Reset a Safety Record? Alberta Court Says Acquired Companies Can

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By Peter Menyasz

Companies in Alberta, Canada, can clean an acquired company’s safety record if they’re willing to invest adequate resources, the province’s appeals body for workers’ compensation cases recently ruled.

The ruling by the Appeals Commission for the Alberta Workers’ Compensation Board wiped the slate clean for an unidentified international company that bought an Alberta operation with a poor safety record because the company made significant changes, Hannah Roskey, an employment attorney at Fasken Martineau DuMoulin LLP in Calgary, said Aug. 3.

“It’s promising in the sense that everyone hopes this can happen,” Roskey told Bloomberg BNA, adding that if the appeal had failed, the company would have faced much higher workers’ compensation insurance premiums, as is often the case when companies with poor safety records are acquired.

While the ruling only creates a precedent in Alberta, most provinces’ workers’ compensation policies are similar, so it likely provides an indication.

Revising Safety Culture

The Alberta commission upheld an appeal by an international public company that purchased the assets and business of an Alberta airline catering company as part of a transaction to acquire a national operation in Canada. The province’s workers’ compensation body determined that the Alberta company’s poor safety record should apply to the company that acquired it, and that was upheld by an internal review body.

The new company’s plans for the acquisition included explicit provisions to revise the acquired company’s safety culture through proven safety programs; additional occupational health and safety management positions; adopting a system to report safety statistics; and funding to improve facility safety. The company also planned to rebrand the new company to adopt the international company’s name, the three-member panel said in its unanimous Oct. 4, 2016, ruling.

The court found “there was a positive and significant change to the risk insured following Newco’s purchase of Oldco and that it was inappropriate for that reason to combine Newco’s experience record with that of Oldco’s.”

The panel rejected the Workers’ Compensation Board’s finding that the change in ownership would have no immediate impact on overall safety risks because the work, assets, workers, customers, and locations were unchanged after the acquisition, and that the new company’s safety record after the sale showed no improvement.

Decisions on workers’ compensation insurance rates when one company acquires another are made on a case-by-case basis, as each situation is unique based on the specific circumstances, Ben Dille, a spokesman for the Alberta Workers’ Compensation Board, said Aug. 3.

“In the case of a sale or transfer of business operations, we review to determine if the seller’s accident experience should be combined with the purchaser’s,” Dille told Bloomberg BNA in an email. “This decision is made based on policy criteria, which weigh a number of considerations such as the continuity of ownership, management personnel, health and safety programs, and more.”

Such decisions can have significant financial consequences for purchasers, as the carry-over of accident experience can lead to experience rating adjustments of up to 60 percent to workers’ compensation insurance premiums, he said.

To contact the reporter on this story: Peter Menyasz in Ottawa at correspondents@bna.com

To contact the editor responsible for this story: Rachael Daigle at rdaigle@bna.com

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