The author’s March 10, 2017, post in this website described the highlights and implications of the Court of Appeal decision in Castrillo, the Fink & Bornstein class action against Ontario’s WSIB.
The class action claims that the Board was guilty of misfeasance in public office when, from circa January 2012 to November 2014, it surreptitiously directed its adjudicators to apply a “secret” new policy of discounting NEL benefits. The new policy directed the discounting of the NEL benefit on the basis of the impact of pre-existing conditions on permanent impairments resulting from work injuries, even if those pre-existing conditions had not been symptomatic prior to the work-injury.
The Court of Appeal put that action back on its feet when it allowed the Plaintiff’s appeal of a Superior Court decision that had struck the Plaintiff’s pleadings as showing no cause of action.
In the following passage from its decision (quoted in the March 10th post), the Court of Appeal effectively defined the evidence the Board would need to present at trial if it were to defend the action successfully:
 It is, nonetheless, possible that the specific determinations made by the WSIB in this case could ultimately be found to be a proper use of the Board’s authority, once the evidence is in about who did what, when and why. One would expect those facts to be revealed through the statement of defence, and through the document production and discovery process. Although the [plaintiff] has tendered a “secret policy”, consisting of three pages of the Board’s orientation manual, the Board might well be found on the evidence to have taken an even-handed and fully authorized approach to its reduction of NEL benefits. These are not matters that could or should be assessed on a pleadings motion.
The March 10 post ended with the author’s promise to explore, in a future post, “known evidence” the Board would have to confront were it to satisfy a court that it had not adopted the new interpretation for an improper purpose, or knowing it to be unauthorized, but, instead, in the Court’s words, had “taken an even-handed and fully authorized approach”.
In the author’s opinion, the evidence the Board will have to confront and overcome may be expected to include at least the following evidence suggesting improper purpose.
One of the facts the class action puts in issue is whether the Board’s exercise of its statutory powers to determine the benefits to which injured workers are entitled may have been exercised in this case for an improper purpose – i.e., the pursuit of cost-savings to an improper degree. The evidence in respect of that issue will include the following.
At the time the new NEL policy was introduced – in or about January 2012 – the Board’s decision-making was being driven by the deep commitment of Mr. I. David Marshall, its new President and Chief Executive Officer, to the “relentless execution” (to use Mr. Marshall’s own words) of a radical, cost-cutting policy.
The Board’s embrace of an institutional culture dominated by a search for radical cost-cutting measures, which began with Mr. Marshall’s arrival at the Board as its new CEO on January 1, 2010, has its seminal roots in the Ontario Provincial Auditor’s 2009 Report on the WSIB’s financial position.
The impact of that report on the Board and its senior management is conveniently described in Mr. Marshall’s own words in what might be fairly characterized as a ‘victory’ speech he delivered to the C.D. Howe Institute on April 1, 2014:
In 2009, the Auditor General of Ontario reported that our costs had so outstripped our revenues that we had accumulated an unfunded liability which was threatening to collapse the system, and that unless urgent steps were taken, government would have to add our funding deficit to the general liability of the province.
At the time, the Auditor General cited our financial statements as showing an unfunded liability of $12B.
The prospect of dropping another $12B onto the province’s books understandably dismayed the then Finance Minister.
Your organization, the CD Howe Institute, wrote an insightful report around the same time called “The Hole in Ontario’s Budget” which estimated the unfunded liability of the WSIB to be closer to 19B then the 12B we were reporting and called for urgent action.
And for good measure, at about the same time, the Canadian Federation of Independent Businesses issued a scorecard which rated Ontario as the worst performing compensation Board in Canada.
This is the landscape my team and I faced when I took office in January 2010. (Emphasis added.)
It was the Provincial Auditor’s threat to add the WSIB’s 12 billion dollars of unfunded liability to the public debt which led the government to appoint Mr. Marshall as the new President and CEO of the WSIB with marching orders to fix the unfunded liability.
To emphasize the importance it attached to those marching orders, the government included in its contract with Mr. Marshall an incentive bonus of 20% of his salary conditional on his success in bringing the unfunded liability under control.
The Board has confirmed that, by the end of his five-year contract, the Board’s cost-cutting performance under his leadership had qualified Mr. Marshall for a bonus of $400,000.
There is evidence tending to show that the Board’s post-2009 commitment to the relentless execution of a radical, cost-cutting policy had, at least by 2011, reached the level of an “improper” institutional purpose that had become the driving force behind its adjudicative and administrative decisions generally, and, therefore, the improper purpose that was also driving the decision on the new NEL policy in particular.
The latter evidence includes a wide range of other, radical and unprecedented and arguably “improper” (certainly, within the injured worker community, infamous) cost-limiting strategies adopted by the Board during Mr. Marshall’s tenure. Most readers of this post will be aware of those measures.
Evidence of the latter measures should be readily available when the time comes for the trial, especially with the fruits of the production and discovery processes then in Mr. Castrillo’s counsel’s capable hands.
Part of the circumstantial evidence tending to prove that the Board’s deep commitment, under the leadership of Mr. Marshall, to the relentless execution of a radical cost-cutting policy was, at least by 2011, at such a level of intensity that it had effectively morphed into an improper institutional purpose is the phenomenal, and otherwise inexplicable, success of that policy.
In the first four years of Mr. Marshall’s tenure, the Board:
- reduced its annual total benefit costs by 2.7 billion dollars – from 5.3 billion in 2009 to 2.6 billion in 2014;
- reduced its unfunded liability by 4 billion dollars – from 12 billion in 2009 to 8 billion in 2014 – and this, without more than nominal increases in employer assessment rates while at the same time establishing a 1 billion dollar occupational disease reserve fund;
- reduced the amount of NEL benefits from 126 million dollars in 2010 to 48 million in 2014; and
- reduced the number of locked-in, 100% Loss of Earnings awards from 1,960 in 2009 to 387 in 2014, etc. etc.
Note: The author has taken these figures from the analysis of the Board’s financial reports by Carmine Tiano of the Ontario Building Trades as published in a paper dated January 19, 2017, entitled Hard Times for Injured Workers – WSIB by the Numbers 2009 to 2015.
UNAUTHORIZED TO THE BOARD’S KNOWLEDGE?
Other major fact issues raised by the misfeasance in public office claim in the class action are whether the new NEL policy, if not improper, was in fact unauthorized, and if so, was it unauthorized to the Board’s knowledge. The evidence on these issues will include the following.
Lawyers experienced in the workers’ compensation field know that in January 2012 there was no interpretation of the Board’s then published operational policies that could have been rationally viewed as authorizing the new NEL discounting policy.
After the new policy was imposed, the CEO and his senior management team steadfastly ignored a stream of WSIAT decisions by experienced WSIAT adjudicators confirming, with full reasons, that the new policy was not authorized by the Board’s published operational policies.
This author also has serious difficulty in perceiving a statutory interpretation of the Workplace Safety and Insurance Act and Regulations which could be rationally viewed as authorizing the new NEL policy’s abrogation of the seminal thin skull doctrine.
Does it not seem at least possible, then, that the Board’s very experienced new CEO may have imposed this radically new policy on the Board’s NEL adjudicators without commissioning – or perhaps ignoring – a considered, expert legal opinion on these critical interpretation issues?
If either of those possibilities happened to be true, that omission would have considerable bearing on the issue of the Board’s knowledge of or consciousness of wrongdoing, or perhaps of the Board’s reckless indifference – that is, on whether it had, as the Court of Appeal put it, “taken an even-handed and fully authorized approach”?
Then there is the evidence suggesting some consciousness of wrong-doing inherent in the following:
Despite knowing that the new NEL discounting policy involved blowing up a doctrine – the thin skull doctrine – that had been a “cornerstone” of the WSIB’s operations for decades, the Board imposed the new policy without notice to the worker constituency and, most tellingly, only after the CEO had first taken extraordinary measures to ensure that the WSIB’s Board of Directors (and, perforce, the “worker” members of that Board) would be excluded from the decision-making process respecting that policy.
An account of the latter extraordinary measures may be found in the WSIB’s 2011, Q2 Report to Stakeholders.
In that report, the Board tells us that, in September 2011, the WSIB’s Board of Directors had agreed that all policies “developed to interpret the provisions of the WSIA”, including those previously requiring the approval of the Board of Directors because they were classified as “strategic” policies, would now be considered operational policies within the delegated approval authority of Mr. Marshall, and that this extension of Mr. Marshall’s approval authority would also include approval of changes to strategic policies previously approved by the Board of Directors.
This historic exclusion of the Board of Directors from the interpretation of the WSA, even with respect to policies of long standing and strategic importance, was accomplished just three months before the January 2012 operational abrogation of the long-established Board interpretation concerning the application of the thin skull doctrine in the Board’s NEL assessment procedures.
Should Castrillo ever get to trial, its proceedings will not be without interest.