Whether as part of a sale or reorganization, it is often necessary to incorporate a new company to carry on the work of a previous company. When doing so, lawyers and clients alike often overlook the implications of doing so on WorkSafeBC.
If your business has employees in BC, you’ll likely have to pay WorkSafeBC premiums. How WorkSafeBC calculates those premiums depends on several factors, most importantly the type of work that the business does. This will determine what Classification Unit the company fits into, and the associated rate that will be charged.
Once assigned to a Classification Unit, WorkSafeBC will also give a discount or apply a surcharged based on the business’s “experience rating”. The experience rating is based on how many claims the firm’s employees have made relative to other firms in the Classification Unit. Fewer claims equal a discount; more claims equal a surcharge.
When you start a new company in order to carry on the business of an old company, WorkSafeBC may permit you to transfer the experience rating from the old company. This sounds like a good deal if you had a good experience rating, but it comes with a major catch. If you transfer the experience rating, WorkSafeBC will also transfer the old company’s occupational health and safety history to the new company. This includes all past violations and penalties. Why does that matter? Because of how WorkSafeBC deals with repeat violations and penalties.
If a company is found in violation of the same section within 3 years, WorkSafeBC is required to consider a penalty against that company. If a company is issued a penalty for a same or similar violation within 3 years, WorkSafeBC doubles the amount for each new penalty. This means that if the old business was issued a penalty for $50,000, and the new company is found to have breached the same or similar provision within 3 years, the new company would face a $100,000 penalty if it transfers the experience rating. This is the case even though the new company is a separate legal entity from the old company, and the new company has never been issued a penalty.
Accordingly, when WorkSafeBC offers to transfer an experience rating between two companies, think twice. If the old company has recent violations or penalty history, it may not be worth the savings.