Insurability of Employment

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.

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.
Last modified: Monday, 21 August 2023, 10:44 AM