Law Business Essentials

Certain types of employment may not be insurable:

• Employment situations where you and your employee do not deal at arm's length, including those to whom you are related (i.e., those connected to you by blood, marriage, common-law or adoption). This is so if you practise as a professional corporation, so long as the employee is related to the person who controls the corporation. Whether you deal at arm's length with your employee is a question of fact, and that includes a determination of whether you are related to the employee. See the Employment Insurance Act 5(2) and 5(3) for more information.

The courts have generally used the following criteria to determine whether one is not dealing at arm's length with another:

• Is there a common mind which directs the bargaining for both parties to a transaction?
  
• Are the parties acting in concert without separate interests? 
• Was there “de facto” control?

An employee, who does not deal at arm's length, including one that is related, can be insurable:

• if it is reasonable to conclude that you would have hired a person who deals at arm's length under a similar agreement (if you are unsure whether you should deduct EI premiums, you can request a ruling up until June 30 of the year following the year of employment);
  
• when a corporation employs a person who controls more than 40% of the corporation;
  
• when the employment is an exchange of work or services; and
  
• when the employment is of a non-resident person, if the laws of that person's country require someone to pay employment insurance premiums in that country.