To the Ad Interim Minister of Public Health, Social Development and Labor Mrs. Rita Bourne- Gumbs Clem Labega Square Philipsburg Sint Maarten

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1 To the Ad Interim Minister of Public Health, Social Development and Labor Mrs. Rita Bourne- Gumbs Clem Labega Square Philipsburg Sint Maarten Philipsburg, July 2 nd,2015 LETTER OF ADVICE Our reference: SER /15/DCB/024 Re: Letter of advice concerning the national decree, containing general measures regarding the price indexation OV and ZV Honorable Minister Bourne, In reply to your request for advice which was received by our Council on April 9 th, 2015, concerning the national decree, containing general measures regarding the price indexation National Ordinance Accident Insurance ( Ongevallen verzekering [OV]) and National Health Insurance Ordinance ( Ziekteverzekering [ZV])2015 (in Dutch: Landsbesluit, houdende algemene maatregelen, van de tot aanpassing van de dagloongrenzen voor 2015, genoemd in de Landsverordening ongevallenverzekering en de Landsverordening ziekteverzekering in verband met de ontwikkeling van de prijsindexcijfers van de gezinsconsumptie ) The Social Economic Council (SER) has evaluated the social, economic and legal consequences of the advice request and came to the following conclusions: Background OV and ZV: The National Ordinance Accident Insurance [OV] contains rules about the insurance of employees against occupational accidents. The National Health Insurance Ordinance [ZV] is a form of health coverage that insures the population against meeting the costs associated with ill health. Among others the OV and ZV regulate the right of the employee to medical treatment and nursing care, financial allowances for occupational disability, the premiums that have to be paid and other responsibilities of the employer and the employee. The OV obliges the employer to pay a premium to SZV, the organization responsible for implementing social and health insurance for Sint Maarten, for each employee. The premium for the employee is calculated based on a percentage of the daily pay of the employee. The percentage ranges between 0.5% and 5% and depends on the level of danger involved with the work. Premiums are due up to a certain maximum amount of wage. 1

2 The percentage of the daily pay is determined for two years. Every two years adjustments are made, based on the increase of the consumer price index (CPI) of August of the preceding year, which is being compared with the CPI of the year prior to the preceding year 1. According to the calculations of the Department of Statistics, the cost of living in August of 2014 increased by 2.2 per cent compared to August The wage limit for August 2014 was set at NAF for a 5-day working week and at NAF for a 6- day working week. This means that including the 2.2 per cent increase- the wage limit for ZV and OV for 2015 will be set at NAF for a 5-day working week and at NAF for a 6 day working week. OV/ZV wage limit proposal according to the national decree, containing general measures regarding the price indexation OV and ZV 2015: 2014 CPI day work week NAF increase NAF day work week NAF % NAF Executive Summary On April 9 th, 2015 the Social Economic Council (SER) received a request to advise on the Landsbesluit, houdende algemene maatregelen, van de tot aanpassing van de dagloongrenzen voor 2015, genoemd in de Landsverordening ongevallenverzekering en de landsverordening ziekteverzekering in verband met de ontwikkeling van de prijsindexcijfers van de gezinsconsumptie (in short: national decree, containing general measures regarding the price indexation OV and ZV 2015). However, while drafting its advice on this matter, the SER noticed an official publication in the Daily Herald of May 26th, 2015 under the Government Info Page, page 18, that the Landsbesluit, houdende algemene maatregelen, van de 15de mei 2015, tot wijziging van het Gevarenklassenbesluit ongevallenverzekering in verband met de vaststelling van een premiepercentage voor de ongevallenverzekering en tot aanpassing van de daglonen, genoemd in de Landsverordening ongevallenverzekering en de Landsverordening ziekteverzekering in verband met de ontwikkeling van de prijsindexcijfers van de gezinsconsumptie (in short: national decree, containing general measures with regard to the hazardous work categories) became effective. As a consequence, the SER observed that: 1. The SER was not included in the process to advise on the national decree, containing general measures with regard to the hazardous work categories. 2. There is a conflict with legislations; the two national decrees, containing general measures as mentioned above are in conflict with each other. 1 Article 8, paragraph 3 of the OV and article 1b ZV 2

3 3. There is a conflict in figures. 4. That executing a law before it is effective is a serious infringement on the rule of law and as is shown now has irreparable consequences which should not be borne by parties that have no influence on the matter. [See attached elucidations for complete explanation summaries for each of these subjects] Advice: The SER regrets that it was not part of the advisory process with regard to the national decree, containing general measures with regard to the hazardous work categories. Due diligence is lacking, which results into irreparable consequences. The SER renders its advice in this case with reference to illegalities that should be resolved as soon as possible to avoid more social, economic and legal ramifications. Therefore, pursuant to the SER meeting on this topic, the SER unanimously advises as follows: 1. That due diligence should always be carried out when drafting laws; i.e. the elucidation attached to the proposed national decree, containing general measures OV and ZV 2015 should contain correct financial information. 2. That the national decree, containing general measures with regard to the hazardous work categories should be amended. The consequences of it being effective retro- actively are too severe and this decree does not reflect the actual premiums collected by SZV over the years That, in order to comply with the National Ordinances OV and ZV, the wage limits should not be raised until We trust to have informed you sufficiently herewith. Should you require any additional information after reading the above, please feel free to contact us at your earliest convenience. Respectfully, Oldine V. Bryson- Pantophlet Chairman Gerard M.C. Richardson Secretary-general 3

4 Attached: Elucidation to this advice ELUCIDATION 1. No advice from SER The statutory task of the SER is to advise the government on all important matters of a social economic nature. The national decree, containing general measures with regard to the hazardous work categories did not reach the SER for advice, even though this is an important matter of social economic nature. This national decree, containing general measures with regard to the hazardous work categories retroactively as per 2010 set the wage limit at a totally different amount than the SER received in its advice request and furthermore the new wage limit does not correspond with the premiums that were actually collected by SZV since This has social, economic and legal consequences that could have been avoided if the SER was involved in this advisory process. 2. Legal Problem: Conflicting National decrees, containing general measures I) According to the law, it is proposed in the national decree, containing general measures regarding the price indexation OV and ZV 2015 that the wage limits OV/ZV for 2015 increases with 2.2% since the CPI in 2014 increased 2.2% compared to the CPI in It is further proposed that the national decree, containing general measures regarding the price indexation OV and ZV 2015 goes into effect retro- actively as per January 1st, According to the calculations of the Department of Statistics, the cost of living in August of 2014 increased by 2.2 per cent compared to August The wage limit for August 2014 was set at NAF for a 5-day working week and at NAF for a 6- day working week. This means that including the 2.2 per cent increase- the wage limit for ZV and OV for 2015 will be set at NAF for a 5-day working week and at NAF for a 6 day working week. OV/ZV wage limit proposal according to the national decree, containing general measures regarding the price indexation OV and ZV 2015 is explained below in Table 1. Table 1: 2014 CPI day work week NAF increase NAF day work week NAF % NAF However, while drafting its advice on this matter, the SER noticed an official publication in the Daily Herald of May 26th, 2015 under the Government Info Page, page 18, and in the National Gazette of June 12th, 2015 that the Landsbesluit, houdende algemene maatregelen, van de 15de mei 2015, tot wijziging van het Gevarenklassenbesluit ongevallenverzekering in verband met de vaststelling van een premiepercentage voor de ongevallenverzekering en tot aanpassing van de daglonen, genoemd in de Landsverordening ongevallenverzekering en de 4

5 Landsverordening ziekteverzekering in verband met de ontwikkeling van de prijsindexcijfers van de gezinsconsumptie (in short: national decree, containing general measures with regard to the hazardous work categories) became effective. This national decree, containing general measures with regard to the hazardous work categories is thus applicable law and has set the OV/ZV wage limit at NAF for a 5-day work week and at NAF for a 6- day work week, retroactive to October 10, 2010 (as explained below in Table 2). Table 2: day work week NAF NAF NAF NAF NAF NAF day work week NAF NAF NAF NAF NAF NAF The national decree, containing general measures with regard to the hazardous work categories conflicts with the advice request the SER received on April 9th, 2015, concerning the national decree, containing general measures regarding the price indexation OV and ZV The SER was asked to advise on the wage limit for a 5- day work week and a 6- day work week according to the OV and ZV, while the national decree, containing general measures with regard to the hazardous work categories went into effect, covering the exact same topic, but only with other amounts than proposed in the national decree, containing general measures regarding the price indexation. II) Even though the national decree, containing general measures with regard to the hazardous work categories is effective retro- actively per October 10th, 2010, it does not correspond with the amounts mentioned in the National Ordinance OV and ZV, in which Ordinances the wage limit for OV and ZV is established at NAF for a 5-day working week and at NAF for a 6 day working week. Thus it is not clear where the legal basis is to increase NAF to NAF for a 5-day working week and to increase NAF to NAF for a 6 day working week. Consequently, the national decree, containing general measures with regard to the hazardous work categories legally is still not valid until the increase from NAF to NAF for a 5-day working week and from NAF to NAF for a 6 day working week can be justified. III) Based on the wage limits provided by SZV for the years 2011 up to 2015, it is clear that there was no compliance with the National Ordinances ZV and OV, as the wage limit ZV/ OV increased on a yearly basis, instead of on a two- year basis 2 as defined in the law. 2 According to article 8, paragraph 3 of the OV and article 1b ZV, the percentage of the daily pay is determined for two years and the OV and ZV also mention that these adjustments are based on the increase of the consumer price index (CPI) of August of the preceding year, which is being compared with the CPI of the year prior to the preceding year. 5

6 3. The National decrees, containing general measures are using conflicting figures disruptively The two different national decrees, containing general measures are using conflicting figures that become disruptive. Table 1 illustrates what is proposed in the advice request to the SER: Table 2 illustrates what is applicable law at this moment: And Table 3 3 clarifies the OV/ZV premiums that SZV collected in reality: Table 3: day work week NAF NAF NAF NAF NAF NAF day work week NAF NAF NAF NAF NAF NAF I) The applicable law (national decree, containing general measures with regard to the hazardous work categories) does not correspond with the premiums that were collected by SZV. Conversely, the outstanding payments to SZV clients are based on (new) retro-active amounts for the wage limits which now turn out to be higher than the wage limits announced and collected by SZV at the time. II) III) Another conflict in figures is noticed where the new applicable national decree, containing general measures with regard to the hazardous work categories uses the amounts of NAF and NAF as its base to increase the wage limit OV/ ZV but it is not clear when SZV made use of these amounts (see Table 3). There are serious financial consequences of laws being effective retro- actively: a significant increase in the social premiums to employers, retro-active 5 years which if acted upon may lead to having all employers having to re-file their Profit Taxes for the last 5 years. The consequence thereof is that because these now higher social premiums are filed as 3 SZV provided the information from The SER assumes that in 2010 the wage limits as set in the National Ordinance Accident Insurance ( Ongevallen verzekering [OV]) and National Health Insurance Ordinance ( Ziekteverzekering [ZV]) applicable for 2010 were used. 6

7 additional costs, profits will go down, consequently Profit Tax due will go down and the government may be faced with having to repay that difference. IV) Looking at the amounts in the applicable national decree, containing general measures with regard to the hazardous work categories, at some point in 2010 the wage limit was increased from NAF to NAF for a 5-day working week and from NAF to NAF for a 6 day working week 4, although those amounts are nowhere reflected in Table 3. Despite the above, the SER supposes that employers paid accordingly and those who were entitled to medical treatment and nursing care, financial allowances for occupational disability under ZV and OV received their part according to the wage amounts set then. With the national decree, containing general measures with regard to the hazardous work categories being effective retro- actively, this unfortunately means that employers still owe the government (NAF NAF =) NAF per employee per month for a 6-day work week of which 8.3% is the employer s contribution and 4.2% is the employee s contribution and (NAF NAF =) NAF per employee per month for a 5-day work week of which 8.3% is to be paid by the employer and 4.2% is to be paid by the employee. Conversely, the Government through SZV still owes those who were sick and injured during that period in time allowances according to the amounts set in the national decree, containing general measures with regard to the hazardous work categories and not according to the premiums that were actually paid. V) With the new national decree, containing general measures with regard to the hazardous work categories which became effective, retro- actively October 10th, 2010 and because a lack of due diligence in drafting laws, SZV consequently collects (NAF NAF =) NAF 5.56 too much for a 5- day work week and (NAF NAF =) NAF 4.64 too much for a 6- day work week. There is no legal basis for that, because the applicable national decree, containing general measures with regard to the hazardous work categories has set the wage limit at NAF for a 5-day work week and NAF for a 6- day work week. VI) The elucidation on the national decree, containing general measures regarding the price indexation states that SZV informed the general public of the proposed increase for 2015 in a timely manner. Therefore, when this national decree, containing general measures will go into effect stating the new wage limits, it is proposed for those wage limits to be effective retroactive as per January 1st, Nonetheless, in practice, SZV already collects the employers premiums according to the increased wage limit but it is not clear whether the financial allowances paid out are calculated according to the new increased wage limit 5. This 4 See national decree, containing general measures with regard to the hazardous work categories Artikel II under A: In de artikelen 5, elfde lid, en 8, vierde lid, wordt NAF vervangen door NAF en NAF vervangen door NAF The (policy department of the) Ministry of Public Health, Social Development and Labor indicated to the SER that it assumes that SZV is compensating those insured under ZV and OV according to the new wage limit, but could not confirm this to the SER. 7

8 is a serious concern for the SER, because laws and regulations can only be applied retroactively in case no one other than the government will be treated unfairly 6. VII) According to the elucidation on the national decree, containing general measures regarding the price indexation OV and ZV 2015, with this proposed increase of the wage limit, it is expected that 75 extra (main) insured persons will fall under the scope of the OV and that the increase will have a positive effect on the fund. Regarding the ZV increase, a similar result has been predicted. The SER comments that this statement is not true for the OV, since the ability of being insured under the OV has nothing to do with (increasing) the wage limit. Unlike the ZV, it does not matter for the OV whether someone earns more or less than the wage limit. In order to be insured for ZV, one s income must not exceed the wage limit. For the OV, however, the wage limit is not a determining factor. 6 See W. Duk. Behoorlijke wetgeving page 17 at e=bl&ots=4u- CwDL5uo&sig=bZlJwh0bCt7IN_I7L7rrELasv4o&hl=en&sa=X&ei=tN8vVZexBdLasASbg4D4Ag&ved=0CCEQ6AEwAA#v =onepage&q=w.%20duk%20behoorlijke%20wetgeving&f=false 8