Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the CRA.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'ARC.
Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the Department.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle du ministère.
Principal Issues:
Has the client reimbursed the Workers' Compensation Board from funds arising from the settlement of a third party action so that the T5007 slips should be amended?
Position TAKEN:
Given the statutory subrogation by the Alberta WCB of the rights of a worker upon acceptance of compensation, we are of the opinion that the amounts received by the WCB from the third party settlement were received by the WCB in their own right. Subsection 17(5) of the Alberta WCA merely contains provisions regarding the disbursement of any funds received by the WCB as a result of the subrogated rights. Accordingly, we are of the view that the worker has not reimbursed the Alberta WCB and the T5007 slips should not be amended.
Reasons FOR POSITION TAKEN:
Previous correspondence positions on similar payments including 951439, 931070, 4-0484 and various Workers Compensation Appeals Tribunal Decisions
May 6, 1996
HEADQUARTERS HEADQUARTERS
Client Services D. Zion
Correspondence Division (613) 957-8953 Attention: Patricia Hachey
961054XXXXXXXXXX
This is in response to your correspondence of March 21, 1996 in which you requested our comments regarding whether the workers compensation amounts reported on T5007 slips issued to XXXXXXXXXX should be reduced by the amount that has been reimbursed to the Alberta Workers Compensation Board ("WCB") from a personal injury settlement.
As we understand the situation, in XXXXXXXXXX was injured in an accident while at work. He qualified for workers compensation benefits and, since the accident, has received compensation and medical aid benefits from the Alberta WCB. XXXXXXXXXX received permission from the Alberta WCB to sue the third party involved in the accident and, in XXXXXXXXXX won a settlement of $XXXXXXXXXX
XXXXXXXXXX
Although not directly relevant to the enquiry we have some concerns as to the whether or not this excess settlement amount could be structured so as to fall within the Department's structured settlement guidelines. Should it be necessary, we would be pleased to review this particular issue upon submission of the pertinent settlement documentation.
Generally, under provincial workers' compensation legislation, the compensation to which a worker is entitled takes the place of the worker's right of action, and the worker would not normally be able to sue the employer in court for damages for a work-related injury. In the case where a third party liability exists, the worker may elect to either take action against the third party or claim compensation from the Alberta WCB. If the employee receives compensation, the compensation board is subrogated; that is to say, succeeds to the rights of the worker and/or his dependants. For instance, in Alberta, pursuant to section 17 of the Alberta Workers Compensation Act ("WCA"), there is subrogation by the WCB of the worker's rights in respect of a chose of action arising from the work-related personal injury of the worker. Section 17 further outlines the WCB's rights and obligations pursuant to this transfer of the workers' rights. In our view, the relevant provisions in this case are as follows:
17(1) If an accident happens to a worker entitling him or his dependants to compensation under this Act and the circumstances of the accident are such as to also entitle the worker, his legal personal representatives or his dependants to an action against some person other than an employer or worker in an industry to which this Act applies in respect of the personal injury to or death of the worker, the Board is subrogated to the rights of the worker, his legal personal representatives or his dependants in respect of that cause of action.
(2) When the Board becomes subrogated to the rights of a worker, his legal personal representatives or his dependants under subsection (1),
(a) no payment or settlement shall be made to or with the worker, his legal personal representatives or his dependants for or in respect of those rights or for or in respect of any claim, cause of action or judgement arising out of them except with the consent of the Board, and any payment or settlement made in contravention of this clause is void,
(b) an action against any person arising out of injury to or the death of the worker may, with the consent of the Board and on the terms that are satisfactory to the Board, be taken by the worker, his legal personal representatives or his dependants, or by the Board in the name of the worker, his legal personal representatives or his dependants, without the consent of the person in whose name the action is taken, ....
(3) If the Board gives its consent under subsection 2(b), the legal costs incurred on behalf of the worker, his legal personal representatives or his dependants in taking the action shall be paid by the Board in the amount prescribed in the regulations unless the legal representative of the worker, or the worker's legal personal representatives or dependants satisfy the Board that that amount is insufficient, in which case the Board may increase the amount.
.....
(5) If money is received by the Board because it is subrogated to the rights of a worker, his legal personal representatives or his dependants, ....
(c) if the money is received as a result of action taken or negotiations carried on by the worker, his legal personal representatives or his dependants, the Board may pay to that person from the money remaining in its hands after payment of all legal costs incurred in recovering the money, an amount equal to 25% of the gross amount received by the Board ...., and
(d) if the balance of the money remaining in the Board's hands after payment of all legal costs incurred in recovering the money and after payment of the amounts, if any, required to be paid under clauses (b) and (c), exceeds the costs of the accident to the Board, including the capital cost of any pension award, the excess shall be paid over to the worker, his legal personal representatives or his dependants, as the case may be.
Any rights that XXXXXXXXXX might have had have been subrogated to the Alberta WCB upon his acceptance of workers compensation. The Alberta WCB had the right to maintain the action against the third party or to grant XXXXXXXXXX the authority to maintain the action in his own right. Regardless of the manner in which the action is pursued against the third party any funds received are the property of the Alberta WCB. Section 17 of the WCA also provides for the distribution of excess funds from a settlement to the worker from the Alberta WCB. XXXXXXXXXX has received funds pursuant to Alberta WCB's obligation to do so under subsection 17(5) of the WCA.
XXXXXXXXXX We were advised that injured workers are informed at the time of application for compensation of their rights under the Alberta WCA and the repercussions of their choice to receive compensation from the WCB. Furthermore, in the case where action is to be taken against a third party the WCB gives the worker the choice of having Alberta WCB legal counsel pursue the matter or to obtain outside legal counsel to do so. When outside legal counsel is retained, the contract is between the Alberta WCB and the outside legal counsel, not the worker and the outside legal counsel.
In summary, given the statutory subrogation by the Alberta WCB of the rights of XXXXXXXXXX upon his acceptance of compensation, we are of the opinion that the amounts received by the WCB from the third party settlement were received by the WCB in their own right. Subsection 17(5) of the Alberta WCA merely contains provisions regarding the disbursement of any funds received by the WCB as a result of the subrogated rights. Accordingly, we are of the view that XXXXXXXXXX has not reimbursed the Alberta WCB and the T5007 slips should not be amended.
We trust that our comments have been of assistance.
J.A. Szeszycki
for Section Chief
Business, Property & Personal Section
Business and Publications Division
Income Tax Rulings and
Interpretations Directorate
Policy and Legislation Branch
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