Business | Spring 2010
Take a second look at workers’ compensation.
By Joy Gregory
A lack of workers’ compensation could put your farm at risk. But even if covered, you might still be living under a false sense of security
Farmers who think they’re saving money by not buying optional workers’ compensation coverage for themselves or their employees may be putting their farms and estates at risk, says Ryan King, managing partner, King Capital Planning Inc. in Edmonton, AB.
"I’m a ‘big picture’ kind of guy and I don’t mind telling you that conversations about compensation coverage for farmers and their staff are complicated. I work in one of the provinces where coverage for farm owners and employees is optional, but that doesn’t mean there’s no need to discuss the question."
Workers’ compensation programs across Canada are administered provincially, allowing for different applications in each province. For example, farm owner/operators in Alberta, Saskatchewan, Manitoba and Ontario can all opt into workers’ compensation insurance programs that provide these owner/operators, who produce the bulk of Canadian field crops, with coverage. In Alberta and Saskatchewan, farm operators can also opt into voluntary coverage of non-family employees. But that’s not the case in Manitoba and Ontario, where voluntary coverage of non-family employees is not an option.
As of January 1, 2009, compulsory coverage in Manitoba was extended to include farms that employ paid workers. Farm owner/operators and family members who work on the farm in Manitoba remain exempt from mandatory coverage. WCB Manitoba figures show about 1,100 new ag-related businesses have joined the program since the changes came into effect in January 2009, says Warren Preece, Workers’ Compensation Board (WCB) of Manitoba.
While mandatory coverage of employees is not universal in Ontario’s farm industry, most categories of employment have required employee coverage for several years. The real issue with workers’ compensation coverage is risk management, says King. Rather than letting his farm clients think they’ll save money by not paying into a voluntary program, "I try to get them to consider whether the universal coverage offered under these programs is enough."
The ceiling for maximum insurable earnings differs from province to province. Under Ontario’s Workplace Safety and Insurance Board, the maximum for 2010 is $77,600. In Alberta, the maximum level of insurable earnings is about $72,000. "If an Alberta farmer shows an income of $120,000, then basically he’s only half covered. So yes, he needs to take a better look at how he’s going to live on half his income if he can no longer work or farm," says King.
"Our approach is to look at everything from the point of view of how it impacts the estate. What does it mean to your estate and loved ones if you, as the owner and breadwinner, are not covered properly?" asks King.
In the end, King’s discussions with clients about workers’ compensation coverage hit the same talking points as their conversations about overall risk management strategies. When farmers tell King they don’t need insurance, he asks them to take a second look. When they tell him their wives can borrow money to run the farm until the estate is settled, for example, King delivers a swift reality check.
"If she’s never had a loan, never been involved with farm finances and has never had a credit card, who’s going to lend her money? Some people tell me she can get it from family. Really? I know it can cost tens of thousands of dollars just to get a crop in the ground, so I ask them what happened the last time they tried to borrow $500 from a family member."
On the plus side, in addition to including disability benefits related to work-related injuries, workers’ compensation does remove the concepts of negligence and fault from legal consideration. This no-fault approach means compensation kicks in without litigation.
But even with the obvious benefits of the no-fault provisions of workers’ compensation programs, King says most farms need to protect their operations (and estates) with additional private 24-hour insurance plans for owner/operators and staff. Noting cases where there is a debate over whether an injured individual was really "at work" when picking up supplies for a business, or traveling from point A to B, King says it’s best to avoid the grey areas. "Is the guy at work? Well, it doesn’t matter under a 24-hour plan. If he’s hurt, he’s protected."
King suggests most farm owners should explore options with a combination of workers’ compensation and private coverage. There are usually good reasons to have basic workers’ compensation coverage and sometimes the premiums a director/owner can save by opting, say, for $20,000 coverage instead of the maximum, "can be used to supplement insurance coverage with disability provisions specific to his needs," explains King. FF
