This article first appeared in the winter 1997 issue of the Expert Witness.
Articles in previous issues of The Expert Witness have dealt with the appropriate approach to the valuation of the loss of household services, as well as methods to determine the number of hours lost, and a brief look at the way that the courts have dealt with this issue. The focus of this article is the determination of the hourly rate which should be applied to the replacement cost of those household services which the plaintiff performed prior to the accident but is now unable to undertake.
On the face of it, this would seem to be a fairly straightforward process. The features which make this issue more complex become apparent when we pose certain questions, such as: What activities comprise household services? What type of provider can best replace those services which the plaintiff is now unable to undertake? Are there features which differentiate the services offered by seemingly similar service providers? Is there a standard which should be adhered to in regard to the level of service that a plaintiff should be compensated for? Is there a generalist rate that can be applied to the loss of household services which reflects the replacement cost of household services for the plaintiff?
While some of these queries lack pat answers applicable in all cases, it is our intent to give these issues serious consideration in the discussion which follows.
What are Household Services?
Anyone who has undertaken activities in or around the home is well aware that these chores are many and varied. Certain household duties come quickly to mind in this regard, for example, meal preparation, general cleaning, and laundry. There are other household activities which should also be considered, despite the fact that they may not form a large proportion of total household responsibilities. Examples would include indoor as well as outdoor maintenance.
Of interest here is the rate payable to replacement help for those services which the plaintiff is no longer able to undertake. In many instances a plaintiff continues to undertake selected household activities but his/her injury precludes participation in other activities. It is, therefore, important to compensate the individual fairly by utilising an hourly rate for a provider who actually performs the required services. The following discussion will provide a brief explanation of the services provided by various agencies or individuals who may be contracted to provide replacement help to a plaintiff.
Types of Service Providers
We find it useful to distinguish three primary types of service providers. These we call: homemakers, housecleaners, and handymen.
The primary purpose of a homemaker is to provide services which allow a person, compromised in some way, to remain in his/her own home. Homemakers generally undertake non-labour intensive housekeeping duties including light cleaning, meal preparation, grocery shopping, and laundry. These individuals would not undertake all of the general cleaning tasks required in the household. It is not the norm for homemakers to provide any of the equipment or supplies required in the performance of their duties.
Housecleaners tend to specialise in more labour intensive cleaning duties than do homemakers, and they usually provide necessary equipment and supplies. These individuals may be found either through agencies which are listed in the yellow pages of telephone directories or through classified advertisements in newspapers. The latter are more likely to be owner/operators.
Replacement services which are of a home maintenance nature would generally be provided by a handyman. These service providers may be accessed through the yellow pages or classified advertisements. They would undertake tasks such as the repair of leaky faucets, replacement of a furnace filter, or minor household repairs.
Finally, repair of automobiles and outdoor maintenance, such as lawn maintenance or snow removal, would be accomplished by service providers who specialise in those particular services.
Average Rates Charged by Service Providers
In February and March of 1997 Economica undertook a comprehensive survey of rates charged by various service providers in the Calgary and Edmonton areas. With the exception of those housecleaners who are individual providers, we have relied on prices quoted by businesses who offer their services in the yellow pages of telephone directories. The table below summarises the results of this survey. These rates are shown in terms of the cost per hour to hire the various service providers, other than average costs for lawn maintenance and snow removal services. The latter prefer to provide quotes for the total cost per season of providing the service.
The large rate differential between homemakers and housecleaners is largely explained by the fact that these providers offer services which differ from one another in a number of important ways. As previously noted, homemaker services are limited to lighter cleaning duties. The source of the rate differential between “agency” and “individual” housecleaners is less apparent. The most significant difference between these two providers is that the former are usually bonded, insured, and covered by workers’ compensation, which is generally not the case for the latter.
Household Service Provider Rates
|Homemakers (Agency rates)||$13.47/hr||$13.39/hr|
|Housecleaners (Agency rates)||$18.49/hr||$17.25/hr|
|Housecleaners (individual providers)||$13.54/hr||$14.98/hr|
|Lawn Maintenance (per season)||$613.62||$589.09|
|Snow Removal (per season)||$589.07||$637.12|
Generalist Rates for Replacement Household Services
In a previous article (The Expert Witness, Winter 1996), we proposed that the technique of choice in the valuation of household services is the generalist variant of the market replacement method. An alternate valuation method, the specialist method, would base the loss on the cost of hiring various and assorted specialists to replicate the contribution previously made by the plaintiff. The concern with that method derives mainly from its impracticality. To match the rates charged by numerous specialists to innumerable household tasks which are now outside of the plaintiff’s capacity would be an almost impossible task. As such, the generalist variant remains the method of choice.
It is shown in two examples which follow that the use of one all-inclusive generalist rate is usually sufficient to accurately capture the plaintiff’s loss of household services. It is recognised, however, that the generalist rate may be oriented either toward: the homemaking type of service (including meal preparation and lighter cleaning); or the housecleaning type of service (comprising more onerous cleaning duties). Finally, a third example describes a situation in which the use of one all-inclusive generalist rate may be inadequate. In that case, it is shown that the use of the generalist rate may need to be supplemented with the use of another rate.
In the first instance, it is assumed that a severely injured plaintiff who resides in a small condominium, will require the services of an individual who will prepare meals and perform general light cleaning duties, to allow him/her to remain in his/her own home. In this case homemaking services would comprise the largest component of future replacement services, as outdoor maintenance is provided and only minimal general cleaning activities would be required in the smaller residence. It can be assumed then that the loss can be calculated according to a generalist rate based on the average cost of hiring a homemaker.
In a second instance, a plaintiff who is less severely injured is able to continue with meal preparation and light cleaning, precluding him/her only from undertaking more labour intensive cleaning duties. Thus, the relevant generalist rate would be the average hourly rate charged by housecleaners.
Finally, in a third case it may be necessary to supplement the use of a generalist rate with the rate of another service provider. For instance, it may be found that the plaintiff’s previous contribution to household services was in the area of meal preparation and home repair/maintenance, neither of which are possible now given his/her physical limitations. The replacement help required by the plaintiff would then include both a homemaker and handyman. For the former, the use of a homemakers’ rate would be representative of the generalist rate required in the calculation of the loss. This alone would not capture the plaintiff’s loss if it shown that prior to the accident he/she also contributed several hours per week to maintenance duties. In this case, the use of a handyman rate should be applied to the portion of hours which the plaintiff is no longer able to contribute toward those type of activities.
As can be seen in the table of household provider rates, there is a large differential between the average rates of housecleaners hired through classified ads and those hired from agencies. It appears that this is attributable to the fact that the latter tend to be bonded, insured, and covered by workers’ compensation, which is usually not the case for the former. The implication of this additional proviso is that the customer who hires housecleaners from an agency is afforded additional protection. Protection, in part, is derived from the screening of service providers, due to their bonded status. The consumer who buys cleaning services from an agency would be covered for breakage or theft which might occur while the service provider was in his/her home. In addition, because of workers’ compensation coverage, the plaintiff would not be liable for injury that the housecleaner may incur while in the plaintiff’s home.
To some extent, then, the consumer who purchases cleaning services from an agency is choosing a service which differs from that purchased from an individual provider. Determination of the appropriate replacement rate for the provision of housecleaning services is an important issue, as it can have a significant impact on the award. It is important, therefore, to ascertain which of these rate forms the basis for adequate compensation for the plaintiff who will need to hire housecleaning replacement services.
There is yet another factor, not yet alluded to here, which further complicates the valuation of the loss of household services. This is the loss of the management component of household services. A more complete discussion of the concept of the “management or indirect labour component” of the loss of household services can be found in an earlier article dealing with judgments in the valuation of household services (The Expert Witness, Autumn 1997). Any individual who has managed a household can verify that this is essential to the success of any well-run home. In regard to this important function, however, the determination of an appropriate rate becomes increasingly difficult, as this is not a service which can be readily purchased in the market. Until an alternate approach is determined to deal with the loss of household management capabilities the loss is probably best reflected by the generalist rate for replacement help that is being used in that particular case.
A number of recent court judgments have specified hourly rates at which the loss of household services has been valued. In Morris v. Budnarchuk (1997) Action No. 9503 04671, Sanderman J. accepted the hourly rate of $10.75 which had been applied to the pre-accident loss. The rate of $12.00 for the future loss of housekeeping services was rejected, to be replaced by the rate of $10.75 throughout. One of the points raised to support the rejection of the higher rate was that there had been no consideration given to the fact that there are people who will perform household services for minimum wage. Likewise, in Reynolds v. Pohynayko (1997) 202 A.R. 1, a proposed rate of $12.00 per hour was rejected in favour of a rate of $8.50 per hour. The rationale for this decision was that there was no need to pay agency rates for housecleaners, as housecleaning services could be hired directly. In Labbee v. Peters, (1997) 201 A.R. 241, McIntyre J. ruled $10.00 per hour to be an appropriate generalist rate at which replacement help could be hired. Other recent decisions have employed similar rates.
These decisions leave both counsel and economic experts in something of a quandary. Whereas our survey indicates that it would be difficult to find a service provider for less than $13 per hour, even from the classified ads, the courts have consistently imposed their own view that no rate above $11 is permissible. The question is: should the expert substitute a rate which has been derived employing a sound statistical methodology with one which has been chosen by a number of trial courts, but not approved by the Court of Appeal?
Some economists testifying in Alberta have answered “yes” to this question and, in the face of the evidence which they have collected themselves, have begun to recommend a rate of $10.00 to $12.00. It is our view that this approach is an abrogation of the responsibility of the expert to provide the best evidence possible. Of course, should the legislature or the courts mandate a particular rate, as has been done with respect to the discount rate in most provinces, the expert would be obligated to adopt that rate regardless of the evidence.
This discussion has expanded on the use of the generalist method in the determination of the loss of household services. Assigning an appropriate rate to the loss of household services may have a large impact on an award for the loss of household services. Given this reality, it is important to look closely at the nature of a plaintiff’s loss of household services. In most cases, the loss can be valued at one all-inclusive generalist rate. This necessitates the determination of whether the generalist’s role is to provide access to homemaking services of a non-rigorous nature or housecleaning services which are more labour intensive. In reference to the latter, it must then be determined whether the plaintiff’s needs are met by the services of an individual provider or whether a housecleaner hired through an agency is more appropriate.
It has been noted that the rates applied to the loss of household services in the courts are not consistent with the rates charged by the service providers contacted in our survey. There is considerable discrepancy especially between the rates suggested by recent court decisions and the rates of housekeeping agencies which we surveyed. This would imply that plaintiffs are not being compensated at a rate which would allow them to hire replacement workers who are bonded, under the auspices of a licenced business. It may be argued that the plaintiff should have access to bonded replacement workers from a licenced agency, thus leaving him/her relatively less vulnerable in regard to the increased potential of theft or breakage of personal property, and exposure to a liability claim from an injured worker. If there is validity to that claim, it may be argued that the use of an agency rate in the valuation of a household services claim is necessary to restore the plaintiff to his/her pre-injury status.
Finally, there are instances when the use of one generalist rate may result in inadequate compensation. In those cases, a more complex approach is necessitated, whereby the plaintiff’s loss is valued according to the cost of replacement help for more than one type of service. Given that this would make the calculation of the loss more complex, it would be advisable to pursue this route only if the plaintiff’s loss of capacity in categories outside of basic homemaking/housecleaning services forms a significant portion of the loss.