"WCB Net Pay" and LTD Benefit Repayment Issues
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The following explains the process of deriving "WCB Net Pay" especially in the context of nurses who obtain a WCB award but have been receiving LTD benefits while filing for WCB.

Note: the organization formerly known as "WCB" has changed its name to "Work Safe BC". In the following, we will continue to use the term "the WCB". This is because we are here dealing with issues related to "WCB Net pay", a term used in the actual wordings of our Provincial Collective Agreement (PCA). For most nurses who are on "WCB", the term "WCB" is probably more familiar.

"WCB Net pay" situations often involve three sums of payments from three different parties – (1) the WCB (i.e. Work Safe BC); (2) the HBT and the LTD insurer; and (3) the employer of the nurse. Each of the three parties is governed by different rules, meaning that each of them would compute their payments based on a different method. In addition, the Federal Government is also involved through its impacts on taxation on LTD benefits and on incomes such as sick payments.

Because so many parties are involved, the three sums of money often do not look identical and in fact, may sometimes look very dissimilar. The fact that they are dissimilar may – or may not -- mean that some computational errors have been made.

A nurse injured at work may file for WCB benefits. This often means wait time for the application to go through. Sometimes the application is denied, in which case the nurse can file an appeal. In the meantime, the nurse may apply for LTD. But LTD itself has a wait time of 5 months. During these 5 months, the nurse may draw on her sick bank or vacation bank.

When she goes on LTD, the LTD payments are based on a percentage of the "straight time Gross pay" at the time of injury, i.e. all other earnings beyond "straight time" Gross pay, such as shift premiums, overtime, etc, would not be considered.

If the WCB appeal later succeeds (and this can be a few months or even a few years later), then the WCB will send her a retroactive award. WCB awards are governed by the statutory legislation of the WCB and have nothing to do with the language of the PCA.

WCB awards are based on an estimate of the nurse's total Gross income prior to the time of injury. Here, total Gross income means straight time pay plus all other earnings, e.g. shift premiums that the nurse derived from her job prior to injury. Then, the WCB would estimate the Net pay from such Gross earnings. The resulting estimated "Net" from such Gross earning may actually only be, e.g. at 67%, of the Gross. Further, the WCB will then pay out only 90% of such derived Net pay.

In moving from Gross income to Net pay, the WCB would not, however, make two important deductions that an employer will typically make – superannuation and union dues. This will mean that the WCB's so-called "Net pay" will usually be a larger number than what that nurse would normally take home as "Net pay" from the employer.

When the WCB award comes through, the nurse in the above scenario will be liable for repayment to the LTD insurer for the LTD payments that she had been getting prior to her success in getting the WCB award. This is because the nurse can not be receiving two sums of injury benefit payments for the same injury and for the same time period.

The LTD insurer should claim back from the nurse only the amount of the WCB award. Since LTD payments and WCB awards are governed by different regulations and are computed based on different methods (as described above), the two sums can sometimes be quite different. If the total LTD sum already received by the nurse is more than the WCB award (for the same time period), then the LTD insurer can only claim back the amount equal to the WCB award and not more.

LTD payments are taxable. Hence, the nurse would have already paid income tax on the "gross" LTD payments. She would have retained only the after tax amounts. The LTD insurer, however, would claim back the "gross" amount, i.e. including the taxes already sent to the Federal Government. In the past, the inclusion of such taxes as part of "LTD repayment" has been the subject of some nurses' grievances. BCNU and the HBT have now agreed that such taxes would be included since the taxes can be re-claimed.

Under taxation rules, the Federal Government permits the nurse to claim back such taxes. However, only the nurse, as the taxpayer, can claim back such taxes. The LTD insurer is not allowed to claim taxes back on her behalf. So, the nurse must remember to claim back such taxes when she files her income tax return for the year.

Further, if the tax refund is of such a large amount that it exceeds the nurse's total taxes payable in the tax return of that year, (i.e. if the tax refund is so large that it wipes out the nurse's taxes payable in that same year and still has a balance of unclaimed refund), then the nurse is permitted by tax regulations to carry over any unclaimed tax refund into future years. This situation is quite common since LTD payments, and therefore the repayments as well, can involve a time frame of several years. Hence, the tax refund can sometimes be quite large.

The WCB sends the actual WCB award to the employer of the nurse and not directly to the nurse. In turn, the employer will give the nurse "WCB Net pay". WCB Net pay is governed by the language of the PCA. That is, the employer should first estimate the nurse's total Gross earnings prior to injury (i.e. straight time pay plus all other earnings such as overtime, shift premiums, etc). From such Gross earning estimate, a Net pay will be obtained based on all normal deductions such as taxes, CPP, etc, and including the deductions for superannuation into her pension plan and for union dues.

The two deductions, superannuation and union dues will usually render the employer's "WCB Net pay" smaller than the WCB's so-called award based on "net pay".

If the employer correctly computes and pays out such "Net pay" and it does look smaller than the WCB award, the employer has no obligation to pay more because the PCA's language has already been followed. In the past, the divergence between a WCB award and the employer's "WCB Net Pay" has been the subject of some nurses' grievances.

The nurse in the above scenario might also have taken out some of her sick bank and vacation bank hours during the 5 months' waiting period for her LTD. That is, she would have received sick pay and vacation pay in that time frame.

Since the WCB award (and hence also the employer's WCB Net Pay) would have been computed including these 5 months as part of the award time frame, the nurse will then also be liable to pay back to the employer such sick bank hours (though she may, or may not, choose to pay back any vacation hours). This is because the nurse could not receive both sick pay and also "WCB Net pay" for exactly the same time frame.

The employer must then restore her sick bank back to the same level as prior to the date of her injury (i.e. as though she had not taken out any sick hours at all).

If the nurse has to repay any such sick hours, then the sum of "WCB Net pay" from the employer will be further reduced by such repayment. This is sometimes the situation: – a nurse finds that her "WCB Net Pay" money from the employer, indeed, looks very different (often noticeably smaller) than the WCB award. But as long as all the procedures described above have been correctly followed by the employer and by the LTD insurer, then such a divergence is the result of the application of the PCA and is not necessarily an error.

This is not to say that errors have not been made by some employers. Sometimes an employer may not estimate a nurse' Pre-injury Gross and Net Pay correctly. Since such Pre-injury earnings form the basis for subsequent "WCB Net Pay" computations, the result will be an error.

However, an error is not automatically implied whenever an employer's "WCB Net pay" looks different from the WCB award and also different from the LTD money claimed as repayment to the LTD insurer.

In the situation where the nurse has to repay sick pay to the employer (as described above), the nurse can claim back taxes already paid on those sick payments. This is because sick pay is deemed income by the taxation authorities and hence taxable. The nurse would have paid taxes on such sick pay at the time when she received the payment (e.g. during those 5 months' waiting time).

But when the nurse repays the employer the sick pay money and in return receives "WCB" money, there should be no tax since WCB money is non-taxable. Therefore, the nurse is entitled to claim back all the taxes paid on those sick payments. The nurse should, therefore, remember to claim a tax refund corresponding to the taxes already paid on those sick payments.

Note -- there are two separate tax refunds that the nurse is entitled to claim. The first one is the tax refund on the LTD money that the nurse has to repay to the LTD insurer. The second is the tax refund on the sick pay that the nurse has to repay to the employer. To facilitate the claiming of such tax refunds, the nurse should make sure that she/he obtains documentation from the LTD insurer and from the employer, such as receipts or formal letters acknowledging repayment.

For the tax return, the nurse will receive a T5 slip from the WCB on which is shown the amount of the WCB award. This T5 may look confusing to the nurse since she/he never receives the WCB award itself (which is sent to the employer). Instead, the nurse receives the employer's "WCB Net pay" which, as described above, may be a different amount. In reality, this T5 has no net impact on the nurse's tax return – the amount on the T5 is entered on one line and is subtracted out on a subsequent line of the return leaving the rest of the tax return unaffected. Any tax accountant will know this.

Lastly, in the above, it has been pointed out that a WCB award can often be a bit larger than the employer's WCB Net pay. However, sometimes the opposite can occur. The WCB has a maximum annual gross income for computing wage loss benefits. For those nurses whose gross earnings prior to injury were above the maximum, only the maximum is used by the WCB for estimating its award. But the PCA has no such maximum on the employer's "WCB Net Pay". When this occurs, it is possible that the employer's WCB Net pay is larger than the WCB award.