# family members not entitled to Employment Insurance?



## wonderings (Jun 10, 2003)

I was just talking with one of our customers about a friend who was injured and collecting EI. Anyways the conversation ended up with him telling me that he could not collect EI because his father was his boss at his auto shop. I work for my father as well in a family business. I tried google searching this but could not find anything, not sure if I am wording things properly. I know EI has been coming off of my cheque every week. Am I not eligible for EI? And if not, I am guessing I should be able to claim the EI that I have been paying and cannot use correct?

thanks


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## Macfury (Feb 3, 2006)

wonderings: I'm no expert but I thought that only held if you were self-employed.


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## wonderings (Jun 10, 2003)

I have never thought about EI before. Though I do remember hearing radio adds a few years back from a lawyer I think, stating that family was not entitled to EI, and could get the money they paid back. I cant find any documents stating if family members working for a family business are eligible or not. Anyone else know?


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## Macfury (Feb 3, 2006)

I know a woman who incorporated her business which employed her husband only and he collected EI when the business went south. Perhaps the difference is that the business must be incorporated--that is, the family member must work for the corporation, not the father.


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## wonderings (Jun 10, 2003)

ahh that could be it. We are incorporated as well. Going to look into this more, I would have almost $3000 coming to me if I am not eligible.


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## Betty Woo (Feb 5, 2005)

I believe that's right re: being incorporated. You have to be paid through the 'business' and not out of Dad's pocket.

That way, the business is paying for all the associated taxes and benefits associated with having an employee - including the Government being able to quantify how many hours an employee has actually worked towards qualification for EI.

The Bank of Parents has it's priviliges but EI isn't one of them  

I'm guessing that your friend was working either under the table (and getting cheques right out of Dad's personal bank account which means he was never, technically, paying into EI) or he was classified as either an independent or contract worker.

Employment Insurance (EI) and self-employed, farmers and independent workers for definitions of 'self-employed' and a good springboard into the issue.

I wouldn't guess about whether or not you'd ever qualify, I'd find out for sure; you really should contact Service Canada and get this resolved. 

Three thousand dollars may sound a lot but its only slightly more than 2-months worth of maxed out EI payments and that's not going to get you very far - especially since a first paycheque could take up to a month to process in a new job.


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## Macfury (Feb 3, 2006)

Betty: I think he's worried thathe might be paing into somethinghe can't collect on--but I don't think this is the case. 

If you're being paid out of dad's pocket the fear is that you just declare the kids unemployed while they continue to work on the EI pay cheque, then start the whole cycle over again when benefits run out.


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## gordguide (Jan 13, 2001)

It depends (just like tax rules) on whether you have an "arms-length" relationship with your employer or not.

An example of an arms-length relationship is where you have no control over your situation ... in other words, you can get fired.

Generally speaking you have to have some interest in the business to be considered to not have an arms-length relationship. That may, or may not be the case if you are related to the owner.

If you or the relative in question does not own at least 40% or more of the business, you are definitely eligible for EI (and must definitely pay EI premiums).

There is no rule that says you cannot collect EI simply because it's a family business. What matters is whether it's a bona fide employer-employee relationship or not. If there are other employees and you are treated exactly as they are, you can successfully argue you do have an arms-length relationship.

For a layoff to result in an eligible claim, the layoff must occur for genuine business reasons. If someone is hired immediately to take your place, even if you were not related to the boss, your claim would be denied, for example, as that is not a true layoff but instead either a cozy agreement or a firing.

An incorporated business is clear cut because either you own shares or you don't, and if you do own shares, either you own enough to affect business decisions or you don't. With unincorporated businesses or proprietorships it's less clear, and it's going to depend on the kind of answers you give as well as the actual situation.

Because this is the kind of thing that can result in "grey areas" (as well as cut-and-dried situations), there are rules developed to make clear-cut decisions. Whether it's fair or not, you may still find you are subject to a rule. If you meet certain conditions you will be "deemed to not have an arms-length relationship". 

If you find you are disqualified from IE or if you find that tax rules treat you as a controlling partner when you feel that is not the case, you can appeal the decision.

Or, if you have been paying EI premiums but are not eligible due to your relationship to the owner and the circumstances of your employment, you can have the premiums refunded to you. You can apply yourself or there are firms that will do the paperwork on your behalf, for a cut of course. I believe you can only go back 3 years.

Ultimately it's the responsibility of whomever does payroll to determine whether you are eligible or not, and if you are not, they are not supposed to be deducting EI premiums in the first place.


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