A Victoria agency that serves people with developmental disabilities is suing the B.C. government for allegedly mismanaging employee health and welfare benefits.
Kardel Consulting Services Inc. and two other social service agencies in Kelowna and Prince Rupert filed suit in B.C. Supreme Court Friday against the province and trustees of the Healthcare Benefit Trust.
The agencies are among more than 50 organizations that have joined forces to fight what they say are unfair financial penalties levied by the non-profit trust. The agencies serve some of the province’s most vulnerable people by providing housing, day programs, job and life skills training.
Karl Egner, who owns Kardel, said the agencies decided to take the matter to court after years of trying to negotiate a settlement with government.
“[We] felt at the end of the day that we were really spinning our wheels and that this was the only avenue that remained where we could convince them we were serious about this,” he said.
D.J. Hildebrandt Homes Ltd., which provides services to people with developmental disabilities in Kelowna, and Fairview Management Services Ltd., which used to provide similar services in Prince Rupert until last October, are the other plaintiffs.
The dispute centres on who is responsible for a deficit racked up by the Healthcare Benefit Trust, which administers group benefits for thousands of employees in the health and social service sectors across the province.
Member agencies pay money into a pool, which the trust then draws upon to pay off long-term disability claims and others.
When the cost of claims exceeds money in the pool, that’s known in the business as an unfunded liability or a deficit.
The Healthcare Benefit Trust has a number of different pools, but the one for community social service agencies posted a deficit of more than $14 million last year.
The trust has been imposing a surcharge on member agencies in order to pay down the deficit, while organizations that leave face “exit levies” that purportedly represent their share of the shortfall.
Kardel and 10 other agencies pulled out of the trust in December over concerns about the deficit. Kardel has refused to pay an exit levy of more than $350,000.
The agencies deny they are responsible for the deficit and the levies, arguing that government forced them to join the trust as part of a mediated labour settlement in 1999.
The lawsuit claims that agencies raised concerns at the time about the trust’s lack of insurance and the potential for an unfunded liability.
But they were told that the risks were “minuscule” and that the province would cover their costs, the suit says.
The agencies claim the government then “unlawfully interfered” in the trust by causing it to set rates so low that the money coming into the pool failed to cover the money going out to pay claims.
As a result, the trust “incurred a substantial unfunded liability.”
The lawsuit argues that government gives the agencies money to run programs, operate facilities and pay wages and benefits — including the surcharges imposed by the Healthcare Benefit Trust.
Since the exit levies are essentially the same as what the government would have been paying in surcharges, it should cover the levies as well, the lawsuit says.
If it refuses, “the province will be unjustly enriched,” the claim says.
The government and the trust have yet to file statements of defence, but both have argued in the past that the agencies were under contract and knew they would be on the hook for any shortfalls.
The government also says it has arranged for agencies to pay back the exit levies over 10 years so as to lessen the impact and protect services to vulnerable people.
Social Development Minister Moira Stilwell reiterated that position in a statement Friday.
“As this matter appears to be moving before the court, I am not able to comment on it specifically,” she said. “What I can tell you is that after two years of discussions, an equitable and flexible repayment plan has been developed for members that have withdrawn from the Healthcare Benefit Trust without paying their contractually required exit levies.”
The trust said in its own statement that the repayment plan offers a “practical solution” for all. “This is our preferred option. HBT must continue to act in interests of the trust, our member agencies, and on behalf of those employees with disabilities who are entitled to receive LTD benefits.”
Egner said more agencies are expected to file lawsuits in the coming days and they are fully prepared to battle in court.
“I really do think we’ve got both the moral and legal high ground on this thing and we’ll see it through if we need to, all the way to the court,” he said. “But, you know, it costs more and hopefully all sides can sit down again and look at this thing afresh.”
