What will elimination of the waiting period mean?

Workers’ compensation “reform” often means changes that effectively reduce costs and/or benefits.  That is not the case with the recently announced changes to one workers’ compensation system.  If the legislature approves the proposed amendment, the Workers’ Compensation Board of PrinceEdward Island will eliminate the waiting period effective January 1, 2016.  That will leave New Brunswick and Nova Scotia as the only two Canadian provinces with waiting periods.  (All US jurisdictions continue to have waiting periods of 3 to 7 days.)

A three-day waiting period was introduced in PEI as a cost-cutting measure in 2002.  In 2014 this “worker-deductible” was reduced to 2 days.  Stuart Affleck, Chair of the WCB, notes in a news release:

Eliminating the wait period will provide wage loss benefits to all workers from the day following an accident.  This measure will have a direct impact on our most vulnerable injured workers who might not have access to sick leave benefits during this timeframe.

The emphasis on the “most vulnerable” injured workers is important.  Day labourers, minimum wage earners,  new entrants to the workforces, or migrant workers must often rely on personal savings (or credit), welfare or the charity of neighbours to cover uncompensated wage loss due to work-related injury.  For these workers, the elimination of the waiting period for work-related injuries can provide 85% of net earnings (maximum annual earnings for 2015 are $52,100) tax free, substantially reducing the financial burden they must otherwise bear. 

Mr. Affleck’s focus on those “who might not have access to sick leave benefits during this timeframe” should not be read narrowly.  I am certain he doesn’t mean to imply that sick leave is a suitable alternative to workers’ compensation—it’s not. Even where sick leave is available, it is not intended to cover absences for work-related injury. 

Sick leave pay is typically available in medium to large firms and government entities.  In unionized organizations, sick leave is a negotiated benefit; in other words, the amount and structure of sick leave provisions (as well as short and long term benefit plans) are wage or salary cost items arrived at in the collective bargaining process; changes to wages, hours of work and even working conditions may well have been bargained to achieve sick leave provisions in collective agreements.  In non-unionized environments, sick leave provisions generally reflect industry standards—to be competitive in order to attract and retain talent. Whether or not the specific sick leave plan was the product of negotiations or market conditions, the value of sick leave is part of the financial compensation for the job.  Unlike workers’ compensation, sick leave pay is taxable and its benefits typically not intended to cover work-related injury, illness or disease.   

A key fact facilitating PEI’s policy shift has been the decreased frequency of work injuries.  The rate of workplace injuries and illnesses has fallen dramatically over the last three decades.  Recent “reforms” in Canada and the US have generally reduced employer costs; yet, rarely have reforms increased the worker access to or compensation for work-related injuries.  Waiting periods, long (or no) retroactive periods, low insured earnings (or weekly benefit) maximums, low benefit rates, and limits on benefit adjustments for cost of living  continue to shift a significant portion of the cost of work-related injury and disease to workers, their families and other systems. 

Work-related injuries that have durations shorter than the waiting period are essentially costless to workers’ compensation insurers.  Aside from some medical costs that may be payable, there is little financial incentive from workers’ compensation premiums to eliminate these short duration claims.  Uncompensated days of waiting period in longer duration claims also shift costs to workers and reduce the potential incentive workers’ compensation costs can have on improving workplace health and safety. 

For workers in PEI (particularly the most vulnerable), the elimination of the waiting period will mean improved access to compensation and less externalization of the cost of work injury to workers, families and communities.  It is also likely to increase the number of reported work-place injuries—not because of a decline in safety but because of increased workplace injury reporting. If improved reporting and cost incentives increase the focus on workplace health and safety, then this policy change is not only good for PEI workers, it is good for everyone.