OPINION — WCB $11 billion in hole, and mining companies pay

There are limits as to how far a mining company can go to return its operations to good health and profitability. There are external restraints besides those common to any competitive enterprise. These are the hobbles imposed by government and para-government organizations.

In this instance, the culprit is the Ontario Workers’ Compensation Board (WCB).

No better example of the hobbling of an industry can be found than Royal Oak’s Pamour gold mine, in Timmins, Ont. Pamour is one of the few remaining old-line mines of the Porcupine camp. By dint of hard work, administrative streamlining, rigorous inventory control, decentralization, empowerment of supervisors and painful layoffs, this operation has reduced production costs to about US$300 per oz. from US$400. (The company is coy about disclosing its precise costs, but they are expected to be made public in Royal Oak’s annual report for 1992).

Now, mine management is up against hard-core statutory costs. And there’s nothing it can do about them.

“In 1988, we paid $4,750 per employee in WCB premiums during a year when our lost-time frequency due to accidents was a little over six,” explains General Manager Michael Mracek. “In 1991, lost-time frequency rate had dropped to two, yet our premiums per employee went to $5,450.”

In 1992, the premium increased to $5,750, but the lost-time accident frequency had dropped to 0.28. “Our accident frequency rate continues to improve, but our premiums go higher,” says a frustrated Mracek. In a nutshell, only 40% of Ontario WCB liabilities are fully funded. The unfunded liability amounts to $11 billion, which the organization is forced to pass on to its clients. In other words, increase premiums. Unfunded liabilities include future compensation for victims of industry-induced sickness and industrial accidents — compensation which the WCB cannot afford to pay.

The first WCB in Canada was formed in Ontario in 1914. It served as a model for provincial legislation in Nova Scotia (1915), British Columbia (1916), Alberta (1918) and New Brunswick (1918). Workers’ compensation acts now exist in all Canadian jurisdictions. The WCB provides medical services as well as financial benefits to individuals suffering from workplace injuries or occupational diseases. Employers agree to pay into the WCB fund; for their part, employees agree not to sue.

Problem is, what defines an industrial accident or sickness is no longer clear. Untangling the cause of a strained muscle, a bad back, deteriorating eyesight or hearing has become virtually impossible (especially in the computer age). Did the ailment occur on the job or on the golf course? Or is the “victim” merely growing old?

Moreover, if the WCB refuses a claim, it will likely be asked to reconsider. It is often under pressure to do so by the news media, by local politicians seeking the spotlight and by union leaders with the same gleam in their eye. The net result has been an avalanche of claims and insufficient assets to cover them.

Without doubt, the WCB’s dilemma will become a political football. But partisan bickering is not going to solve the problem. The fact is, the WCB no longer works. It was never intended for the complex and all-inclusive workplace that has evolved over the past 75 years. A new structure is needed. Kerry Thomas of Peat Marwick Thorne advises companies on how to tackle high WCB premiums — for example, segregating high-risk employees in office and service jobs. This and other strategies cope with the immediate problem. But for a long-term solution, the need for a new structure . . . that is another question.