Application 1: General

1. What responsibilities do employers have to ensure their business is correctly classified?

Employers must provide the WCB with a detailed description of their business at registration.  If there is a gradual or abrupt change in the nature of the business, a change in the classification may be required.  An employer must notify the WCB of any such changes.  This will ensure the employers are included in the correct classification for their business and are paying the appropriate premium rate (see Application 3, Changes to an Employer's Classification).

To ensure the correct classification has been assigned, the WCB may examine a business at the employer's request, or the WCB may initiate the review at its own discretion (see Application 3, Question 4 & Policy 06-03, Premiums).

2. What information does the WCB consider when assigning an industry classification to an employer's business?

The WCB considers the following information when assigning an industry classification to an employer's business:

• products / services sold
• raw materials, equipment and processes used
• occupational mix of the workers
• work contracted out
• work locations
• customers and competitors
• ownership
• work performed by other companies at non-arms length
• any other information the WCB requires to gain a complete understanding of the employer's business.

3. What is an arms-length relationship?

An arms-length relationship is one between unrelated persons each acting in their own self interest.  A related person includes but is not limited to those:

• defined in s.134 of the Act, and
• legal entities under the de facto control of the same person or persons.

It is a question of fact in each case whether persons are dealing with each other at arms length at a particular time.

4. Why does the WCB classify businesses by industry rather than the workers' occupations?

Classification by industry provides collective liability among employers with the same kind of business.  The rates established represent the composite experience of all occupations employed by businesses within the industry classification.  This method of classification reduces administrative complexity for the employer and the WCB, as well as promoting consistency in the classification of similar businesses.  Ultimately, this allows businesses to control and pass on the costs of workers' compensation which are principally related to their own industry.

5. What happens when an employer's business activities do not match an existing industry classification?

The WCB prepares and regularly updates industry descriptions to provide general guidelines for classifying businesses.  These descriptions include activities that are common to most businesses in the industry and are not intended to fully describe every detail or unique process in each employer's business.  An employer's business is assigned an industry classification which provides the most appropriate description, or "best fit" based on information provided by the employer.

6. What if the business activities are split between separate legal entities?

When related entities contribute to the production of common goods and services, the WCB considers the activities as a whole.  When separate legal entities in a non-arms length relationship contribute to one business, the WCB assigns the same industry classification to each entity.  This allows for consistency in classification regardless of the business structure.

For example, ABC Sales Ltd, in a non-arms length relationship, was established for the sole purpose of selling the products manufactured by ABC Manufacturing Ltd.  Sales is an integral activity related to the manufacturing process.  ABC Sales Ltd. is therefore classified in the same industry as ABC Manufacturing Ltd.

When an employer restructures a business, either establishing or consolidating separate legal entities operating at non-arms length to carry on the existing business, the industry classification will be determined in accordance with Application 2, Question 1.

7. Will an employer's business activities outside of Alberta affect the industry classification?

The WCB determines the employer's industry classification based on the employer's business being conducted within Alberta.  When workers are covered under s.28 of the Act  and these activities comprise an integral activity for the employer, the WCB will consider business activities performed outside of Alberta when determining the industry classification to be assigned (see Policy 06-01, Employers & Workers, Application 4, Coverage Outside of Alberta).

8. When is this policy application effective?

This policy application (Application 1 - General) is effective June 1, 1998 except when noted otherwise in specific policy sections.