playing field with six labour representatives and five business representatives may be of some concern to some and, as I think Mrs Witmer pointed out, there is no one representing the small business community.
You didn't set this up, and I appreciate that, but you have to live with the fact that if this is a group that has been directed by the Premier to take a lead role in investigating possible reform of workers' compensation, I would think it's going to be living with you for some time to take a lead role in investigating what reforms might be recommended.
Initially, it was not a level playing field. I understand, if the media reports are correct, that Mr Hargrove and Mr Ryan have resigned, so now we've tilted the playing field in the other direction, where we've got five management representatives, with once again no one representing small business. The strange thing about that to the members of the government is that there are obvious people who could represent small business, Judith Andrew, for example, or many others, and give a good amount of input into this very important issue.
I would contend that while it's a major concern to Digital Equipment and to Noranda and Canada Trust and General Motors and Stelco, they have the capabilities and the wherewithal to deal with your bureaucracy somewhat better than a small employer with 30, 40 or 50 employees just trying to survive the recession.
Let me tell you, my information is that the Premier, in his first meeting with representatives of the Premier's Labour-Management Advisory Committee, expressed concerns about two areas: the size of the unfunded liability and some current and outstanding policy issues that he wanted it to specifically look at. But the number one issue he hit on was the size of the unfunded liability.
If that leaked document that Mr Offer was presenting a couple of weeks ago is of any consequence, it's not even on the government's agenda to deal with any reforms that the PLMAC might recommend. The PLMAC appears to be in disarray, with the labour members quitting over disagreements with the Premier and his social contract. Who is really looking, Mr Di Santo, at reform of workers' comp, or are we just blowing smoke here?
Mr Di Santo: Mr Mahoney, obviously you understand that you are putting me in a very difficult situation.
Mr Mahoney: That's what you get all the big bucks for.
Mr Di Santo: You're asking me questions that I cannot answer, basically, because --
Mr Mahoney: Give me an opinion.
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Mr Di Santo: You're talking about Mr Hargrove, who resigned. I read that in the papers. But I didn't appoint Mr Hargrove, I didn't deal with him when he resigned --
Mr Mahoney: Mr Di Santo, I don't want you to go off on a tangent. I've clearly said that you did not set up this association. This is my specific question: You and Mr King have indicated, I think it's fair to say, that you support some analysis of reform on the workers' compensation. I'm getting a nod in agreement with that. If the PLMAC is the body that's being directed by the Premier to do it, how in the world can it do it? How can you have any sense of confidence in this group or in this government to look at reform when it's falling apart?
Mr Di Santo: I said before that in this area what is important is consensus. I can tell you that the Workers' Compensation Board is giving every possible support to the PLMAC, in terms of research, and we are in a working group where there are many people you mentioned before belonging to small business in those organizations.
What is important here I think is to reach consensus on the strategic issues, and the fact that one member resigned and another member is not there I don't think is important, the numbers. If there were 12 workers and 5 employers or 3 employers, it wouldn't change the equation, because what is necessary is a consensus. If there is not consensus, there is no reform, because the government, any government -- your government, their government -- cannot impose a change in the fundamental dealings of how the Workers' Compensation Board is placed in society.
Ms Murdock spoke before about the mining industry. They have a very serious problem. They are performing the way we want: They are doing the best rehabilitation, they are doing excellent health and safety programs; in fact, they have declined constantly. They have an interest. The president of Noranda, in the Premier's council, has the same interest as a small businessman, because if we don't have a system that represents the interests of everybody, we cannot reform the system.
The Chair: I'm sorry. That's the end of this round.
Mr Di Santo: We can go back to that.
Mr Allan K. McLean (Simcoe East): I'd like to take the opportunity to ask a few questions. While the majority of the administration costs of the WCB are within the control of the board, there's a growing, powerful amount that is beyond the board's control. I understand you're required to provide funds for the Workers' Compensation Appeals Tribunal, the Workplace Health and Safety Agency, the office of the worker adviser, the office of the employer adviser and the Industrial Disease Standards Panel, and these commitments amount to about 25% of the total administration expense. Do you have a breakdown on how much you give to each one of the different agencies? What would the total be for the 25%?
Mr Di Santo: Yes, we do. Around $100 million, basically.
Mr McLean: Around $100 million?
Mr Glenn Cooper: In 1992, it was $97 million, the largest proportion of which goes to the Workplace Health and Safety Agency, which I believe was approximately $60 million.
Mr McLean: The previous question was with regard to the worker adviser, and you had indicated that you had no control over the worker advisers. There's nobody who would be more acquainted with it than you because I believe you were the one who was initially its chair. Has there been a problem with that part of the agency, if it takes two years to get something through? Has there been staff layoff? Has there been a problem within that part of it?
Mr Di Santo: There are basically two problems. I speak here as a private individual, because I want to premise that it's an independent agency and we have no control. In other words, we are asked to pay the bill and we pay the bill, but we cannot question why the bill is paid and for what.
Mr McLean: How much does it cost a year for the worker adviser, and how many offices are there in Ontario?
Mr Di Santo: The worker advisor? You're getting me out of balance. I'm told between $8 million and $9 million. The problems with the office of the worker adviser reflect what's happening in our economy in general. Their case load has increased, because if you are in northern or eastern Ontario and you have an accident and your income is cut because of the accident and you need to survive, you tend to go back and appeal your case. The number of appeals is increasing, because there is an increasing number of people who are slipping into a situation without income. They think, rightfully, that they can go back and have their rights restored through an appeal, so they have increasing appeals. They have their budget frozen because of the economic circumstances of the province; obviously, because of the social contract, they have the same obligations as any other agency in Ontario. Therefore, the case load is increasing. That's the simple explanation.
Mr McLean: Okay, that's fine. I have some other questions.
Mr Di Santo: I want to reply, if you're still interested in the legislative obligations of the board, that we transfer $1.1 million to the Industrial Disease Standards Panel, $9.2 million to the office of the worker adviser, $3.5 million to the office of the employer adviser, $61 million to the Workplace Health and Safety Agency, $11.3 million to WCAT, $1.9 million to the mine rescue stations and $12.1 million for the administration of the Occupational Health and Safety Act. These are the transfers in 1993.
Mr McLean: Why are the businesses of Ontario paying this amount of money when it's benefiting everybody in Ontario?
Mr Di Santo: That's an excellent question. In fact, you're not the only person who has asked that question. We developed a graph which looks like an octopus and gives you a graphic explanation of how complex this field is. What happened in effect was that initially you had the Workers' Compensation Board and then successive governments tried to address specific aspects of the workers' compensation system. They chose the road of setting up different agencies or bodies, and of course that has become very complicated. The question is, is this also very effective?
Mr McLean: And the answer is?
Mr Di Santo: I don't have an answer. I wish I had. But I think this is one of the questions that has to be addressed by the Premier's council, because I think this is an answer neither you, members of the Legislature, nor we, the administration of the board, should give. It's one that the employers who are paying the bill and the workers who are receiving benefits from those organizations should give collectively.
Mr McLean: Thank you. I've had enough on that; I'm finished.
I want to go to another area, to have somebody answer a question with regard to the 20 inspectors you have. I have a letter here and I just want to read a couple or three paragraphs with regard to an individual who is very upset because she feels she's paying tax for somebody who's abusing the system. You've already replied to this letter, and I've received it and I appreciate the answer we got, but I just want to indicate to you a couple of paragraphs.
"I'm talking about one person in particular who has been claiming WCB for at least five years. This person has degenerative disc disease and has conned his doctor and the doctors at WCB. This person did not hurt his back at work but went to work and claimed that that is where the injury occurred.
"I have the same back problem as this person, but there is a big difference. My injury was work-related and I have continued working full-time as a nurse since the accident. This person brags about all the tax-free money he receives while he is renovating his house, lifting large, heavy objects," and so on.
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How many types of letters do you get like this, and what number of people did you look at within the last year over the same type of concern?
Mr King: I had indicated yesterday, during my explanation of the fraud strategy and what we're doing to try to deal with the problem of fraud in Ontario, that we had around 430 cases that were presently active and being investigated in Ontario, but that in addition we had 822 approaches indicating that there may be fraud or may be something requiring further investigation. The latest statistic I had for the whole fraud investigation area would be a total of 1,250 cases to date thus far. Now, that doesn't necessarily represent a year; we've gone out and rather aggressively advertised that we're in a position to start investigating and dealing with fraud, so that may be a bump, that may be an increase because we have gone out and asked people to report anything to us.
Mr McLean: It has increased over the last year, I would presume, has it not? Substantially?
Mr King: I believe that every business in Ontario and perhaps in Canada would report that the recession has caused increasing problems with stretches upon their capability to deal with fraud.
Mr McLean: I have one that was given to me last Friday, as I travelled a bit in the riding, of an individual who owns a small store. She had an employee who was shovelling snow and all of a sudden hurt their knee. That individual has been on compensation for a year. The lady who owned the store did not get anything from the WCB about the individual receiving this injury. All she knows is that this individual is getting workers' compensation, and she claims that there was no injury, that this individual is doing what some others do, and is very concerned about it.
Mr King: Again, I can only suggest that people who have concerns about workers or employers or suppliers or our own employees who may be undertaking activities which we should look at more carefully should be in touch with our special investigations branch. Its number would be available through any workers' compensation office, be it regional or area. We will certainly be pleased to look into it. We may not be allowed to report back because of freedom of information and the right of individuals to privacy.
I also wanted to take a brief moment to point out the delicate balance we have to try to maintain. Many of the members of this committee have pointed out the severe or serious service delivery problems of us not responding to pay the claim quickly enough or us not responding sympathetically to an injured worker who has approached the board for benefits. That's a very serious matter and I don't underplay that in any way, but we often know significantly more because of the reports on our files than the constituency assistant or the MPP knows from the one-sided approach they receive.
So I just urge some caution, that things may not always be as simple as they seem when the individual approaches you and says, "This person is shovelling snow and they didn't hurt themselves." I don't know; there may be a perfectly legitimate claim and perfectly legitimate benefits being payable. I ask you to keep an open mind on that, just as I ask you to keep an open mind when someone comes in saying, "The board is bad because they didn't pay my claim." There may be very legitimate reasons involving law and involving fact.
Mr McLean: I would be safe in advising those people to write to the board with their complaint of any individual who would do that?
Mr King: That's correct.
Mr McLean: Would it be appropriate if they didn't sign their name? Or would they have to sign?
Mrs Karen Haslam (Perth): Do you look at things that are unsigned?
Mr McLean: Well, I'm asking them a question, whether they would accept a letter --
Mr King: The issue of anonymous approaches is somewhat different from those that are signed or have a name assigned to them. Only if there is a prima facie amount of evidence contained in an anonymous approach that would allow you to legitimately say, "I have to look into this," would an anonymous call lead to an investigation. If someone phoned in anonymously and said, "I know because of the following: They have a secret bank account and they're receiving 50 cheques a day," I believe that even though that's anonymous, I owe some degree of duty to look into that, because there's fact there or there's purported fact that can be looked at quickly. But if someone said, "John Doe is a ripoff," I don't think we legitimately should look at that unless there is sufficient evidence. Anonymous approaches will not be looked at unless there is sufficient evidence that, on a prima facie basis, would lead you to conclude that there's fire behind the smoke.
Mr McLean: What about Crime Stoppers? Is that ever involved within your jurisdiction? Do you receive calls from them?
Mr King: I had indicated yesterday in my explanation of our fraud strategy that we have partnershipped with the various police agencies across Ontario, and they are the ones that support Crime Stoppers. They would come to us if they had evidence leading them to believe there was a fraudulent case against a worker or employer, one of our employees or a supplier.
Mr McLean: I have another area of concern. I've gotten letters like this before, but I'd like to read this one -- it's only a short one -- into the record.
"I wish to register my concerns about the way in which the Workers' Compensation Board is operated.
"I am enclosing copies of two pieces of correspondence, one that relates to the cutting of our rate by about $4.50 and one that reverses the rate change, retroactive to January 1, 1993, the date of the rate cut.
"My personal objection to the change is that consulting staff at the WCB offices did not know last week that the change was being made. I called in and questioned the rate, and spent at least 10 minutes on the phone while a staff member checked more than one computer program in order to confirm our rate. I then proceeded to make our payment based on the lower rate.
"Yesterday I received the notice of change, dated June 30, 1993.
"The letter indicates that firms may apply for special consideration where rates will change, but again a staff has had to be allocated to deal with calls. More staff will be required to deal with the paperwork, and many small firms are going to have difficulty in coming up with the additional money. There may be layoffs and bankruptcies caused by the financial stress incurred.
"The rate change should be effective July 1," that is, of 1993, "or retroactive payments should be due in several equal payments with no penalty. The WCB already has reports of earnings on file and could easily have the computer do a statement of balance due for every firm at very little cost."
This is an indication of some of the letters that we're receiving from small business. They say:
"In my opinion, it is time the WCB had a complete overhaul. Lines of communication need to be clarified and reorganized. Methods of billing and recording could be streamlined. Above all, the needs of small business need to be seen as having as much importance as the demands of big business.
"I hope others will state their views of the situation. Perhaps a chorus of voices speaking out will have some effect where one will not."
Mr Di Santo: Is it a construction company?
Mr McLean: No, that is from Valerie Gregg, Bremat Systems Ltd. It's a small company, probably five or six employees, I would anticipate.
Mr Di Santo: But in the construction business?
Mr McLean: Roofing, I believe.
Mr Di Santo: I want to make a premise and Brian will explain to you the technicalities. This is a classic example where a small businessman is faced with a situation which is obviously aggravating for him. Logically, he draws conclusions on the old system.
What happened here was that, as we explained yesterday, we have reorganized all the rate groups. Last year in the budget we decided that in order to allow the employers to go to their rate group without having too much increase or decrease, we would increase a maximum of 3% and decrease a maximum of 3%.
In mid-year, COCA, which is the major construction organization in Ontario, told us that this was not acceptable, that it wanted the employers to be transferred to their proper rate group, and that resulted in that type of situation. But it was not the fault of the administration; it was a decision of the board of directors that was prompted by the employer representatives, because in the construction industry they had come to the conclusion, for reasons I don't know, that this was the best approach.
Mr King: As Mr Di Santo has explained, the Workers' Compensation Board did not institute this change at its own initiative. They responded to an approach from the Council of Ontario Construction Associations, which indicated to us that the board-approved rate setting was not suitable. It came forward with a very large argument and lobby that we amend that. That construction lobby was supported by the unions in the construction industry. In fact, it was a joint effort on the part of both the employers and the workers on the Workers' Compensation Board to bring about the change which led to this constituent's concern. In a technical sense, this was not the initiative of the administration of the WCB but was an initiative of the industry and workers in the construction area, and our board supported them in that.
It may be of some assistance to a constituent who obviously has concerns: Although I believe there has already been a response, if you want to leave the concern or the letter with me, I can certainly see that it's looked at once again.
Mr McLean: I believe they have had a response, but would this not be an indication of the importance of having small business represented on that board?
Mr Di Santo: It was prompted by the representative of small business, Mr Carmer Sweica, who represents the construction business.
Mr McLean: I thought it appropriate that it should be on the record, because there are other individuals who may be in the same situation. They'd be well aware of that.
The Chair: Thank you. This meeting is adjourned until 2 o'clock. Thank you for your attendance.
The committee recessed from 1203 to 1405.
The Chair: We are continuing to review the Work-ers' Compensation Board. In rotation, our first speakers this afternoon are the government members.
Ms Murdock: I want to follow up this morning's session, a continuation of the question I asked. All I know is what was on CBC, so I don't even know whether or not it is part of the classification problem.
Mr King: I think I can give you an answer or follow-up from what Mr Di Santo was telling you. The board introduced a new classification plan on January 1, 1993. Last fall, when we discussed the plan with employers, we went out and consulted very heavily about how we move from the old rate system to the new rates. There is a significant move in many cases: Some employers go up and some go down very considerably. The board had recommended that we move towards the new rates in a three-year progression; that is, that we go one third of the way to the new rate up or down, then one third of the way, then one third of the way.
The employers of Ontario came to us unanimously, in a consensus, and said, "Don't do that." The employers of Ontario came to us through their major associations, including the Ontario Mining Association, and said, "Only go up or down 3% towards the new rate." To give you an illustration, if an employer was paying us a 6% rate and its new rate was going to be 9%, our recommendation was that we move one third or $1. The consensus of employers was, "No, only go up 3%," or 18 cents, I guess it would be.
The particular story you're referring to had to do with a mine which is going to see a much lower rate under the new rate structure, but because of that recommendation by employers that we only go down 3%, it saw only a very small reduction in its assessment rate in 1993. Depending on what our board of directors decides to do in the 1994 rate, they may either get a big decrease in their assessment rate or, if the employers come to us and tell us unanimously or in consensus, "Don't move very far toward the new rate," they may see only a very small move toward the lower rate.
What we can't see happen is that all of those who get a reduction in their rate under the new plan see themselves get a lower rate and that all those who have to pay more end up being free from paying more. There's got to be a balance here: If we're to give reductions under the new plan, we have to see the increases. We're out consulting right now with the employers on this.
Ms Murdock: I know that part of the reporting was that both the Local 6500 and Inco were going to try and arrange a meeting with people at the board. Is that possible?
Mr King: There is a meeting scheduled for this Thursday afternoon when the members of this committee, or those who are free, will be touring 2 Bloor East. I have a meeting arranged with the Ontario Mining Association. Presumably, if this employer wishes to come to that meeting, it is free to come. If they wish to bring their bargaining agent, they're free to come. They may be requesting another meeting that I'm not aware of, but I stress that we can't single out one employer and say, "You get the decreased rate and no one else does." We've got to be consistent so that if we go up we go down, and if we go down we go up.
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Ms Murdock: I'll make this my last question because I know Mr Waters has questions too. In terms of the classification, is the classification rate in any way tied to the health and safety programs? Mr Di Santo has used Inco and Falconbridge as examples of how well that's working, where there are joint health and safety committees and how they've reduced accidents and deaths. When they do that, is that going to be tied in any way to the rate? Is it possible to do that?
Mr King: The reduced rate for this particular employer is based upon its cost relative to others in its industry. They have a better cost experience, which arguably is related to their health and safety program and to their modified work program in getting workers back to work. That has certainly been Mr Di Santo's experience, and he's spoken glowingly of their health and safety and their modified work program. It would be our wish to see them receive this more favourable rate in as quick a method as we can find to give them the new rate, but if the employers of Ontario come to us with a consensus which says, "Don't go up or go down rapidly," then I'm not too sure we can single out individuals. We've got to determine what the consensus of employers in Ontario is.
Ms Murdock: Just one more on that: I know it is tied, that high-risk industries have a higher premium and so on. Is that going to be maintained in the new classification system?
Mr King: The speculative or the futuristic comments I made, that we should be considering a different rate structure, were more to get people to think about some of the problems that are raised by the present rate structure and the pressures of competition on our industries. The board of directors and the administration have implemented the new classification plan that the employers wanted. We're committed to it. We implemented it, even in light of having systems problems; we were able to put in a contingency. There is simply no plan on the part of the board to go away from that plan, which is based upon experience. My remarks earlier were more strategic than they were operational or short-term.
Mr Daniel Waters (Muskoka-Georgian Bay): I believe it was during the time we brought you back on one of your many trips to resources development. The hot issue of the day was your new building, and I was as upset as anyone else about the thought of WCB building a new building. I recall meeting you, Mr King, and Mr Di Santo outside the room, and we had a discussion on the new building, at which time I went away quite satisfied, by the way, with WCB's decision. Maybe that would be a good place to start this afternoon: the rationale for the need for this new building.
In my case, I have a father who is in a wheelchair, who is a partial quad. When you started talking about accessibility, in the limited amount of time I'd been in your existing building I recognized the need for some definite changes for people with disabilities, if we were to do it.
The other part I'd like you to touch on, which was mentioned this morning when we talked about the finances of the board, is that I would assume with this new building that after 20 years you would then have some sort of asset which would possibly be used in your financial picture. Could you touch on all of that?
Mr King: Firstly, the Workers' Compensation Board is coming out of a long-term lease at its present quarters at 2 Bloor Street East, commonly known, I believe, as the Hudson Bay tower at the corner of Yonge and Bloor. If I walk into the WCB building off of Yonge Street, or try to walk into the WCB building off Yonge Street, I am met with approximately 12 to 16 steps. Therefore, because I have difficulty with steps, I walk around to the Bloor Street side of 2 Bloor and try to get in the building. I look and I find a similar set of steps to go up into the building. To get down into the concourse to get to the building, I'm faced with steps going down. I'm in a wheelchair, so I can't do that. I either face the humiliation of a disabled person having to have someone carry my wheelchair up those steps or down those steps or I try to find another way to get in the building.
I continue around the building and come to a parkade entrance. I wheel my wheelchair down a parkade entrance, which would be very dangerous, and I find myself in a parking garage. I then make my way to the elevator, to the concourse of the building, and I come to the WCB. I find an escalator. I can't go up an escalator in a wheelchair and I have to look around for an elevator. There is one elevator hidden away around behind to get me up to the main entrance. If I try to come by public transit on the subway, again at the Bloor and Yonge station I find a stairway before I can get up into the concourse, so public transit is not an acceptable method.
For those of us who work at 2 Bloor, a thorough analysis of that building's ability to handle the WCB's needs for efficiency and service to the workers and employers has been done. Firstly, we moved into that building 19 years ago. The air-conditioning system does not support hardware for a data-processing system. We can't have a computer mainframe in there because we can't have the proper environment. We therefore have to be offsite for something like that. During the hot summer days and the cool winter days, other delicate electronic equipment which is vital to us, because we go absolutely blind if we can't use our electronic office, fails on us because of the inadequate ventilation, air-conditioning and heating system.
The floor sizes at 2 Bloor are very small. It has what's called a very small footprint or floor plate. Our business is therefore separated over about 25 floors. Therefore, if you want to come to visit someone in order to coordinate the way you do your work, you may have to move between floors 20 or 30 times a day rather than be able to walk on a level surface in a larger building.
I know there has been some controversy about the elevator system. I invite any of you who are going to tour the building to come to that building at any time between 8 o'clock in the morning and 9:30 in the morning and try to go up, or to come to the building at coffee break time and try to go up or down. I think there is simply no question that the present site is inadequate.
Several years ago the board, as part of its strategic facilities planning, did a detailed study about what would be the best future for the WCB. It first determined that the 2 Bloor site would not be a proper site for the WCB, for some of the reasons I have mentioned. It therefore went out and did extensive surveys of the stakeholders, the clients of the WCB, to determine what they wanted by way of service from us -- accessibility, location, public transit versus driving, downtown versus out in the more suburban area -- and, based upon that finding, determined that a downtown location would be preferable for the customers.
It then determined, in terms of its business needs, what would be the best business deal. We have $6 billion to invest in workers' compensation. One of the things you have to do when you're investing that much money is to distribute that money in as safe a way as possible by diversifying your investment. The board therefore has a large sum of money in the very, very secure bond market, but your rate of return isn't as good on the bond market; therefore, it has another chunk of money, somewhat smaller, in the equity market, where your return is traditionally much higher but your risk is somewhat higher. Finally, the board has significant investment in the real estate market. If you look at the other large funds in Ontario, any board or any large pension group -- OMERS, hospitals, teachers -- you will find that real estate is one of the main planks of their investment platform.
From an investment point of view, the board determined that it could make a wonderful return for its investment by investing in an office tower in Toronto. The tenant side of the WCB determined that rather than pay rent to a landlord and see that money disappear totally, it would be better to take a long-term lease on a building and allow the investment side of the operation to have an ownership position in that building; in other words, it would pay rent to buy a building.
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The board has entered a rather complex agreement to have the investment side invest in an office tower in an ownership position. The investment side will be about three-quarters owner in an office tower after the mortgage is paid. That will be an asset to the board in its investment fund, and it will return a rate of return higher than the average long-term rate of return of bonds and equities.
As a tenant, the board is guaranteed a 20-year rate for rental, without any increases for 20 years. In addition, it has two 10-year holdovers it can take, which means it has 40 years' potential in that building.
The new building will be designed specifically to deal with efficiency and service for our clients. I have described to you earlier that we're an electronic office, a paperless office. Those of who are able to tour on Thursday will tour one of our offices and will see cables coming down out of the ceiling. That's because that office was never built to handle the modern electronic office. If we have to move anybody, we have to have people come in at night and go up through the artificial ceiling to move one computer. We have 1,300 imaging terminals and several thousand computer systems to do our business efficiently. There is movement of those machines, and it's incredibly inefficient and costly to do that.
The new building will be user-friendly for disabled people who visit us. A hundred thousand people visit the WCB every year: 100,000 people. The majority of those 100,000 people are disabled workers. I've described to you what is a real dilemma for them to come and visit us at 2 Bloor. The new site will have ramps for the disabled. It will have parking spaces specifically set out for the disabled. There will be a special elevator, meaning they don't have to wait and wait in the lobby. In addition, there will be two huge floors set aside for the WCB. That means our business can be spread out horizontally rather than vertically, and the majority of linkages and connections in our business will be done right beside each other rather than up and down.
The present building is leading to an incredible amount of health and safety problems. The lighting is 20 years old. We are an electronic office. The number of claims coming in for people who have serious health problems, from eyestrain, from ergonomically incorrect workstations, is skyrocketing.
The new building will be designed so that the lighting is state-of-the-art from a health point of view for our workforce.
For those who might think this is going to lead to excessive space or luxury for employees, right now we have less than one half of the square footage per worker that the private sector in the insurance industry allows for each worker -- less than half the square footage. Any of you who will be able to visit Thursday may criticize us for making workers work in unsafe working conditions where they're literally tripping over each other because of the crowding. We will not be expanding up to the private sector level in terms of space per employee; in fact, we will be having three quarters of the square footage that the private sector has.
In case anyone thinks the executives will be getting a better deal, the executive offices are all going to be smaller and more compact. There will be more meeting rooms for employees to meet, to be trained and to come together to conference cases and to learn how to get our business run better.
This has not been one of the easiest times for the WCB to have gone through, because the board made a very strategic decision in 1990 to go with the new office building as being the best choice for the WCB. What unfortunately happened between decisions being made, contracts being signed and agreements being achieved between developers, land owners and fellow partners in the investment was that the real estate market in Toronto collapsed. Therefore the perception has not been the greatest, from the WCB's point of view.
The Chair: You may wish to continue your answer to Mr Waters on the next rotation, because we're out of time on this rotation.
Mr King: Thank you, Madam Chairman. May I just introduce a board member of the Workers' Compensation Board who has come to observe: Steve Mantis from Thunder Bay, or north of Thunder Bay in a town I can't pronounce, is here.
The Chair: I too was happy to see Mr Mantis arrive in the room, because I recall Bill 162 and Bill 208, when Mr Mantis represented the injured workers in this province in a very excellent way in a number of deputations back in those years; I can't even remember what year we started on the road show with those bills. I too commend Mr Mantis for his work.
Mr Bradley, we had you down before lunch, if you would like to proceed.
Mr Bradley: Are we still dealing with the building?
The Chair: You can deal with whatever you want to deal with.
Mr Bradley: Okay. I wanted to deal with a couple of problems that have arisen in terms of the service you can provide. One is the issue that is being raised on many occasions now, even by people who in years gone by would have thought it was impossible ever to raise it: That's the issue of workfare, that is, requiring able-bodied individuals who are receiving welfare benefits, social assistance, to work. Even our Premier has made some vague references to this -- I would never have expected that, but he has -- and others have advocated this over the years.
One of the problems, I would guess, would be the coverage of these individuals. What problems are there in providing coverage for individuals who are employed in this fashion, particularly on a perhaps temporary basis as opposed to a permanent basis, temporary not only in terms of until they get off welfare but in that they might work two days one week and no days the next week?
Mr King: The Workers' Compensation Act outlines in both law and in regulation those industries which are covered or protected under the plan, and it does indicate in some cases where there are exclusions. If there were a work program such as you describe -- it might be, let's say, a municipality that put together some sort of work program -- provided it was under the auspices of an employer who was covered under the act, in other words, who was protected under the terms of the act, there would be protection for those individuals working under workers' compensation.
Sometimes you have to make special arrangements. You may recall some years ago when there were arrangements between unemployment insurance and some industries to work partial weeks and people collected partial UIC. The Workers' Compensation Board had to be flexible in order to establish the ground rules for those who might have been injured so that people didn't end up with a lifetime of low insurance coverage because of a short-term solution.
So those who might work only one or two days a week may fall into the category of present part-time workers, or, if the arrangement is similar to what I've described about those UIC-employer arrangements, the board may make a special case and indicate that we would cover people to a set amount if they're injured on that type of employment. I could see us being partners in determining the best way to handle those situations.
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If, on the other hand, those make-work projects were, let's say, in banking, an industry that isn't covered, there would be no protection under workers' compensation unless there was an application, and the law does allow for people to apply to be covered, and we could then determine whether coverage was available.
Mr Bradley: We had a situation arising in Ontario earlier this year with municipalities and agencies, boards and commissions indicating that there would be a major crisis with people -- for want of a better word, trainees -- who were working for homes for the aged, other municipal services, hospitals and so on, who had to be covered by WCB somehow. Am I correct in assuming that this wasn't really your battle, that it was a battle over who was going to pay the premiums, or were you deeply involved in that?
Mr King: We were so deeply involved in it that it's a period in my life that matches the facilities strategy.
What happened was that as industry began entering this recession and began looking for ways to compete in the very, very difficult cost squeeze they faced, one of the areas they looked at was whether or not they had to pay the compensation premium of workers they took in to train. In some cases there is apprentice training, in some cases there is industry training, in some cases there's just the voluntary bringing of people in to train them. To give you an example, to become a fully qualified registered nurse in Ontario, you'd likely have to work on a hospital ward for a period of time under the supervision of both a medical and a nursing supervisor to get hands-on experience in nursing, in addition to your schooling. What we found is that the employers in some instances were indicating that they were not going to be liable for the protection of these people they were bringing in to be trained because they didn't think they could afford to pay for it in the cost squeeze.
It gets complex between schedule 1 and schedule 2 employers, but in health care, for instance, most of them pay the full costs of work injuries. They don't pay us an insurance premium; they self-insure. They announced, some of them: "We won't pay these people. If you make us pay them if they're injured, we won't bring them in to be trained."
As an interim step, the WCB put forward what was called an interim training policy that said: "Let's start with the premise that these people are covered with workers' compensation protection so that if they're injured, they're protected, number one, and two, they won't be able to sue someone for negligence. Now that the interim policy is in place, let's argue about how it gets paid for." If you followed the story, you will know that the government ultimately indicated its willingness to pay the costs of the training participants, and that became the ultimate solution.
The problem you first posed, which is work creation measures, may be covered under the training situation. It may be covered in another way, depending on the individual circumstances.
Mr Bradley: I have a brief question about local community legal assistance clinics. They have in many municipalities provided the service of representing employees rather than employers, employees who are unable to get a worker adviser or who feel they would have a difficult time themselves in dealing with the board, so they have gone to those offices. Now that the provincial government has cut funding, frozen funding, whatever it has done to the funding of those offices, do you anticipate that's going to increase your workload on your worker adviser? Or how do you see this impacting on your whole operation, the fact that those people sometimes just when you phone say, "We're taking no more cases this month"?
Mr King: As Mr Di Santo pointed out earlier, it would not be proper for the Workers' Compensation Board to comment on another independent agency, the office of the worker adviser. I'm aware that there may be some funding problems in the community clinics.
Let me start with the premise that nobody under a workers' compensation system should have to have a representative in order to have his rights protected. Nobody, meaning neither a worker nor an employer, should have to either hire someone or seek the services of an office like the worker adviser. It is our duty as an agency, as the upholders of the Workers' Compensation Act, to insist that every worker's right under that act is fully exercised and fully protected and that every employer's right is fully protected.
That's a premise. Whether that's the case in Ontario right now is probably very arguable. We have a duty, as the administering body, not to make workers prove that they were injured on the job, but if an injured worker comes to us, to go out and find out if they were, if there's a dispute.
I would urge people who are sitting in a queue or waiting in a line for a representative to help them with an appeal, at least at the initial stage, to simply write a letter saying, "I would like to appeal," because our first level of appeal, called "decision review," will do sufficient investigation to determine whether a claim rests or whether the person should get more benefits.
When you step up a step in Ontario you get to the hearing branch, and people often feel it necessary to have a representative at a formal hearing. That's probably where a representative may be more practical, because often an adversarial system exists, with the employer and the worker having an argument at that level. But I urge everyone at that first level: "Don't line up in a queue waiting for someone to take your case. Try us out and see if we can do the job for you." If we can't, they have two remaining rights of appeal in Ontario, one to our own internal hearings branch and the final one to the Workers' Compensation Appeals Tribunal. So although there may be a problem out there with representatives being available, I urge people not to become totally and absolutely frustrated if they think they've got a valid case. I would urge them actually to phone the workers' compensation office and see if they can't get it straightened around with the supervisor before they even appeal, rather than to wait and become more and more frustrated.
Mr Bradley: I will turn it over to Mr Mahoney, who has some questions.
Mr Mahoney: I have a number of questions, but I've got to follow up on that offer, which I think is a fair offer. I guess the problem is that we as MPPs deal with people every day at a level of frustration that goes well beyond the initial stage. You say, Mr King, that it's not your -- I'm not sure of the word you used -- job to ask workers to prove that they're injured, but every day I get people where that kind of thing is being disputed. More importantly, what's being disputed is the level of rehab that they've attained, as to how much modified work they can or cannot do.
Over the lunch period, I talked to a fellow who's been literally forced back to work half-days and is in terrible pain. His doctor agrees that he shouldn't be working, but he has no choice: He's going to lose his home if he doesn't go back. It's the system that's saying to him that he has to go back to some form of modified work, which is still causing him terrible pain.
While that may be your goal and your wish and, trying to be fair, may even be true in many cases, there are so many cases where it's simply not true, and those are the ones we get hit with. How do we sit here and accept with any credibility the statement that the workers' compensation system is not pushing people to a level of proof that is beyond their ability to prove?
I use the example of the university boy who fell off the back of a truck and wound up being left with the onus of proof on him. Common sense would tell you that an injury of that severity would not heal in one week, yet that's exactly what he received, one week's compensation from the board, and lost over $1,200 in summer earnings. There are all kinds of cases.
I've never met you. I've listened to you and Mr Di Santo for the first time this week. I don't doubt your sincerity, but I don't know if you've got your finger on the pulse of what's really happening in worker compensation issues at the street level. Maybe you should spend some time in my office or some MPPs' offices answering those telephone calls on workers' compensation issues and see what's really going on.
Mr King: I hope I've been candid and open at this three-day hearing thus far in admitting that the Workers' Compensation Board has not solved the problems. In fact, I've openly admitted to serious mistakes and serious service delivery problems. I am talking about a compensation system which should exist in Ontario and which we're trying to move towards, a system that says you don't have to hire someone in order to have your rights protected, that that is our job as the administrators of this system.
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I'm loath to get into a discussion about constituency offices, because I think first and foremost that MPPs are advocates for those who are their constituents and who come to see them with problems. Litigative law, like workers' compensation, where there is debate and dispute on fact, where there are significant wins or gains and losses to be made depending on which way the board rules, can lead to simplistic decisions being made when you only hear one side of the equation. Those of us in administrative law try as hard as we can to evenly adjudicate these cases. We don't make the right calls every time, but when you look at a case, you often find two sides to the case.
Mr Mahoney: I accept that. I would also accept the fact that while Mr Cleary and myself and perhaps some others have given you individual cases just as examples, just as Mr Di Santo did in his story of John in his opening remarks, it's very difficult in this setting for us to deal with individual specifics.
I accept the fact that you said, in essence, it would be a perfect world if a workers' compensation system did not put the onus of proof for injury or level of rehab on the client, but the reality is that the Workers' Compensation Board, in a generic sense, in the province of Ontario very, very much puts the onus of proof on those individuals. In many cases we see, it involves tremendous hardship to those people in the interim.
They might even win an award somewhere down the road, but we heard of one fellow who had to suffer through seven months of inactivity on the part of the board. I don't know about you, but I couldn't live seven months without some form of income and still hold on to my home and my automobile and other things I need, so I think there are very real problems in that area.
I do appreciate your response and that we have to deal with it individually, but I find a sense of frustration as an MPP in, first of all, listening to the litany of sob stories that come into my office from people who feel they've been done wrong by the Workers' Compensation Board. It gets tedious listening to all of these problems, but that's part of my job. What's even more tedious is a feeling of helplessness I have, that I can't resolve the problem unless I happen to be fortunate enough to be sitting on a committee and deliver something to someone in a position of authority such as yourself.
But I shouldn't be having to deal with you on a regular basis, nor should my staff. There should be a system of communication, which is, frankly, just not there, Mr King, on an ongoing basis.
Mr King: I'll be very brief. I didn't want to say that we're in an ideal world. I was trying to say --
Mr Mahoney: If we were.
Mr King: -- that if anyone was mistaken that they need a representative at that first level and therefore are delaying trying to get their compensation claim straightened around, all I ask is, give it a try before they become very frustrated. If they can't get through, then they may have to go through one of those more formal procedures. That's basically what I was trying to say.
Mr Mahoney: On some of the other issues, first of all, I read a response to a question that was sent prior to these hearings to Mr Di Santo, and this is a response to our clerk here. The question was, "Is the agency audited by the Provincial Auditor, ministry auditors, external/internal auditors or others?" and then the answers are provided in writing.
On the question of external auditors, the answer "Yes" has a double asterisk. It goes on to say, "The 1992 annual report of the WCB includes the opinion of the external auditors." Do you have any idea to what extent those auditors actually audited, or did they simply provide one of those generic chartered accountants' statements, that sort of disclaimer that says, "If there's anything wrong here, it's not my fault"?
Mr King: I think I would ask to defer to a professional finance person, because Mr Cooper, the chief financial officer, is the main person to deal with the auditors. I think he can give you a professional response to that.
Mr Glenn Cooper: We have a professional firm of auditors, chartered accountants, the largest accounting firm in Canada as our external auditors. They work on their assignment under the direction of the Provincial Auditor. In other words, they develop an audit plan and their audit plan is reviewed with the Provincial Auditor. It's also reviewed with the audit committee, which is a subcommittee of the board of directors. That audit plan is also reviewed with management. Management can have some input about the areas where they have concerns.
I believe they spent in 1992 well over 2,000 hours in the board doing audits. Because they were a new auditor this year, they spent additional time getting to know the business. It is a full-fledged audit. The working papers they produce are reviewed in detail by the Provincial Auditor's staff. The report comes back to the audit committee. The Provincial Auditor is present when the report is given to the audit committee of the board of directors, and the opinion, as you see, was an unqualified opinion in our 1992 annual report.
Mr McLean: I'd like to follow up on some of the questions I had this morning with regard to the individual small store that had the problem with the individual who said they were injured. Is there a charge back to that individual small store owner of some costs related to the compensation that the individual would be receiving?
Mr King: The Workers' Compensation Board has what's called an experience rating plan. I can't know without knowing the individual employer whether they're a member of that plan, because not every employer in Ontario is a member, although the board is moving to bring all employers under it.
If that employer is a member of the new experimental experience rating, NEER by acronym, their record of number of claims with the board, that is, the incidence, and the severity or the costs of those claims would be checked against all other employers of that particular category. If their experience was worse, they would owe us a premium or a fine, a surcharge, and if their experience was better than the other employers', we would give them a reward or a merit rebate, so yes, there could be a charge against that employer related to the costs of that claim if they're a member of the plan.
Mr McLean: What division of the WCB would deal with those types of instances?
Mr King: There are two parts of the WCB that deal with this particular situation. There is an employer incentives branch of the WCB which deals with the experience rating plans and deals with any appeals or concerns that workers and employers might have. The actual adjustment of the books, if you will, if there were any changes, would be in the area of the revenue department. If you have a concern for a company or a constituent, both of these departments are under the vice-president of finance, so all they would have to do would be to contact the vice-president of finance at the Workers' Compensation Board for possible redress.
Mr McLean: I want to move on to another area. It's been brought to my attention on several occasions and just this last week, and I told the individual to write me a letter. It had to do with an individual who wanted to start a new business. He anticipated he would be hiring six employees but, as it turned out, the business didn't get off the ground when he really wanted it to and he ended up hiring one employee, but the WCB has continually billed him for payments for six employees. He became very frustrated after about nine months and wanted to know what they're going to do about it. Do you have many cases like that?
Mr King: Too many. Probably one is too many, but I won't try to pretend there is only one. We have, and I will plead guilty to this, expended the majority of our energy since the last standing committee on resources with what I call service delivery for the workers and the benefits side; in other words, the claims of those workers who are filing for benefits.
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We have been putting some energies in the area of revenue enhancement -- that's the employer side of the equation -- but I think I would have to argue that until the hiring of a new executive director, a very experienced gentleman from Alberta, in about January or February of this year, we have not done everything we should have to make sure that employers are properly serviced.
I urge you, if you get cases like this from the employers where we're not providing good service, to be in touch with either myself or the vice-president of finance and administration, because this is not acceptable service. Unless it's brought to our attention, we can't take the corrective action.
We are implementing performance management where people are going to be held accountable for their areas of responsibility and we have to be able to have this feedback from people like yourself.
Mr McLean: I'm only giving you a few instances, but I understand it's a major, major problem. My quarry was to find out if you're addressing it and how soon it is going to be addressed without further complications.
I've often wondered why the WCB didn't, when a person needs a physiotherapist, have it done privately. How many people do you have on staff at the WCB who are physiotherapists?
Mr King: About four years ago, the board closed down its physiotherapy, literally closed it down, and started up what was called the medical rehabilitation strategy. Right now across Ontario, there are now 104 community-based clinics, private clinics; the private sector has these clinics. They're based upon the sports medicine theory of treatment whereby you don't let the injury tighten up by not moving it, by getting active as quickly as you can. What you see with professional athletes is that very shortly after a sprain or a strain they're back out on the field, and the way they're able to do that is to keep the injured part moving, not to let it tighten up.
Each of these 104 clinics, spread all across Ontario, is a private sector clinic. It provides the basic 90% of the physiotherapy that's delivered, or the treatment at that level that's delivered. There are private physiotherapy clinics that are utilized in Ontario. The board may have a handful of physiotherapists for very specialized cases.
We have an amputee clinic, for instance, and a prosthetics clinic where they build limbs. We have an orthopaedic shoe area where people who have foot injuries can have special footwear prepared --
Mr McLean: Is that in the office on Highway 400?
Mr King: That's the Downsview site off the 400, yes, that's correct.
Mr McLean: Is that facility used to its max or has it been phased out somewhat?
Mr King: The Downsview facility off Highway 400 on Torbarrie Road is the facility that I indicated was virtually shut down about four or five years ago with the decentralization of the treatment of workers. Prior to that time, workers were flown in or bused in from all across Ontario to have treatment at Downsview. Now they can have treatment at Thunder Bay, they can have treatment in Oshawa, they can have treatment in Oakville, they can have treatment in St Catharines -- in their local community, with a private clinic, one of these 104 clinics.
The facility at Downsview does have the orthopaedic clinic, it's got the prosthetics shop, it's got a head-injury clinic, which is a very specialized area, it's got the orthopaedic shoe program and a neurology program, but right now it would be about one quarter utilized. The building is up for sale right now, as a matter of fact.
Mr McLean: Then the staff and injured workers' travel expense should be down and not up. The indications I have are that it's increased substantially.
Mr King: The travel expense may not have gone down, because if someone was being treated centrally at Downsview in Toronto, they may have been paid travel once every week or once every two weeks to come into Downsview. However, if they're being treated in Thunder Bay and they live at Red Lake or whatever town is near Thunder Bay, we may be paying them each day to come in for treatment and then home again at night. It doesn't necessarily follow that because you decentralized your treatment, you're going to cut your travel costs.
Mr McLean: The retraining programs I've observed -- I have one case right now where the individual has been offered some retraining programs. The individual wanted to be retrained as a veterinarian, which he thinks he has the education for and wants to do, but the retraining would put him into a position which would pay far more than he was getting before; of course he's been denied for that very reason and he is rather upset that he's been denied. Will you not allow them to make any more than they were making in their previous employment?
Mr King: I would hope not, but I dread to give blanket assurances in a forum like this because someone will always bring a piece of paper up to prove me a liar. I think the board admits that it needs to do work in the area of vocational rehabilitation. The task force report you referred to, which was a joint report from both industry and labour, was highly critical of the board's rehabilitation program.
In response to that, we have done many things, the first of which was to hire someone specifically dedicated to vocational rehabilitation, the chief vocational rehabilitation officer. The second item: Odoardo mentioned yesterday that he has appointed a vocational rehabilitation advisory committee which has equal members from industry and labour, who are to tell us, as the chief users of the compensation system, the type of rehab they want us to provide. I think it's going to take us a while longer to give the sort of rehab that Ontario has the right to expect and that we have the duty to provide.
Should we be rehabilitating people? Of course we should. I have a special interest in this from a personal point of view in that I earn a little more money now than I did when I was injured some years ago, and it was through rehabilitation, through a workers' compensation system. I'm a personal fan of that model.
Mr McLean: I'd like the record to show: Can you indicate to me the numbers of the board and the makeup of the board?
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Mr King: At present there are 11 people who are board members. The two Odoardo mentioned yesterday were myself, who is vice-chair, and of course he is the chairman of the board. Titles: Odoardo Di Santo, chair of the Workers' Compensation Board; Brian King, vice-chair.
Representative of employers is the Honourable Robert Stanbury, vice-chair, who is nearly full-time; Carmer Sweica, who is out of the Council of Ontario Construction Associations; Maurice Dutrisac, who is presently senior vice-president of human resources with Southam, previously out of Inglis manufacturing and who is a Canadian Manufacturers' Association representative; and Ms Daphne FitzGerald, who is a vice-president of human resources, although I believe she got a promotion, with Zurich Insurance.
From the workers' side is Dennis Schweitzer, who is with the United Transportation union, and he is full-time or near full-time vice-chair of the board. Joe Duffy is the head of the construction workers' council, representing construction workers. I'm going to be knifed in the back because Steve Mantis, who is a representative of the Ontario Network of Injured Workers -- no, he's left, so I won't get knifed in the back -- is a board member representative of workers. Homer Seguin is presently, I believe, retired, but a long-time activist in the United Steelworkers in the area of occupational disease and other union matters.
That's four and four from industry and labour, two appointed by the government, as was pointed out yesterday. In a third category is the ex officio member, the chair of the Workers' Compensation Appeals Tribunal, Ron Ellis.
Mr McLean: How much would a full-time vice-chair make?
Mr King: I believe their per diem is presently $400 a day.
Mr McLean: But they would be pretty well full-time?
Mr King: I believe there is a cap on their billing. In other words, they're not allowed to bill more than $88,000 a year, which would be 220 days maximum, if my math is right.
Mr McLean: What would the salary range of the vice-chair of the board be?
Mr King: I get $120,000.
Mr Mahoney: We could get Bradley to retire for that.
Mr McLean: There were some modifications done at the present site with regard to some drawings and some art. Is that in the foyer? Where is that, and what was the cost of that?
Mr King: I know of no modification other than that I had some art taken down out of my meeting room because I thought it was too much like Number 18 or Number 16 or whatever that expensive drawing was. I don't know where it's hanging now, but I know of no other modifications.
Mr McLean: You talked earlier on about the rates and how you're changing them, lowering some and raising some. In three years you hope to have it finalized. Are you looking at a flat rate in three years?
Mr King: I had tried to give the committee some strategic thoughts about future potential changes to compensation and I had raised the issue of a flat rate. Let me once again assure this committee that the board of directors has implemented the classification plan that the employers of Ontario recommended we implement. It was implemented fully January 1 of this year. The employers didn't all go to the rates that are called for under the plan because they came back, on a consensus basis, and said that would be too traumatic.
The board is committed to that plan. The board has no plan to move to a flat rate now or in three years. I would hope people could break some of the paradigms that exist and discuss alternatives, but that's my feeling alone.
Mr McLean: Thank you. The final question I have is that the Workers' Compensation Appeals Tribunal has been allowing chronic occupational stress since 1987. The WCB administration proposes a policy with regard to WCAT more stringent than that. How many of those appeals of chronic occupational stress do you deal with in a year?
Mr King: You're very correct that the Workers' Compensation Appeals Tribunal does hear cases for chronic stress arising out of the course of employment and has accepted numerous cases of chronic stress, some of them highly publicized.
The Workers' Compensation Board policy is to accept stress cases where there is a traumatic onset. In lay terms that I always like to use, because I'm a layperson, I think all of us would agree that if a law enforcement officer was present when there had been a particularly gruesome discovery, and I won't go into any examples, something can snap, something related directly to the work you do. If you're with a fellow who is gunned down, for instance, or if you were on top of that scaffold that collapsed in St Catharines and you managed to make it on to the safety of the pillar but watched six of your comrades fall to their death and you had a breakdown, I think every one of us would say, "That was caused by work; there is no doubt that was caused by work."
What we at the board don't generally do is accept the day-to-day stressors that all of us face as being work-related or compensable. There have been a handful of cases, and I assure you just a very handful, that have been accepted at the board, but we don't generally accept them.
I don't know the numbers of cases that come through our system each year. If I recall correctly, the estimates of cost if the board were to open up the entire system to chronic stressors was in the $150- to $200-million range per year.
Someone has just written me a note indicating there are likely around 500 cases per year brought forward for stress claims, and we would accept those in the category I previously described where there was a culminating incident or a trauma.
Mr McLean: How many of those 500 would be approved?
Mr King: I would guess that less than 50 even acute stresses would be accepted and less than a handful of chronic stress would be accepted by the board. The WCAT may be up in the score of cases accepted for chronic stress now.
Mr McLean: Thank you. Madam Chair, tomorrow afternoon we're dealing with the tour of the board?
The Chair: Yes, that's right.
Mr McLean: Was there any discussion with regard to touring it in the morning and having some questions in the afternoon after we had a look at it?
Mr Mahoney: They need the morning to get the building set up.
The Chair: Actually, to answer your question directly, the only discussion was between this afternoon and Thursday afternoon. There wasn't such a wise suggestion as to tour it in the morning and talk about it in the afternoon. I'm sure if the committee wanted to change it, we could change it.
Mr McLean: I'd like to do that, but it's up to the rest of the committee.
Mr Bradley: They'd have to work overtime tonight to put all the boxes in the aisles.
The Chair: We're finished Mr McLean's time. Would the committee like to consider going in the morning instead of the afternoon?
Mr Marchese: If Steve is coming, absolutely.
Mr Mahoney: I'm not available tomorrow. You guys have a nice time.
Mr Marchese: Jim is coming.
Mrs Haslam: I'm concerned about Ms Witmer.
The Chair: Ms Witmer won't be here tomorrow --
Mr Bradley: She's going to miss the trip.
The Chair: Excuse me. Ms Witmer is not able to be here tomorrow at all, Karen, so that's not a problem.
Mrs Haslam: That was one of the concerns. My other concern is the time allotment. Some of you have seen the building; I haven't. If anyone has been on a tour with me, you know that I ask a dozen questions, go into a lot of places and spend a lot of time looking at the facilities I am interested in. I'm only asking about time. Is this a time problem?
The Chair: Let me answer the question with a little structure. The sitting schedule which you approved at the beginning of the week was to sit from 10 till 12 and 2 to 5. If you wanted to do the tour in the morning, then we could agree to spend three hours in the morning and sit two hours in the afternoon.
Mrs Haslam: I've only asked that as a clarification. Would that be okay with everyone?
Ms Murdock: Nine to 12 and 1 to 3? I like that.
Mr King: We're at work at 6:30 in the morning.
Mr Mahoney: Most of us don't get home till then.
Mrs Haslam: We're not asking from where.
Interjections.
Mr Waters: Do whatever you have to, Madam Chair.
Mr McLean: I would suggest 9:30 to 12:30.
Mrs Haslam: And 1 to 3? I would like clarification on the time, because like everyone else I have functions to attend in the evening at 5 o'clock.
The Chair: Okay, 9:30 to 12:30 would be the morning. Then are you talking about an hour for lunch or to get back here, or what would be your wish?
Ms Murdock: The board will provide us with sandwiches.
Mr Mahoney: Won't you get sandwiches at the board? Watercress sandwiches, those little things?
Mrs Haslam: No, they won't.
Mr Marchese: With the unfunded liability?
Mrs Haslam: Can you afford it?
The Chair: Can I afford it?
Mrs Haslam: No, Madam Chair, I would never ask what you can and cannot afford, trust me. I am asking for the times. Is it 9:30 to 12:30 and then 1 to 3?
Mr Mahoney: If the Chair's buying lunch, I might change my schedule. Are you buying lunch?
The Chair: The afternoon has to depend on what you want to do about lunch. Is there a cafeteria we could eat lunch in, Mr King?
Mr King: No, but we could arrange, if it wouldn't be looked upon as --
The Chair: Payola.
Mr King: -- an undue influence, to have some sandwiches available at 12 o'clock at the boardroom.
The Chair: Actually, Mr King, to make you feel more comfortable about that, having been on this committee for a number of years intermittently, I can remember other government agencies, even the psychiatric hospital in Mr McLean's riding, that served us a very lovely lunch as a committee, and certainly in other parts of this province a government agency has served the committee lunch, so it would not be a precedent to serve an inexpensive repast.
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Mr Waters: Madam Chair, if I might, could I make a motion that we meet at WCB, 2 Bloor Street, at 9:30 to 12:30 and then resume in the afternoon at 1:30 till the appropriate --
Mrs Haslam: Till 3, I thought.
The Chair: Are you saying 3 or 3:30?
Mrs Haslam: Let's say 3, and then --
The Chair: No, we have to agree. I think we should sit from 1:30 to 3:30 and then we're committing to the same amount of time.
Mr Waters: That's fine. That's my motion.
The Chair: The motion is that we sit from 9:30 to 12:30 at the WCB office and then reconvene here from 1:30 to 3:30 tomorrow. All in favour? Carried.
Mr King: Where would you like us to be to receive you? At the reception area at Yonge Street?
The Chair: That deals with my next question. What does the committee want to do, just meet there, or would you like to get taxis from here?
Mrs Haslam: To 2 Bloor Street? It's two blocks.
The Chair: I'm only asking. Ms Murdock?
Ms Murdock: Actually, I think we should all just meet there and get there on our own steam. But given what has been said here yesterday and today in terms of the disabled entry etc, I think we should be meeting somewhere outside the building as if we were an injured worker who required accessible entry and that somebody from the board meet us downstairs and bring us in the way a disabled person would have to go.
The Chair: All right, Mr King, where would you suggest the committee meet you at 9:30 tomorrow?
Mr King: If you meet us at the Yonge Street entrance, that probably is the easiest to get to. You can take either of the two subway routes to the Yonge and Bloor station and the concourse, where there are signs that show you the way to the WCB. There are receptionists on duty who can show you to the Yonge Street entrance. We can determine at that time how many would be present at lunch and figure out what to get.
The Chair: Is everybody here now going to be there in attendance tomorrow?
Mr Mahoney: No.
Mr King: We can check tomorrow morning.
Mr Mahoney: Mr Curling will be there.
The Chair: Mr Curling, Mr Bradley and Mr Cleary. Are you coming tomorrow morning?
Mr Bradley: Oh, I wouldn't miss this trip for the world. I'll be there, large as life.
The Chair: All right. We've agreed on the times. We've also agreed to meet at the Yonge Street entrance. Anyone who is not attending tomorrow, would you indicate for the clerk, please? They're all coming. Everyone who's in the room, with the exception of Mr Mahoney, will be there tomorrow.
Mr Mahoney: I'm sure that breaks your heart.
Mrs Haslam: Oh, it does.
Ms Murdock: I think it's sad that you're not going to be there. You, as a critic, should be.
The Chair: We're going to resume our rotation with Ms Carter for the government.
Ms Jenny Carter (Peterborough): I want to get back to the building. I'm looking at the Provincial Auditor's report, which says:
"The assessments were highly influenced by the WCB's desire to own its headquarters. For instance, the cost of constructing and financing a new building was not compared to the cost of leasing space."
It seems to me it's common sense that if your rent money is going into something you basically own, you're doing much better than if you're just paying rent, but I wonder if you could go in a little more detail into that situation and the extent to which you're getting your money back, how long it takes to recoup your investment and so on.
Mr King: I'm going to ask the chief financial officer of the Workers' Compensation Board to comment on the investment aspect of the Simcoe Place project.
Mr Glenn Cooper: Yes, your views are correct. Normally, if you're going to stay in a location for a number or a period of years, you're better to own the premises as opposed to lease. Generally, in an office tower situation, it's better, once you get beyond 8 to 10 years, to own a facility as opposed to leasing it. The economics work out to your favour.
In our case, we have committed to a 20-year lease of these premises. We were in our former building with a 20-year lease. We think the Workers' Compensation Board will be around for another 20 years at least and that we will need the premises.
I think the report you make mention of was subjective. One may want to keep one's options open, but there is a cost to doing that, and our analysis indicates that the cost of keeping our options open and with more flexibility would cost us more money. In this situation, we've entered into a fixed lease rate for 20 years, and we have the ability to sublease the building; if we wanted to sublease, it would give less space. So we do have a fair amount of flexibility, at the same time minimizing our cost, and we have a very attractive rate of return on our investment.
Ms Carter: It was pointed out to us earlier that you do have funds to invest anyway so that you might as well invest in what is going to be your own building.
I think there's some misunderstanding here as to where the money is coming from that is being invested in this building. There seems to be an impression in some quarters that it could put up your assessments to employers. I just wonder if you could explain to everybody where it came from.
Mr Glenn Cooper: Where the money is coming from: First of all, we do have $6 billion, which was earlier described by Mr King as widely diversified into various portfolios including bonds, equities and a small portion in real estate.
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Our present plans are to borrow a portion through a mortgage and use part of our own funds for the facility. Originally, in 1990, it was anticipated that all the funds would be borrowed, that we wouldn't use any of our own money. By using borrowed funds rather than our own money, we get an even higher rate of return because you still have your own money invested, what you're originally earning. If you're using somebody else's money to borrow and use that for an investment, you're making money on that; you're enhancing your return.
At the present time, we have made arrangements to borrow a little more than half of the transaction. We wanted to have financing in place before we started construction and that's why we put some financing in place. We will visit the marketplace over the next couple of years as the building is built and determine whether or not we'll borrow more for the facility.
Ms Carter: How was the decision arrived at to spend the money in this way?
Mr Glenn Cooper: The decision was arrived at basically in 1990-91, before I was at the board, but I understand the decision was arrived at because the return could be enhanced. We saw an excellent return on the facility, better than most real estate investments. The independent consultants we've used on this transaction have both estimated a return of about 13% per annum on the investment, which is considerably higher than what we earn on most of our investments.
Ms Carter: So this will have no effect on employer premiums or compensation rates or anything else?
Mr Glenn Cooper: The investment and the transaction, if it has any effect at all, is going to enhance returns. This goes the other way: It could reduce rates.
Ms Carter: Now, on a slightly different point, I want to read you something else out of this auditor's report. It says: "In our opinion, although the WCB technically had the statutory authority to enter into this transaction, it did not appear to accord with the spirit of section 64 of the Workers' Compensation Act. The WCB followed an indirect route for the transactions involved in this project. Lengthy and costly opinions from various lawyers and complex commercial arrangements were used rather than obtaining ministerial and cabinet approval for this project."
I wonder if you could explain that.
Mr Glenn Cooper: First of all, the government of the day was informed as we moved ahead in this transaction; we always keep the government informed of major transactions. The legal opinions were sought on the basis that in 1987 significant amendments were made to the Pension Benefits Act of Ontario which allowed corporations and pension funds to incorporate subsidiary companies to hold real estate. We, being in the real estate investment business, had inquired of our external lawyers whether or not the board could make such investments, to incorporate subsidiaries to hold real estate investments, because that was part of our regular business.
We had received an affirmative reply because our act allows us to invest in those securities which are permitted under the Pension Benefits Act. The complication here is that you're going from our act to the Pension Benefits Act, an act that was written for pension funds. We are not administering a pension fund. Our funds are funds that were raised and set aside, some of which are paying pensions, but it's not a pension fund. There are some complications involved here in going from one act to another act and interpreting how that act refers to our act.
It's very difficult for me to say what is the spirit of the legislation. I can't tell you what somebody else feels the spirit of the law is, but our views and the legal advice we received said we were within the legislation. We have received at least three legal opinions of that view. Obviously, as we moved ahead in the transaction -- and the transaction, as earlier stated, started in 1990 -- we have kept people informed of what we were doing. This is the first I've heard that somebody has commented that there's some concern with the spirit.
Ms Carter: Of course, the obverse, as they say, is that you did do, I understand, a very thorough job of exploring what was available and getting advice and so on, so you knew there were in fact no properties that would meet your specifications. I understand there was a Royal LePage review of rental properties in the fall of 1990.
Mr Glenn Cooper: I think I would refer that question to Linda Angove, who's secretary of the board. She is responsible for that process and was here through that process.
Ms Carter: I'm not questioning your decision to have your own building. I'm just trying to bring out some of the processes and the work that was done before that decision was arrived at. If you could elaborate on that, I would certainly be grateful.
Ms Linda Angove: Certainly. I'd be happy to. In the fall of 1990 we had a full public tender, calling from the real estate community for a number of options, including lease-only options. At that time, we did not know whether an existing building would meet our requirements, so we looked for both existing buildings and design-build.
Our initial response was 34 submissions, which included a number of existing buildings. It was important for us to meet our accessibility requirements as well as our operational requirements, so that was the first thing we looked at when we evaluated those 34 submissions. The director of internal audit participated in that review to ensure that it was a fair and equitable process and he endorsed the process we used.
We short-listed down to 13 sites that we wanted to investigate more thoroughly, of which four were existing sites in the Toronto area. We went and we actually looked at each of those sites and we evaluated those and short-listed down to four design-build sites. We determined with the help of Royal LePage -- and the consultant we utilized was also an architect, so he could tell us quite clearly what was involved in retrofitting an existing building, the cost associated with that and the time involved to do that, so we were well prepared in saying that we could only go to a design-build option.
We went to the board of directors at every phase of this project so that in July 1990, when we decided to relocate, that was approved by the board. In September 1990, when we initially tendered, when we short-listed from 34 down to 13 and when we short-listed from 13 down to 4, each of those steps went to the board of directors, and it approved every one of them.
In February 1991 we recommended that negotiations occur with the preferred site, which was Simcoe Place, and the board authorized us to enter into two agreements with the proponents of Simcoe Place. One was a lease letter agreement that outlined the parameters of a lease for the tenant, and the other was a co-ownership agreement that outlined the parameters of the ownership position for our investment fund.
Over the next 18 months, we negotiated the contracts associated with both the agreement to lease and subsequently the lease, as well as the co-ownership for the investment fund, then returned to the board of directors with both of those agreements in April 1992, and we obviously received its endorsement to proceed, and in June 1992 we closed the transaction on both sides for both the tenant and the investment side.
Mr King: If I might be allowed one brief comment, there was reference to, I believe it was, "expensive" legal opinions. Some of us came into this transaction in the middle of it. I personally felt it my duty and my obligation to properly instruct the board of directors as to whether every part of this transaction met all of the requirements under law and under proper financial management.
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I'm one of the ones who looked over two existing legal opinions on the transaction and asked for an independent third opinion, because I felt I owed it to the board of directors to advise it independently. Although these were expensive opinions, this is also a very expensive transaction. It has also proved to be highly controversial, and I think these expensive legal opinions come to show that the board followed the letter of the law to the letter. In fact, I apologize not a bit for bringing forward that third legal opinion, because I needed the assurance personally that the transaction met my own ability to recommend it to the board. Right before the final financing arrangements were concluded, that third opinion was sought.
Ms Carter: So this has been a well-researched decision?
Mr King: Yes. As a matter of fact, I tried to get Erik Peters, the Provincial Auditor, to show me his legal opinions, but he wouldn't.
Ms Carter: Just to sum up, as I said, it is a well-researched decision, and we can be sure that the money is not coming from the pockets of injured workers and it's not affecting the board's unfunded liability and it's not affecting employer assessment rates, right?
Mr King: That's correct.
Mrs Haslam: I always end up at the end. I understand what my colleague is saying, that you're moving towards a better system and you've done everything, and that's exactly what I wanted to talk about. You had a critique, you've done the review, it involved an action plan, you've involved the workers in that action plan, and you're looking at continuously monitoring the success, because that was my last question in the last round.
We looked at unfunded liability. You told us the rates are down, so the employers' rates are being monitored and they are not unduly being raised. Your telephone system is better. We've now talked about the better facilities, the fact that this was a July 1990 decision, that you tendered for alternative sites, that the original landlord -- I've been reading the official debates on the standing committee on public accounts, where some of the concern was, why wasn't the original landlord involved? It's my understanding that he did not tender as one of the alternative sites, is that correct?
Ms Angove: That is correct.
Mrs Haslam: Correct. Now, you've just finished saying that there was design-build, four design-build, and you went with the design-build and you entered into those agreements, which begs the question: All of these things you went through, the review, the discussion, seem to be pointing to the fact that you're doing the right thing. What about the penalty? Was that looked into? Was there a penalty?
Given your performance in the past three years, of appearing before us and answering the questions and acting on the recommendations, I want to ask you first of all about the penalties. Did you investigate penalties if you had to get out of this deal when new chairs came in, when a new government came in, and about the recommendations of the auditor's report of June 30, in particular page 14, recommending that you re-examine your relationship with the minister? And I would like your comments on whether you're going to continue in the way you have in following recommendations and acting upon those recommendations, as you've done with all other recommendations until now.
Mr King: No one I have talked to will definitively give you the total exposure you would face if you were to break out of the sort of deal that was signed by the Workers' Compensation Board and developers and land owners. But from March 1991, when the board of directors voted to proceed in partnership with a developer and a bank and a property owner to develop the Simcoe Place project, we were locked in. To break out of it following that would have exposed us to -- all we can do is estimate the exposure of the penalty.
There was no penalty written into the agreement that showed our full exposure. The chief financial officer and I sat down as a team of two right at the 11th hour to determine whether we did have any options whatsoever. We met with independent lawyers to discuss the legality of the project and we did discuss options available to us if we were to make the decision to walk away or to recommend that the board walk away. The exposure we would have presented the WCB system was quoted in the $100-million range, so I don't believe walking away was a viable option, although again that becomes subject to significant debate between lawyers. I'm sure they would have loved to have gotten into that debate by having us walk away.
The second part of the question was vis-à-vis the value-for-money audit of the Provincial Auditor. We have agreed to comply with every recommendation made in that audit report but did indicate that we didn't agree with every finding. There is a distinction there.
The Provincial Auditor recommended that we do three things specifically, and we agreed to do all three. The first was that we return to the public accounts committee at the appropriate time, after construction has been completed and we have moved in, and do a thorough cost-benefit analysis once the real cost is known rather than the estimated cost. We have agreed to do that and look forward to meeting the public accounts committee either in late 1995 or early 1996.
The second recommendation was that we do a thorough report to the provincial cabinet on the transaction, and that presumably meets the breach of spirit that the Provincial Auditor felt we may have been involved in under section 64. Again, we agreed to do a full report to the provincial cabinet on the project from a value-for-money point of view.
Finally, we were asked to clarify the accountability between ourselves and government. In other words, who should be doing what, under what circumstances?
Mrs Haslam: Is that under an MOU?
Mr King: We have been working with the Ministry of Labour to update a memorandum of understanding. That memorandum of understanding as it presently exists dates back to either 1982 or 1983. We had actually been working on getting it updated before the auditor got involved. We hadn't completed it. The deputy minister and I have met on three occasions now to go over potential wording so that he can recommend it to his minister and I can recommend it to our board of directors and chairman. We're not quite at the final product yet, but we have agreed to comply with the Provincial Auditor's recommendation on a new accountability definition.
Mrs Haslam: On a point of clarification just before my time runs out, can we go back to March 1991? When did you and the new chair join the WCB?
The Chair: You are out of time.
Mrs Haslam: It's a clarification.
The Chair: Go ahead.
Mr King: The chair joined the compensation board four or five days after the board meeting of March 1991, when the decision was taken to lock the board in. I technically joined the day the board made the decision, but I hadn't heard from the standing committee that approved appointments and therefore didn't know until later on that it had approved my appointment. I was a board member in fact, but I wasn't present, and Mr Di Santo was appointed effective May 3, 1991.
Mrs Haslam: So you were talking about a board decision that was made prior to both of you coming into power.
Mr King: Technically I was a board member on the day the decision was made. That was the day my appointment became effective.
Mr Mahoney: I have one follow-up question to the issue that I raised earlier in the week on the flooring.
Mr Bradley: Oh, I'm glad we're back to that.
Mr Mahoney: I've received some additional information today that apparently the engineers and the Workers' Compensation Board are aware of. It's a memo from C-TEC, which is the company you've given the contract to to provide the flooring. It's a memo to all C-TEC dealers and sales personnel. This is the company out of Michigan that has been awarded the contract for the flooring.
Mr Bradley: The American company.
Mr Mahoney: The American company. I'm told that the specifications in the tender that was put out called for 3,000-pound specifications on the product. This is a memo that was, as I said, put out to all C-TEC dealers and sales personnel. I'd just like to read the operative part:
"Current C-TEC testing has demonstrated that the combination of manufacturing process variables such as steel tolerances, chemical balance of the concrete ingredients, temperature, humidity and test methods can affect the absolute consistency of panel performance at the edge. Certain panels will exceed the CISCA,"the Ceiling and Interior System Construction Association, "CISCA-guided requirements of the 2,000-pound ultimate load at the edge as suggested in our Sweet's brochure, Manuspec and Specdata, whereas there are certain other panels which on an individual basis may fall short of the target load.
"We have several approaches in progress which will consistently meet 2,000 pounds at the centre of the edge of the panel. These approaches are being refined and will have a specific answer shortly. We ask that you continue to promote the Tec-Crete panel."
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Apparently the engineers and, according to my information, WCB, whoever that may be, are aware of this particular memo, which would say that the load requirement of 2,000 pounds ultimate load, both in the centre of the panel and on the edge of the panel, is in some dispute here, and this has been admitted to by the C-TEC Access Flooring Systems corporation. Your specs call for 3,000 pounds. The American product will provide, on a good day, it seems, 2,000 pounds, but apparently there's a problem.
Maybe you can't answer this today. If you can, that's fine. You, Mr King, have stated that, to paraphrase it as a layperson, you wouldn't want to make a recommendation that would have a floor fall in. I agree with that, that the technical people should be the ones to answer this. But it appears the American company is fighting for the life of its product and I'd sure like to know what's going on with this. Would you undertake to investigate it?
Mr King: I thank you for that information. I couldn't respond, nor do I have people here who could respond, but I appreciate your bringing that to our attention. If we could have a copy of that, that would help us. Hopefully by tomorrow afternoon, if we resume, there can be a response to that.
Mr Mahoney: Yes. I won't be here, but I can get that through the committee. If it's not available by tomorrow afternoon, I would hope it would be followed up in any event.
Mr King: You can be most certain.
Mr Mahoney: I'll give this to our clerk to get copies, if she wouldn't mind.
On the issue of the building, it seems to me that the issue here is not necessarily, was it a good decision or not? The committee will see tomorrow rather crowded and unsatisfactory conditions -- and I don't mean that facetiously -- from everything that you've said, the square footage available per employee etc being substantially below the private sector in the insurance business. I'm sure that WCB has outgrown 2 Bloor. I never disputed that, even when the issue was raised, and frankly I don't dispute the value of ownership versus rental. I think ownership makes a lot of sense.
I would wonder about the comments about a high rate of return being 13% when you in fact are the main tenant, occupying 70% of the building, therefore paying 70% of the rent, paying $26 a foot plus $19 for common area in a market where, if you were to do it again today, you'd be negotiating a substantially different deal, I'm sure. Hindsight is a perfect science.
Your rate of return is based on an extremely high rent in today's marketplace or even in the marketplace that existed within the last, I would think, 24 months, but 12 for sure. Therefore the rate that you pay as a tenant would clearly affect the rate of return that would be received by you as an owner. You have two hats here: You're an owner and you're paying rent to yourself in the form of 70% at an extremely high rate. In fact, if you were doing the deal today, you'd probably get a year's free rent, a trip to Acapulco, and who knows what else? You'd get a substantially better deal.
I think you can dispute those issues all day long and say, "If you had known what the market would be" etc. In fact, let me just finish that by saying I'm sure you would agree that if you were doing the deal today, $26 and $19 would not be the deal you would cut. You would likely get a substantially better deal in the marketplace today, based on interest rates, based on competitiveness within the marketplace. If you don't agree, you can tell me that, but I'd be surprised to hear that.
My concern is that when a committee examines an agency, frankly, it's too late: The horse is out of the barn, the door is shut; you're not going to stop the building. I hope that if I'm able to shed some light on improprieties in the flooring contract, maybe there's a shot that we can review that, but you're not going to stop the building. I accept that.
My concern is, what process is involved with a government agency in making decisions of this nature? You, Mr King, were not here when the decisions were made. The authority to go and look at alternatives was given by the former government. Beyond that, there was no authority given and the decisions were made, and I'm told by your chief financial officer that the government was kept informed throughout the process, I believe is what you said, of the decision-making process on the deal.
I asked this question in the Legislature and got their arm's-length answer, their don't-want-to-touch-you answer when they don't have an answer, but I'd like to ask it, Mr King, to you. Section 64 of the act is put in there and it says that cabinet approval must be obtained -- I don't need legal advice on this, and I'm not a lawyer; common sense applies here -- "to purchase or otherwise acquire such real property as it may consider necessary for its purposes."
Common sense says if you're moving out of 2 Bloor into Simcoe Place, you are acquiring that in some fashion for your purposes. You're replacing your administrative offices. What it seems to me the board attempted to do was to interpret this acquisition more as an investment that would show a great rate of return of 13% rather than an acquisition for the board's purposes. It was as if they took some of their pension money, the $6 billion in assets that you have and that you invest in various things in a portfolio. I assume you have professional investment counsellors who would advise you on certain areas that you may or may not or should or should not invest in to get the best return on the buck out of that $6 billion.
If somebody here was advising you that a good rate of return, 13%, could be obtained by investing in Simcoe Place and it's a straight investment that you're not acquiring in any way whatsoever, then my interpretation would be that you could get around the requirement of section 64. "It's strictly an investment, we're making an investment, we have the authority to manage our funds under the act."
But it clearly says "to purchase or otherwise acquire." You're entering into a joint venture agreement with a developer and a bank, I believe, to acquire under lease, and eventually ownership, under a long-term agreement, this facility for your purposes. The fact that it's an investment is a bonus to you. The fact that it shows a return is a bonus.
Having told us you were not part of the decision-making process but that you did seek additional legal approval, could you tell us, as members of the loyal opposition, how we are supposed to accept an explanation that says that the board effectively went around the requirement for cabinet approval, that the board did not break the spirit of section 64 of the act? I don't see how anybody could interpret it any other way.
Mr King: Obviously, you're met in your views on it with those of the Provincial Auditor, who himself felt that the spirit of the act had been broken, if not the letter of the law. I think you've raised a question which has to do with accountability, which has to do with authority and which has to do with how legislators are to hold its agencies accountable for the rights they're given under the law that governs them.
I had indicated earlier that we have a property out on Highway 400, the Downsview property, which involves an acreage and a building that dates back into the 1950s. That is a real property that we own and that we utilize exclusively and have utilized exclusively for purposes of rehabilitating injured workers. The board decided some years ago that it was no longer useful for that, that it was better to decentralize and have that property up for sale. That property sale would be subject to the approval of the Lieutenant Governor in Council under section 64 because it's a property that was exclusively utilized by the board of directors for its business, which is the compensation and rehabilitation of workers.
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As I understand, and I don't pretend to be a real estate lawyer or one who interprets statutes beyond the jurisprudence that I've been involved in, the advice is that the Simcoe property is not defined as a real property under the act, that it is not used exclusively for the board's business, that it is an investment and that the board is leasing from an owner of a building. If that is too close to conflict, which you and others have thought it was, then I probably would go so far as to say the board could have and possibly should have gone at some point in time and sought the authority of the Lieutenant Governor in Council. It seems to me if what you had spoken of earlier holds true, which is that the board has appointed to it people in a governance position who are directly answerable to government, then there should be no difficulty in these sorts of things if there was to be a cabinet approval, for instance. But I wasn't there and I don't know all of the circumstances.
I do believe I can give you some light on the subject. The board and the stakeholders to the board want to separate the compensation system as much as possible from the government. You as a legislator might not want to agree with that, and that's where there may be a conflict.
Mr Mahoney: It would sure lighten my workload if that happened.
Mr King: The rationale from that is not to be cocky, not to be arrogant; the attempt is to make the workers' compensation system a system which is owned, and therefore the decisions are made, by the stakeholders. With the aforementioned Premier's Labour-Management Advisory Committee, the employers and the unions and workers there are trying to figure out a way that they can be made responsible and held accountable for this system so that it does not come back on to government all the time as being this nightmare for government. Every government in Ontario has not been happy with its workers' compensation system. I think Simcoe Place is one example where the stakeholders are trying to exert their independence, to show that, "We want to run this place." Now, that might be coming in conflict with both yourself, who feel we should be more accountable, and with section 64, although I believe that's a spirit question rather than a legal question.
Mr Mahoney: I think there's a point to that, if I could just add, because I think you raise a valid point. I certainly have sensed that there is an attempt to sort of flex the muscles and be independent. That's a debate that should take place in a forum just like this, frankly, or perhaps through the reform process, if there's one that is established.
But I immediately run into the concern that -- Mr Di Santo's not here so I won't be critical with him not here, but he did say there was no taxpayers' money in this. I inferred from comments you made that you somewhat disagree with that, that at the very least it's public money if it's not tax money. You can make an argument that says that the employers must pay the rates -- they have no option in the matter -- and therefore call it, as I said before, a premium, a rate or a tax. It's not an option they have: They can't even go to another source to buy the same coverage, and if they could you could at least say is less of a tax.
But it's clearly public money. So when it's public money, regardless of what government's in power, how can you have an agency exclude itself from public jurisdiction?
Mr King: Again, that's a subject that has been debated and is being debated in Ontario right now, not at the legislator level at present, but one might predict that it might become a debate at the legislator level, because the clients of the WCB, the stakeholders, are taking very seriously the need to accept ownership. By that, I don't mean the ability to build $178-million towers on Front Street --
Mr Mahoney: Let's hope that's all it is.
Mr King: -- but the necessity to own the problem of a $400- or $500-million difference between revenue and expenditure per year, which has ultimately resulted in an $11-billion unfunded liability. The ultimate consequence of what was discussed yesterday or Monday on governance is that Mr Di Santo may not be the choice of the board of directors for chairman, and he understands that, yet he supports the process of reform which may lead to his job disappearing. I as well support the process whereby the stakeholders assume ownership of this program; I ultimately am supporting myself likely being out of a job.
But I don't believe you can make the parties responsible -- who have made your life difficult, who have made the lives of every government difficult, because they can do that through their lobbies -- unless you can get them to accept ownership. I can't solve the problem of $11 billion, nor do I believe governments can, because they have tried mightily in the past.
I think the question of accountability of such an agency is the question. Are you going to allow the parties to be accountable, and how are they then going to be accountable back to the Legislative Assembly through a committee such as this? I don't know.
Mr Mahoney: The real ownership, though, is the people who pay for it, ultimately. Ten years ago, those people accepted a very substantial increase in their rates with a view to getting the fiscal house in order. They sit there today and say, "Why did we agree to that?" because the opposite has happened. Through all three parties being in office, the opposite has happened.
Mr King: I happen, although please don't quote me as being counter to Mr Di Santo's position, to come closer to your argument that there is only so much money in a closed economy. That money can only go to those who are working, to capital which has money to invest, and to those who aren't working, so if we as a compensation board take money, through the taxation on employers, out of the system, that means there's less to go around in things like collective bargaining, in the wages and salaries of workers and in the taxes that those corporations and workers pay. But these are incredibly big and complex questions.
British Columbia has achieved a model whereby the board of directors is equally bipartite. The chair is picked by the board of directors. The vice-chair or the president is picked by the board of directors. The government has a more hands-off relationship.
I don't believe government can ever be totally hands-off. How you want that accountability, whether it be through an annual report, whether it be through grilling, or polite questioning, at committees like this --
Mr Mahoney: You get the polite stuff from them enough.
Mr King: -- or from the Provincial Auditor's reports, I think that's a subject for you to decide, not for bureaucrats.
But I'm admitting that it is a serious problem. It's an evolving problem, because I think you're going to get requests from your stakeholders, industry and labour, to, "Let us own this system, because we're the ones hurt and we're the ones paying." You have choices to make then.
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Mr McLean: I have a couple of policy items I'd like to clear up, and then I have a few questions about another area of concern I have. It has to do with the following:
"The concepts of compensability and work relatedness have been adjusted so radically and quickly that business has lost faith in the system.
"In the eyes of the average business person, the workers' compensation system has long abandoned the requirement to establish `work relatedness,' allowing the program to become an employer-funded general insurance scheme.
"As the requisite to establish `cause and effect' between injury and employment has waned, injuries bearing no reasonable relationship to the employment have been routinely accepted, undermining the very premise of the Ontario workers' compensation program.
"The policy proposal `Entitlement in the Ontario Workers' Compensation System,' rather than offering a remedy, instead widens the breach even further, diminishing any expectation that in a true sense, the injury must arise out of the employment.
"It is improper for the Workers' Compensation Board, through its own resolve, to set out to redefine compensability in this manner."
Can you elaborate on that very policy I just stated?
Mr King: I think you've struck to the very core of the problem we have as administrators in the compensation system. You, as legislators, have given us the following interpretation to make in law. You have said that we shall compensate for disablement "arising out of and in the course of employment." That wording comes from British parliamentary statute and it has been debated in courts in Britain and it is the subject of volumes and volumes of writing and of precedent.
Basically, what it means is that my old metaphor of the machine falling on the worker is no longer the case we end up having to adjudicate; that's less than half of the cases. We're good at that: If a machine falls on a worker, we can say, "Yes, that happened at work." What we're asked to do now is to adjudicate a worker walking up a sidewalk on a Monday morning and it's icy and they slip and fall and break their leg, and they're right outside the plant door. Is that a disablement arising out of and in the course of employment? A worker does an action with his or her elbow 50 times an hour while at work and that elbow gets sore. We're asked to define whether that occurs arising from work when in fact you know that they go out and play tennis at night and perhaps they curl, so you mix up personal lifestyle and work.
This isn't easy stuff. If you think I would like to adjudicate chronic stress, I assure you that would be the last thought in my mind as an adjudicator. I've tried, and what happens is that someone comes in and says, "My dog got run over, the boss yelled at me today, I'm behind in my mortgage and I've just had a breakdown," and I'm supposed to decide whether that arose out of and in the course of employment. I'm afraid I'm not that good an adjudicator. We don't need these problems, necessarily. We were given this problem by the statute.
Some provinces in Canada have tried to clarify that. That may not be a solution for Ontario. Manitoba clarified it by changing the law to say that work must be the dominant cause of a work injury. I don't know what that means. That's subject to a lot of debate and litigation. Manitoba as well said that stress over time is not a proper subject for a compensation claim. Again, that is a limiting factor.
Mr McLean: I guess the bottom line, Mr King, and what I'd like to find out, is what percentage of the claims you handle would be in a category such as that and what percentage of the claims are truly work-related?
Mr King: Everything we accept is truly work-related. Of the claims, however, that are filed with us for adjudication, less than half of them fall under the category of a sudden event occurring at a point in time which one might typically define as an accident.
About half the claims are for so-called soft-tissue injuries: for repetitive traumas, for the tenosynovitises, the carpal tunnel syndromes, the sorts of things that result from the modern workplace where there are repetitive actions such as for cashiers in grocery stores. To pretend those aren't harming workers is to blind yourself to reality. Anyone who watches a cashier and talks to a cashier in a non-compensation setting will know they end up having aches and pains which ultimately can become disabling. We have to face this question as an administrator. Now, you as the legislators can change the law.
Mr McLean: But the small businessman is the one who's really concerned about this.
Mr King: The business person has some way to deal with this. I was reading the American Compensator this morning, and it said that businesses can truly affect their costs, number one, by prevention, and it specifically dealt with ergonomics. It said that by looking at the way you cause your workers to do their work, you can reduce the number of compensation claims.
We all know that for people who work keyboarding, simply giving them a wrist support, giving them a proper chair they can adjust, giving them a proper workstation which they can adjust, giving them a footrest, can reduce claims by 70% and 80% for strain, so the employer can affect these. Where the employer is frustrated is when they don't feel they're to blame for it, when they don't feel they're to blame for something falling out of the sky and landing on a worker and we accept a claim.
Mr McLean: I have a final question in this area. The average rate is $2.96. The information I have with the base strategy minimum terminal financial indicators indicates that by 1995, it will be an average of $3.88. Is that what the projection is?
Mr King: I believe that's the projection Mr Di Santo gave you before the luncheon break. That, I want to stress, is what is called the target rate. That is the rate we would have to charge if we were to provide sufficient funds to pay for the new claims that occur in a year and to pre-fund the future costs of all the claims and to make a payment against the amortization of the unfunded liability. But the board has not met that target rate since it first brought in the funding strategy in 1984.
I'll make one more plea. This should be non-partisan, because I think you go across governments of all political stripes that have not been able to come up with the proper formula for solving the funding of the compensation questions. I can take you back to 1983 and 1984 when that target rate was set; it has never been met and I expect it will not be $3.88 in 1995.
Mr McLean: So we're anticipating close to a $1 increase within the next two years.
Mr King: No, we're not anticipating that. I've just indicated that I can foresee no circumstance that the board would raise the rate that high over two years.
Mr McLean: What is the value of the Downsview site?
Mr King: We have it for sale right now, and I would predict that the price can only be determined by the market.
Mr McLean: There will be an evaluation on it, I'm sure; I'm sure your board will have it valued because you want to know what you're going to ask for it. Is it $2 billion or $4 billion? There's a fair bit of land there and I know what property's worth in that area.
Mr King: There are many options for disposing of the Downsview property. If we are able to find an institutional buyer that can utilize the existing building and adapt it for its purposes, it would be prepared to pay us more than someone who's going to tear down that building. There are zoning problems. There are problems of access because Torbarrie Road did not go through north-south. Although four or five years ago there was a valuation placed on the building, that valuation would not hold up in today's market.
Mr McLean: Perhaps you'll have one for tomorrow afternoon.
Mr King: Can I suggest that I can't have one for you, because I don't believe we can have one until a buyer comes along and says, "Here's what I'm prepared to pay," and unless we get a price that the board determines is acceptable, we won't sell it.
Mr McLean: What is the appraised value for insurance purposes? Maybe you could have that for tomorrow, because there will be insurance on it. There will be liability on the land but not the building.
Mr King: I'm not too sure, and I ask the committee for some guidance here, but we have a property for sale right now. We have it listed with a private agent. That agent has been asked by us to go out and beat the bushes, if you can understand, to find a buyer. I don't think we should discuss either an appraised value or our own strategy for how much we think we should get for it. I would not like to influence the market out there, which may be looking at the property and may get some edge if they happen to read this proceeding.
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Mr McLean: I have a question for the accountant. You indicated $6 billion in real estate and bonds. How much money is in bonds?
Mr Glenn Cooper: We have a holding of bonds or coupons or strip bonds that exceeds $3 billion.
Mr McLean: As to the architect who was with you when you were looking at the different sites and recommended that you go ahead with the new site, is he the one who got the job to recommend for the design of the new building?
Ms Angove: No, he's not. The architects for the new building are Norr architects, and they were selected by Cadillac Fairview some years ago when the project was put together. The architect we used was with Royal LePage Real Estate consulting services, quite independent.
Mr McLean: Have you any idea what you have with regard to extra work orders, responsibilities in that line? Is that pinned down or is it going to be like the Dome, where there was no end of it?
Ms Angove: We have a number of checks and balances to monitor the construction of the project and we monitor every change order. The agreements we negotiated allow us to have some say over change orders of a certain magnitude in terms of cost, so there's some restriction in terms of what can be approved in the way of change orders and they're monitored very closely.
Mr McLean: Who owns the land the building is going to be built on?
Ms Angove: The CBC.
Mr McLean: What percentage of the building will the WCB occupy?
Ms Angove: Seventy.
Mr McLean: Who is responsible for renting out the balance of the building?
Ms Angove: The co-owners are. It's being done through Cadillac Fairview.
Mr McLean: Who will carry the cost of any unrented part of the building?
Ms Angove: The three co-owners.
Mr McLean: Did your agency require approval from any government agency, like the cabinet or ministry, with regard to the building of the new building?
Mr King: We did not seek approval from anyone but the board of directors of the Workers' Compensation Board for the construction of the building. There was no approach made to the cabinet. I can only answer from the day I was appointed as to whether there were approaches made to a minister for approval, but I've been told there was no direct approval sought through any minister. There may have been information presented.
Mr McLean: Will you be cashing in some of the bonds to get the money to build the building or where will the funds be coming from?
Mr Glenn Cooper: At the present time, we anticipate using a $100-million mortgage to pay the first $100 million of the $178 million. We will look at using the cash short-term investments we have available or putting additional mortgage on the facility. We have a commitment in place for the first $100 million, and in fact the $100 million could increase by another $32 million.
Mr McLean: Wouldn't the use of your bonds be more available and less expensive than borrowing and putting a mortgage on it?
Mr Glenn Cooper: While we're borrowing, we're using other people's money, we're using leverage; therefore, we are still getting the return on our own funds plus we're getting the return on somebody else's money that we're borrowing. There is an advantage to borrowing money.
Mr McLean: What do you estimate the cost to be for the new computer equipment that will be installed in that facility?
Mr King: We would not be buying any new computer equipment as such or per se for the new facility. We have the equipment available right now. We may have a beefed-up security system. We may have a dual outlet outside of the building in case one of them is damaged. Those are being planned into the new building. We may move the mainframe into the new building, but there will be no new equipment necessary. There will be pre-wiring. That's all a part of the total cost of the project, however.
Mr McLean: Will the furnishings be part of the tender for the new building or will they be extra?
Mr King: The Workers' Compensation Board has gone out and done an ergonomic study of the workstation requirements. We have a generic furniture supplier where we've tendered for furniture. We will not be buying new furniture for Simcoe Place. What we will be doing is replacing furniture as we're doing right now when old furniture becomes either unhealthy for workers or broken down. We're replacing it with this new generic furniture, but we will be moving existing furniture and it will be the normal lifespan that will determine when new furniture comes in, although my couch is getting damn shabby.
Mr McLean: What have you been paying a year for the lease of the present facility you're in? The accountant will probably have an answer to that.
Ms Angove: The cost per square foot?
Mr McLean: For the total.
Mr Glenn Cooper: The cost per square foot varies considerably because we're in a number of different locations. We're primarily in 2 Bloor East. The original lease was in 1974; we went into a fixed lease at that time. The average cost is around $14 a square foot, between $14 and $15.
Mr McLean: That's what you paid last year?
Mr Glenn Cooper: Yes.
Mr McLean: What do you anticipate it will cost for the accommodation of the new building per year?
Mr Glenn Cooper: The square-footage cost will be $25 a square foot and it's fixed for 20 years starting in 1996, so 20 years from there it's fixed at $25.
Mr McLean: I have read somewhere it's going to cost about $385 a square foot. Is that to build it?
Mr Glenn Cooper: That is not even the cost of building it.
Mr McLean: What was that figure for?
Mr King: The figure of $380 was in a motion that came from, I believe, the public accounts committee to have the auditor look into the WCB. Nobody I've been able to talk to yet can figure out where a figure of $380 a square foot came from. It may have been intended to be the cost of building the facility, but it didn't even bear any relationship to that. None of us has been able to figure out where that came from except from a member who said, "Because it costs $380 a square foot, we should investigate it."
Mr McLean: Of the sites or buildings that you looked at, what was the closest one to being purchased in terms of a facility that would have accommodated your requirements?
Ms Angove: Do you mean of the existing buildings we looked at? None of them met our requirements. None of them came close in terms of the elevator capacity, for one, and the mechanical, electrical and cabling capacity. They just could not be modified at a reasonable cost for us to even consider it. In each case, it was cheaper to go to a design-build than to try to retrofit an existing building.
Mr McLean: Then why do we hear daily, with regard to this very building you're building -- I spoke at Rotary yesterday and that was one of the very questions I got: "Why are they proceeding to build this expensive building, because they could have rented?" There's lots on the market that could have been modified to have been suitable for what you need.
Ms Angove: If I can speak to that, we had a very thorough review of the real estate market, particularly existing buildings. Not only when we did the tender but periodically thereafter we would ask Royal LePage to tell us what the market had: "Is there any building out there that could accommodate us?"
It is true that there are 20 million square feet of vacant office space in downtown Toronto. The problem is it's dispersed throughout the city. The average size of available square footage that can be leased in downtown Toronto is 6,000 square feet; that's less than 10,000. We are looking for half a million square feet.
It's true that some buildings may have 100,000 here and 100,000 there, but clearly it's detrimental to the operation to split it up all over the city. That's our problem today. We have people and leases all over the place. We're trying to consolidate it. We know from studies we've done in the past that it costs us more to operate in decentralized functions than it does as a centralized facility, and that is why we are looking for that amount of square footage.
Mr McLean: If your board of directors anticipated and thought that this was the proper way to go, they've certainly done an awful poor job of PR work to let the public know what you were doing.
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Mrs Haslam: Actually, I had a couple of questions and I'm only going to ask one. When we're talking about the new building and we seem to be looking at the benefits to you as a board, and the decision and the process you went through and what was available and what wasn't available, as a government we're very interested in jobs and I wondered if you had any information on the number of construction jobs, the number of person-years in jobs it's going to mean to the economy to build at this time.
Ms Angove: We estimate with the assistance of Cadillac Fairview that approximately 200 to 300 construction jobs will be created with the project. In addition, obviously several other jobs will be created in manufacturing of raw materials etc. It's difficult to estimate what that number is.
Mr King: Right now it's the only major construction project under way in Metro. If I can cheat a little bit and respond to Mr McLean's question that I wasn't allowed to because we ran out of time, of course it doesn't look perceptually or optically all that great to be having the only building going up in downtown Toronto right now. Of course there are landlords out there bleeding and suffering and who are militating against us doing this.
Number one, we've saved over $22 million in the construction costs because of that economy and because the tenders have come in a lot cheaper, but it's not very easy to explain to the person who's lost their job or who's afraid of losing their job that we're building a new office building, especially when there is so much rhetoric surrounding the building. I'm not too sure any public relations campaign could explain this right now, although I grant your point that we probably didn't do a good enough job in explaining ourselves.
Mrs Haslam: Mr McLean would have complained about the amount of money you spent on tooting your own horn at the next committee meeting, so don't worry about it.
Mr McLean: On a point of privilege, Madam Chair: Mr McLean is not usually one to complain at all; he's usually very positive.
Mrs Haslam: I haven't noticed. Oh, I'm sorry, Mr Bradley would be the one. Excuse me. The two of you look like twins; I got you mixed up.
Mr Bradley: You'd be following government policy if you did that.
Mrs Haslam: I'd like to ask a little bit about the auditors. I've been reading the special auditor's report from June 1993. As an arm's-length agency, are you audited on an annual basis?
Mr King: Yes, we're subject to audit by the Provincial Auditor annually.
Mrs Haslam: This decision was made three years ago in July 1990, so the decision was made and everything was put in place. I'm interested, did the auditor mention anything about this decision in any previous audits?
Mr King: The propriety of the transaction or the legality of the transaction had not been previously mentioned. As a matter of fact, the company that ultimately ended up as the real estate holding company, the numbered company 799, had been specifically audited by the Provincial Auditor's office in 1990, at which time the Simcoe Place development was known and it was known that 799 was going to hold the Simcoe Place. There was no mention of any impropriety, any breach of any spirit of law, any breach of any Management Board of Cabinet directives, so we had, I suppose, some right to believe that we had the transaction, subject to the special audit that was ordered by the public accounts committee.
Mrs Haslam: Does the auditor look at the investment part of the WCB?
Mr King: The Provincial Auditor has looked very closely at the investment part of the WCB and in fact has made specific recommendations to make sure we can be secure in the way those investments are handled and accounted for. I believe, if you wish to know further, I would defer to my colleague Mr Cooper.
Mrs Haslam: I'm just interested that you're using the money from the investment fund and, as this happened three years ago, it seems that out of the blue they're saying: "Wait a minute, wait a minute. Value for money." I'm wondering what the auditor said about your investments prior to this.
Mr Glenn Cooper: In 1990, the Provincial Auditor's office conducted an audit of all our investments. It was a special assignment outside of their normal audit of the financial statements. As Mr King said, there was no mention in that audit about the incorporation of the subsidiary company that holds the real estate for the tower that's being built on Front Street, so it was never brought to our attention.
Certainly, in this most recent audit for public accounts, the Provincial Auditor was asked specifically to look at that specific transaction. Presumably the audit was far more detailed, and there were maybe changes at the Provincial Auditor's office since that time and maybe there's a different view; I don't know.
Mrs Haslam: What I'm saying is, does the auditor usually make comments on what you invest that money in, and whether you always make a profit, that kind of thing? Is that his job? Does he do that?
Mr Glenn Cooper: As part of the audit of the annual financial statements, he would not make comments specifically on types of investments or second-guess investment decisions. He would only conduct that type of audit if it was requested by a committee of the House.
Mrs Haslam: Those are all the questions I have at this time.
Mr Waters: I'll take over. The discussion on the building: It's my understanding that the commitment that was made in 1990 for the building and the available space of that day versus the available space in 1992 -- to make it very clear, would that not be like comparing apples and oranges to start with?
Mr King: I bought a house in Ontario two and a half years ago when I moved here and I would rather I bought a house today in Ontario. I think that should answer your question, that I've lost considerable equity that I might have had in that house. That applies perhaps more so to the commercial real estate market, that it was overbuilt, than it does to the housing market.
Mr Waters: Something has bothered me as I've sat here this afternoon. It's a tone, it isn't something that's said, but I get the feeling that there's an assumption that every person who goes on WCB is abusing it or is looked at as an abuser when I hear people posing questions like, "Gee, the employers are paying too much." In fact the other day, Ms Witmer said something like -- just a second and I'll go back to my notes -- "too much money is being expended on compensation."
I have to tell you, people don't go out and lose an arm and a leg, or a 15-year-old girl doesn't work in a corner store at minimum wage and come to Toronto with a meat grinder on her hand for the love of it or to get some compensation. I hope the members across start to understand that most people who are applying for compensation have very valid claims. It may not be something that you see, but damn it, you were injured at work.
I get very frustrated with this, and that leads to a question. This is a case where a young girl out there at age 15 was working in a corner store, and on her last day on the job she had her hand caught in a meat grinder. She did come to Toronto with a meat grinder on her hand. What kind of compensation does she get for the rest of her life? Is it based on minimum wage as a 15-year-old girl working in a corner store, or is it based on a young girl who was an A student in school who had the potential to do whatever she wanted in her adult life when she finished her education?
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Mr King: The workers' compensation law limits you rather significantly to compensating on the basis of the earnings at the time of injury. If someone was on minimum wage at the time of injury, he or she may have that hanging like an albatross around the neck for the rest of his or her life. There has been some attempt in Canadian compensation and elsewhere to take into account that earning profile varies according to your experience on the job and your years on the job. Some acts allow the compensation board to adjust the earnings of the worker, who is in a lower-skilled job while young, at various points in time.
If you know the construction industry, those who begin working in the construction industry start out as first-year apprentices. They may be only earning 50% of the journeyman rate, and maybe 60% and 70% as they work through. Some acts contemplate that the board can raise their earning profile to the journeyman rate, at such time as they would have achieved that, to give a fairer compensation.
The way we have to work around that is through rehabilitation. We have to maximize the potential. We have to give the worker sufficient ability to go out and overcome whatever handicap caused by that meat grinder, or whatever else it is that caused the problem. That is our job.
Mr Waters: I know this young girl quite well. Given this young girl's situation, within five weeks this young lady was out teaching downhill skiing. She is now a silver medalist in disabled Olympics. This is a person who didn't lose her arm and retreat into herself. But I can tell you, as a teenager, first off, it destroys your social life and your standing in society with your peers. Secondly, the potential this person had with two hands versus one, because she lost her right hand and she had to learn to write all over and all of that -- there is no way the system, as it exists today, compensates that young lady in a fair and equitable fashion for the rest of her life with her potential loss.
Mr King: The only response I can give is I can conceive of no amount of money that can compensate for the loss of a hand to a teenager, so all we can do is the best we can do with the programs we can design to try to make up for that loss.
Mr Waters: I see an old friend sitting back there with her hand up watching the proceedings. I have a question, actually, that maybe she's the one to answer.
I had a plant in Muskoka that closed down a few years back. The plant had been there for about 15 years. As we all know, latency period for airborne problems is somewhat longer than 15 years, so since the plant has closed down 20 out of approximately 100 to 150 overall employees in that period of time are either dead or dying from airborne disease.
The question is, is this just the tip of the iceberg? There have been so many of these places: They know what the latency period is when it comes to plastics and some of those wonderful weird chemicals that are floating around the plants; they knew what the latency period was with asbestos. What they're doing is moving to another jurisdiction to disperse that workforce, and then I believe the new employer of that person ends up paying the cost of the previous employer. I'm wondering if we're just seeing the tip of the iceberg, or if you can give me some hope. Linda, it's yours.
Ms Linda Jolley: Linda Jolley, senior vice-president of strategic policy and analysis division.
I don't know what the exposures were in the plant. If the workers all died of a similar disease, one would expect that perhaps --
Mr Waters: Heart and lung.
Ms Jolley: Heart and lung. Perhaps there may have been an exposure there that may have caused that disease, and it would be certainly important to investigate that.
When a plant closes, however, the costs of the occupational diseases, when they get recognized, actually get spread over the great group that's left behind. That's one of the problems in occupational diseases, because a lot of the diseases we're compensating presently in the province of Ontario are out of the mining industry, out of Johns-Manville, for example, out in West Hill that are long since gone. That cost is being left on the rate group that's left behind, and it's a real problem in terms of the long-term funding of diseases.
Mr Waters: And hence it adds to the unfunded liability and all of those things we face. We have employers who know what they're playing with. In my old life I used to get the brown envelopes the same as the opposition gets them now, and you would get the information that would say this stuff is bad, but just try to prove it.
Ms Jolley: I think that with WHMIS, the workplace hazardous materials information system, the obligation to inform workers of the hazards is a lot stronger, and that's helped, certainly.
Mr Waters: While I have you at the table, I have one last question and it deals with this, whether the employer runs or whatever. As we get into these sophisticated plastics and different compounds that are in the workplace, in 20 years -- well, now it's probably down to 10 years -- I feel we're going to see a major influx of a number of airborne diseases. Is the WCB or is anybody out there working at dealing with that at this point in time? Is there a strategy?
Ms Jolley: I think there's a strategy being worked out as a result of the provincial task force that the Ministry of Labour set up, and that is to look at: Who is doing research? How can we identify new diseases? How can we then develop guidelines to recognize those new diseases? And then how do we actually set regulations and standards to prevent future disease on that?
One of the problems is that we have been focused, in the past, on individual toxic substances. We may know what an individual one does, but we don't necessarily know what the soup of them do together. The testing that's going on presently is a lot more than it was in the past, and that's probably as a result of the liability law in the United States. The third-party lawsuits that have been going on have forced manufacturers to do a lot more testing to see whether their products are safe, to protect them from liability.
Mr Waters: In essence, our manufacturers aren't doing it, but the US is doing it and therefore we benefit from it in a lot of cases; not in all cases.
Ms Jolley: I think they're the major producers of the chemicals as well.
Mr Waters: I believe Ms Murdock had a quick question, so I'd better leave her some time.
Ms Murdock: I don't think it's for you, Linda. Thank you very much, though.
It's in regard to the financing of the actual deal that was made over 20 years. A lot of people are equating the deal to their own experience on a residential basis rather than on a commercial basis. I don't know much about it either, except to say that I recognize that a 20-year lease or co-ownership plan, whatever, is quite unusual, that it doesn't usually last that long -- am I correct? -- in the commercial end. Also, there's the interest rate: The general perception is that people think the interest rate is quite high in comparison to their own residential rates, so if you could explain that.
Mr Glenn Cooper: In commercial real estate, if you have a tenant that is fixed for a term of 20 years, like our situation here where we have a 20-year fixed rate, you want to mortgage the property for a similar term. By fixing your finance for the same term, you fix your revenue stream, you fix your costs; then if you fix the spread between the two, your return is known. That's basically what we've done here. We've fixed our mortgage rate.
To go out for 20 years and to take a mortgage that will not start for a couple of years after the building's started, it was 10.25% to get $100 million. That was the best available money in the marketplace at that time. We wanted to make sure that funding was there before construction started. The construction started on the building in February. We received this funding commitment in January. You can always second-guess a funding decision after it's made, but I can tell you that the developer, Cadillac Fairview, was responsible for arranging the financing on this transaction. They have an interest in the property. The financing was subject to approval by the major bank that was also an investor in the property. They agreed with the financing.
We also had a say in financing. We agreed with the financing, but we also went out to independent financial advisers to determine if that was the best financial advice. We received two opinions that it was the best available in the marketplace and it should be the proper financing that was pursued.
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Mr Mahoney: I don't know who would like to answer this, but I'll just throw it out. If we had a chance to do this building over again, start right from scratch, would you do it differently, from two angles: (1) from the process of getting approvals or dealing with the government, and (2) from a financial perspective?
Mr King: I think that's probably too speculative. In terms of the credibility of the WCB, and I believe it was Mr McLean who raised that issue, it has not done a lot for the credibility of the WCB. I'm not too sure what costs you can put upon something like that, but I couldn't speculate on such a question.
Mr Mahoney: Financially?
Mr King: No, I was commenting that it's clear that the credibility of the WCB has not been increased or raised by this controversy, and that has caused us considerable concern. What that has meant to us financially I think I can only speculate on. I back this as a good business deal. The timing is not the best from an optics point of view, and I'm not too sure what that means and what that credibility loss or that credibility problem does to us, and that's my problem in answering this. It's a good business deal. Does it look good right today? I don't think the public believes so. I believe that some of the public thinks this is not a good deal.
Mr Mahoney: You used the term that you were concerned about some of the rhetoric. I think, Mr King, it was you who said that it has perhaps caused the deal to look worse than it is. Do you consider the report of the Provincial Auditor to be rhetoric?
Mr King: I had referred to the $380 a square foot, for instance, as an example of a figure that is sort of like the $500-million fraud, which nobody really knows where it came from either; it fell out of the sky and everyone started to quote it.
Do I consider the report of the Provincial Auditor rhetoric? I've had long discussions with the Provincial Auditor about the role of the Provincial Auditor. I've had a good deal of experience, for 20 years, with auditors. Auditors are there to assist managers in understanding the problems they have in managing, and it's vitally important that a very close relationship of trust develop between auditors and managers, because you don't want managers stonewalling auditors.
Managers can be strongly criticized without having subjective opinions brought to bear. I find too many subjective opinions in the Provincial Auditor's report, and I disagree with them and I've told him so. I don't necessarily find it to be a normal audit report that I have been used to. I find that someone who is in an audit function who finds someone to be in breach of the spirit of the law -- I find that to be a subjective opinion and I've told Erik Peters so. His response was that it was his belief that because he was ordered by the public accounts committee to come in, he could not report like a normal audit report might.
Mr Mahoney: There's been a change, though, in what we in the Legislature expect of our auditor over the last several years, mostly fuelled by the federal auditor, in the way the federal auditor has responded, being extremely critical of government, whichever government is in, going through government agencies and ministries and being very detailed and very critical and very outspoken.
I think there was a sense that the Office of the Provincial Auditor in Ontario was somewhat less than that, was perhaps a little too tame, was just giving those, the term I used earlier, generic remarks that say, "We've looked at it" and sort of disclaimers. There was, I think, during our time in government, through the public accounts committee when Mr Phillips was the Chair, a real desire to have the Provincial Auditor be more caustic, to be more candid, to be more forthright when investigating agencies and ministries. You, coming from other provinces, may not have experienced that, but I think as a result that is more the expected role that legislators have of their Provincial Auditor.
That's just a comment about why I think that has resulted. You certainly have a right to disagree with his report, as do I, as does any member of the Legislature, but I would hope you would not categorize it as rhetoric. I would categorize as rhetoric, perhaps, the figure given out in error of $380 a foot. I don't know where that came from either. I suspect it was in relationship to building costs, but even that wouldn't make sense, so I don't know where that came from.
Mr King: I did not call the Provincial Auditor's report rhetoric --
Mr Mahoney: That was my question.
Mr King: No, I do not consider it to be rhetoric.
Mr Mahoney: In terms of another issue related to the building, there were three people invited to bid on the general contracting on this particular project. The initial advertisements put out looking for proposal calls were done in what would seem to be a normal way of a government agency, which is to put ads in the paper looking for proposal calls. Advertisements were placed in two newspapers, requesting pre-qualification information from parties interested in providing space. There were 34 responses received. That was September 18, 19 and 20, 1990.
On October 22, 1990, detailed proposals from 13 pre-qualified proponents were requested. That was short-listed down to 3 from 11; there were 13 requested, 11 submitted proposals and 3 were put on a short list.
The thing that concerns me is that some time later, October 16, 1992, there were three general contracting firms in the province of Ontario that were selected and asked to submit bids on the general construction, the general contract of the project. Why was it limited to three, and in your experience, is that a normal number on a project of this size?
Ms Angove: The transaction we signed, both as tenant and the investment fund on the investment side, accepts Cadillac Fairview as the developer. In fact, the agreement signed by Cadillac Fairview with CBC, the owner of the land, requires Cadillac Fairview to be the developer. As the developer, they are responsible for selecting the general contractor. The WCB does not interfere with that decision at all. It's entirely up to Cadillac Fairview.
The reason they only asked three contractors to bid is simply because they would only approach contractors who have the experience to build a building of this sort and have proven experience to do it, and also contractors who have proven experience that they will come in on time and on budget. They refused to accept bids from contractors they had dealt with in the past. They clearly had exceeded both the schedule and the budget, and that's why they went to three.
Mr Mahoney: Would they come to this strategic management committee? I forgot exactly what it's called. It's a committee made up of the three partners involved in the project, consultants and engineers etc. The people who made the decision to buy that American floor, would they come to those people and discuss the general contracting proposals?
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Ms Angove: They discussed the process with the working committee of which WCB is a member, and they explained quite clearly why they were going to follow that process, why they would not accept a bid from a contractor who could not prove that it had built a building of this magnitude on time and on budget.
Mr Mahoney: Surely to goodness we know of several contractors other than PCL, Jackson-Lewis and Eastern who would be competent to build a building of this nature.
Ms Angove: Mr Mahoney, you must appreciate that the WCB is not in the business of building buildings, so we have to defer to the expertise of the developer and let the developer do his job. Also, there is a performance penalty if this building is not delivered on schedule, and the developer is liable. Clearly they have a very strong interest in ensuring that the contractors who bid can in fact perform and deliver the building.
Mr Mahoney: One of the concerns I have, however, is that this is, statements to the contrary, a public building; it'll be occupied 75% by a public government agency. I've been involved in former municipal life with building a public building with public money. We went out to a Canada-wide contest to do it, and went through a very extensive proposal of advertising and making sure that people were aware of what it was we were seeking to build, and I believe we received -- Mrs Marland would remember because she and I were on council together -- somewhere in excess of 200 submissions for that particular project, and then going through a very open and public process.
I would question whether it is proper for a government agency entering into a joint venture agreement to virtually abdicate its responsibility to the public by turning over the authority for such decisions to a private developer. I wonder if you have any thoughts on that.
Mr King: I think this cuts back to the earlier question you had raised, which is, what is the Workers' Compensation Board's accountability, both in law and otherwise, to the legislators and to the public of Ontario? I can tell you that two of our board members have a good deal of experience in construction. One of them is the head of the Provincial Building and Construction Trades Council in Metro, and the other is out of the Council of Ontario Construction Associations. They do not find the present arrangement to be any difficulty whatsoever, given their years and years of experience in construction.
I understand the concern you've got from a public accountability point of view. On the other hand, you're directly linking this to being a public building, and I think that gets back to the previous discussion we had as to whether this is arm's length. Clearly, if we have a high performance penalty, if that building has to be ready and we're to hold that developer accountable, they've got to be allowed to choose the general.
Mr Mahoney: It seems to me that you want your cake and eat it too, that you want a situation that says that it's arm's length and yet you're an owner. If you were simply a tenant and you contracted with Cadillac Fairview to have them build you a building, I would never ask this question. But you are an owner. You are a one-third, whatever the terms of the joint venture agreement is; you are a 70% tenant. Without you, this deal doesn't fly, by the way. Let's make that very clear. Without a 70% tenant, AAA rating, I assume -- at least it used to be; maybe it's not quite any more, but whatever; you're pretty solid. Any developer would be delighted to have you as their partner, and even more delighted to then turn around and find out you were going to rent 70% of the project they're building. The bank would be delighted to accept a 10.5% mortgage on $100 million, I can tell you, even a couple of years ago, with such a worthy tenant ensuring and guaranteeing that mortgage.
I don't know how you can dodge it. Bob Mackenzie tries this when we ask questions. He says: "They're arm's length. We don't want to deal with them." I don't think you, with all respect, can do that as well here. The WCB has an obligation to be accountable to the public. It is public money that funds it and it is public money that is ultimately building this facility. You've entered into an agreement with a developer.
By the way, this group over here -- Mr King, I'll try to be a little non-partisan, but the members opposite would be screaming; you could not imagine. If the Liberals had ever entered into a joint venture agreement with Cadillac Fairview, you would go wild, absolutely wild. You would be having somebody write a bloody book to investigate what had gone on and who was in whose pocket, yet you climb into bed --
Interjection.
The Chair: Ms Haslam, Mr Mahoney has the floor.
Mr Mahoney: -- with a private developer and you defend it. It's truly amazing. Anyway, back to the question. Sorry; I just got off on a little bit of a tangent, and I apologize for that.
I say that notwithstanding the politics that from time to time creep into this situation, in all seriousness, how can you push it off as arm's length when you, as vice-chairman of the board, and Mr Di Santo, as the chair, and the entire board, have cut a deal -- I'm not even commenting on what the deal's all about -- to go in and be a partner and be a tenant and therefore guarantee all of this stuff? I suggest to you allowing Cadillac Fairview to make the deal to limit it to three companies to bid on this thing was improper.
Mr King: Workers' compensation boards are usually considered to be somewhat of a hybrid. We rest halfway between line departments of government and private corporations. That power doesn't flow because I like it, but it flows from the law that governs workers' compensation boards. You, as legislators, have given us the authority to tax, in our case, $2.5 billion a year. You have given us the authority, although you may not like it, to spend $3 billion a year --
Mr Mahoney: Did we give you carte blanche, though? I mean, there's a difference.
Mr King: No, but I'm trying to put a perspective around this that the board has been given enormous powers of taxation and expenditure, and that gives it a hybrid position somewhere between a line department, which usually is directly accountable to a minister for that type of taxation, versus the private corporation. I think the board tries to exercise itself as much as it can along private sector lines when it comes to commercial and when it comes to the treatment of its employees.
The Workers' Compensation Board, in my view, expects more accountability out of its employees than the corresponding group in government does because it's closer to the private sector. I think that's the ultimate statement, that the decisions made surrounding Simcoe Place were made more in the hybrid character of a private corporation.
Mr Mahoney: I understand that you're going ahead with the building, and I think spending a whole lot more time on it is probably self-defeating. I don't like the way the decision was arrived at. I think there are a lot of improprieties in this. I hope, if anything, as a government agencies committee we can see fit to correct those kinds of things in the future, whichever government happens to be in at the time. There are a lot of very legitimate questions that have been raised, in my view, by opposition members.
The comment was made some time ago that you get hauled in here every six months and you don't have time to do your work, and isn't that a shame. It reminds me a little bit of what we do with education. Certainly with every change of government, if not two or three times during the term of a government, we convene select committees or special committees, and now a royal commission at a cost of three million bucks. We had to give Gerry a job, I guess.
I see four areas as options for coming up with some ideas on reform. I'm running out of time so I want to be quick. A royal commission is one; a value-for-money audit by the Provincial Auditor is two; a select committee, hopefully non-partisan, if that's possible, would be three; and fourth, the one that I tend to lean towards, is what I would call a forensic audit: private forensic auditors who would be retained by the government from three, four, five or whatever firms to come in and, totally unencumbered, be given complete authority to meet with your financial people and go through the board process and meet with MPPs and do all of that kind of thing, to come up with a report.
Let me just briefly say, the royal commission I think is too expensive, would take too long, and it bothers me; as to the value-for-money audit, the government's already shown it's not willing to listen to the Provincial Auditor in the value-for-money audit it had done on the building; the select committee, I'm afraid, would bog down in partisan issues too often, although I've found that select committees worked reasonably well on education and energy, but there's that problem. So this forensic audit idea: I just wonder if you've thought of that or if you think that idea might work.
Mr King: A forensic audit usually refers to a firm coming in and looking for wrongdoing or malfeasance, so maybe we have a different definition of a forensic audit. At least, when I've looked for advice on how to set up a fraud strategy I went to forensic auditors. Some of the boards in Canada have brought in management consulting firms to try to help them come to terms with managing this program. Ultimately, I have to indicate to you that this is a political problem, not a management problem. The future direction of the board will come from the legislators. We can only manage the law we're given to manage as best we can do it. The direction comes through the law and it comes through the critics we have and the stakeholders we try to serve. So my own advice, for what it's worth, is that you would be better off, if you want to come up with something, to consider this to be more of a political question than some sort of pawning it off to an auditor looking for the magic bullet.
Mr Mahoney: Madam Chair, I know I'm out of time, but I just say very briefly, particularly since I won't be here tomorrow, that I think I asked some reasonably tough questions this week and I appreciate the attempts to answer them. I don't agree with everything, but I think there was an honest attempt to face the music, so to speak.
The Chair: And your father would be proud of you.
Mr Mahoney: He probably would, but who knows? He never was.
The Chair: Thank you, members of the committee. Tomorrow morning, if you are delayed for some unforeseen reason, we will start the tour at 9:30 but we will leave a trail for you to catch up to us along the way. We'll look forward to seeing you at the Yonge Street entrance.
The committee adjourned at 1703.