Employment Insurance (EI)

Decision

[1] The appeal is dismissed. The Appellant has not proven that she qualifies to receive special benefits because her hours of employment are not insurable as she owns more than 40% of the voting shares of the company.  

Overview

[2] The Appellant applied for employment insurance special benefits. The Respondent determined that the Appellant’s employment was excluded because she owns more than 40% of the voting shares of the corporation she worked for. This decision was maintained by Canada Revenue Agency’s (CRA) insurability ruling and appeal. The Appellant agrees that she owns more than 40% of voting shares of her corporation. The Appellant appealed the decision to the Social Security Tribunal (Tribunal). The Appellant made several arguments including that the decision was unfair, that she paid employment insurance premiums as an employee of the corporation, that she was paid hourly, that her employment should be insurable and that she should qualify for employment insurance benefits for self-employed persons.

Preliminary matter

[3] A pre-hearing conference was held on September 21, 2018. The Appellant stated that she was not planning to appeal the Canada Revenue Agency appeal decision and was prepared to proceed at the next date for the merit hearing.

Issues

Issue 1 Does the Appellant have sufficient hours of insurable employment to qualify for special benefits?

Issue 2: Does subsection 5(4)(b) of the Employment Insurance Act (Act) apply in this case?

Issue 3: Does subsection 9.1 of the Employment Insurance Regulation (Regulation) apply in this case?

Issue 4: In the alternative, does the Appellant qualify for maternity benefits for self-employed persons?

Analysis

[4] The relevant legislative provisions are reproduced in the Annex to this decision.

[5] The issue in this case is whether the Appellant is employed in insurable employment in view of the fact that she owns more than 40% of the voting share of the company she works in.

[6] The number of hours of insurable employment that an insured person must accumulate in his or her qualifying period is set out in subsection 7(2) of the Act, with the specific number being determined in relation to the regional rate of unemployment that applies to the person.

[7] Section 93 of the Employment Insurance Regulations sets out alternate access to special benefits (which includes maternity benefits). Subsection 93(1) provides that an insured person who does not qualify to receive benefits under section 7 of the Act and who is claiming special benefits may qualify if the person has had 600 or more hours of insurable employment in their qualifying period.

Issue 1: Does the Appellant have sufficient hours of insurable employment to qualify for special benefits?

[8] No, I find that the Appellant does not have sufficient hours of insurable employment and does not qualify to receive maternity benefits because she owns more than 40% of the voting shares in her company.

[9] I first note that the Appellant does not dispute that the qualifying period ran from April 23, 2017 to April 21, 2018 and that the unemployment rate for her economic region in X was 5.6% when she applied for benefits. However, the Appellant is disputing the Respondent’s determination that the Appellant did not have sufficient hours of insurable employment to establish a benefit period.

[10] The Appellant testified that she applied for maternity benefits because she met all of the requirements and identified herself as an employee of the company and not a self-employed person. The Appellant does not dispute that she owns 100% of the company, but states that she is paid a regular salary and has deductions for employment insurance. She provided a copy of her paystub as evidence that she received a salary from the company (GD2-13).

[11] The Appellant relies on the definition provided on the Service Canada website which states “if you are employed in insurable employment, your employer will deduct the applicable EI premiums from your wages or salary” (GD2-15). At the hearing, I noted that the statement suggests that a determination must be made on whether the employment is actually insurable employment. Therefore, I was not persuaded by the Appellant’s argument that this sentence on Service Canada’s website meant that employment insurance deductions at the workplace will automatically establish that one’s employment is insurable employment.

[12] The Respondent argues that the Appellant’s employment is not insurable employment because her employment is excluded according to subsection 5(2)(b) of the Act as she owns more than 40% of the voting shares in her company. The Respondent relies on CRA’s insurability ruling and subsequent CRA appeal decision.

[13] CRA’s insurability ruling, dated June 1, 2018, concluded that the Appellant was an employee, but that her employment was not insurable because of paragraph 5(2)(b) of the Employment Insurance Act since she controlled more than 40% of the voting shares of the employing corporation (GD3-30 to GD3-31).

[14] The Appellant appealed CRA’s insurability ruling and CRA issued an appeal decision on August 17, 2018 (GD8-4 to GD8-7). More specifically, CRA maintained that she was an employee and stated the following (GD8-5): “Paragraph 5(2)(b) of the EIA expressly does not include in insurable employment the employment of a person if that person controls more than 40% of the voting shares of the corporate employer. The worker was the only shareholder and controlled 100% of the voting shares of the payer during the period under review. Based on the information collected and analyzed in this appeal case, we conclude that the worker controlled more than 40% of the voting shares of the payer during the period under review”.

[15] As a result, CRA concluded that (GD8-5): “The worker's employment with the payer was excluded from insurable employment during the period from April 23, 2017 to April 21, 2018 under paragraph 5(2)(b) of the Employment Insurance Act as the worker controlled more than 40% of the voting” .

[16] The Appellant does not dispute that CRA has exclusive jurisdiction to make determinations on insurability rulings and hours of insurable employment. Subsection 5(2)(b) of the Act identifies which employment is excluded and states as follows: “the employment of a person by a corporation if the person controls more than 40% of the voting shares of the corporation”.

[17] The Act and the Regulations do not allow any discrepancy and provide no discretion in relation to the number of hours of insurable employment required to qualify for benefits (Canada (Attorney General) v Levesque, 2001 FCA 304; Pannu v Canada (Attorney General), 2004 FCA 90.

[18] I find the legislation in subsection 5(2)(b) of the Act to be explicit and clear because it specifically states that the Appellant’s employment is excluded as she owns more than 40% of the voting share of the corporation.

[19] The Appellant further submits that she was misled by the Commission because it failed to provide her with appropriate information on the application for benefits so that she could make an informed decision about whether it was more appropriate to apply for benefits as a self-employed persons. However, I note that the Appellant called a Service Canada office when she was completing her application to ask questions about her employee status and was told to visit a Service Canada office in person. She subsequently went to a Service Canada office to deliver her ROE, but decided not to speak to any agents because she felt that she had satisfied herself that she was an employee and not a self-employed person.  

[20] The Appellant’s duty to inform herself about her rights is not satisfied only by seeking information in a review of the Service Canada Website. Furthermore, the application for benefits provides several areas which could have triggered her to consider the question about her status as an employee or self-employed person. For example, the Appellant admitted that she had not noticed the option on the application which states “the Record of Employment will not be issued because my employment is not insurable (examples: I am self-employed, I control more than 40% of the voting shares of the business I work in, etc.) (GD10-12). I find that the application for benefits was sufficiently clear because it expressly stated that employment is not insurable when an individual controls more than 40% of the voting shares of the business.

[21] The Appellant has argued some compassionate circumstances, however there is no authority to exempt a claimant from the qualifying provisions of the Act no matter how sympathetic or unusual the circumstances. (Canada (Attorney General) v Levesque, 2001 FCA 304); (Canada (Attorney General) v Pannu, 2004 FCA 90).

Issue 2: Does subsection 5(4)(b) of the Act apply in this case?

[22] No, subsection 5(4)(b) of the Act is not applicable in this case.

[23] The Appellant argued that the Respondent should have entered into an agreement with her to include work she performed as a project manager for her corporation as per subsection 5(4)(b) of the Act.

[24] I note that subsection 5(4)(b) of the Act does not require the Respondent to make or initiate an agreement with the Appellant. This subsection states that the Commission may, with the approval of the Governor in Council make regulations for including insurable employment. While the Appellant argues that she was employed by her corporation as a project manager and did not work in her capacity as a chief executive officer of her corporation, it is not relevant or applicable as there were no regulations in place to include the Appellant’s employment.

Issue 3: Does subsection 9.1 of the Regulations apply in this case?

[25] No, subsection 9.1 of the Regulations is not applicable because the Appellant was not employed in insurable employment.

[26] The Appellant argues that subsection 9.1 of the Regulations states that where earnings are paid on an hourly basis, the person is considered to have worked in insurable employment.

[27] This subsection provides the methods of determination for hours of insurable employment. As the employment was not employed in insurable employment, even if she was receiving an hourly wage from her employer, it is not applicable.

Issue 4: In the alternative, does the Appellant qualify for maternity benefits for self-employed persons?

[28] There is no jurisdiction to consider whether the Appellant would qualify for maternity benefits for self-employed persons because there is no reconsideration decision on this issue.

[29] The Appellant argues that she meets the definition of self-employment based on subsection 152.01 of the Act and should be entitled to receive benefits for self-employed people.

[30] The employment insurance program for self-employed people is a separate program for which she must qualify. While the Appellant argues that she meets the definition of a self-employed person, this does not automatically grant her benefits under this program.

[31] The Appellant further argued that decision held in T.S. v Canada Employment Insurance Commission, 2015 SSTAD states that if his income was ruled not to be insurable employment it must therefore be self-employment income (para.12).

[32] I find this case is distinguishable because the issue was whether the Appellant had sufficient self-employment income to qualify for benefits. In that case, the appeal was allowed because it was determined that the Appellant had self-employment income of $28,000.00 and was entitled to benefits for self-employed persons. While that case also discussed the issue of insurable hours, the issue in the present case is different because the Appellant did not apply for employment insurance benefits of self-employed persons.

Conclusion

[33] The appeal is dismissed.

Annex

The law

Employment Insurance Act

1. 5 (1) Subject to subsection (2), insurable employment is
   1. (a) employment in Canada by one or more employers, under any express or implied contract of service or apprenticeship, written or oral, whether the earnings of the employed person are received from the employer or some other person and whether the earnings are calculated by time or by the piece, or partly by time and partly by the piece, or otherwise;
   2. (b) employment in Canada as described in paragraph (a) by Her Majesty in right of Canada;
   3. (c) service in the Canadian Forces or in a police force;
   4. (d) employment included by regulations made under subsection (4) or (5); and
   5. (e) employment in Canada of an individual as the sponsor or co-ordinator of an employment benefits project.
2. (2) Insurable employment does not include
   1. (a) employment of a casual nature other than for the purpose of the employer’s trade or business;
   2. (b) the employment of a person by a corporation if the person controls more than 40% of the voting shares of the corporation;
   3. (c) employment in Canada by Her Majesty in right of a province;
   4. (d) employment in Canada by the government of a country other than Canada or of any political subdivision of the other country;
   5. (e) employment in Canada by an international organization;
   6. (f) employment in Canada under an exchange program if the employment is not remunerated by an employer that is resident in Canada;
   7. (g) employment that constitutes an exchange of work or services;
   8. (h) employment excluded by regulations made under subsection (6); and
   9. (i) employment if the employer and employee are not dealing with each other at arm’s length.
3. (3) For the purposes of paragraph (2)(i),
   1. (a) the question of whether persons are not dealing with each other at arm’s length shall be determined in accordance with the Income Tax Act; and
   2. (b) if the employer is, within the meaning of that Act, related to the employee, they are deemed to deal with each other at arm’s length if the Minister of National Revenue is satisfied that, having regard to all the circumstances of the employment, including the remuneration paid, the terms and conditions, the duration and the nature and importance of the work performed, it is reasonable to conclude that they would have entered into a substantially similar contract of employment if they had been dealing with each other at arm’s length.
4. (4) The Commission may, with the approval of the Governor in Council, make regulations for including in insurable employment
   1. (a) employment outside Canada or partly outside Canada that would be insurable employment if it were in Canada;
   2. (b) the entire employment of a person who is engaged by one employer partly in insurable employment and partly in other employment;
   3. (c) employment that is not employment under a contract of service if it appears to the Commission that the terms and conditions of service of, and the nature of the work performed by, persons employed in that employment are similar to the terms and conditions of service of, and the nature of the work performed by, persons employed under a contract of service;
   4. (d) employment in Canada by Her Majesty in right of a province if the government of the province waives exclusion and agrees to insure all its employees engaged in that employment;
   5. (e) employment in Canada by the government of a country other than Canada or of any political subdivision of the other country if the employing government consents;
   6. (f) employment in Canada by an international organization if the organization consents; and
   7. (g) the tenure of an office as defined in subsection 2(1) of the Canada Pension Plan.
5. (5) The Commission may, with the approval of the Governor in Council and subject to affirmative resolution of Parliament, make regulations for including in insurable employment the business activities of a person who is engaged in a business, as defined in subsection 248(1) of the Income Tax Act.
6. (6) The Commission may, with the approval of the Governor in Council, make regulations for excluding from insurable employment
   1. (a) any employment if it appears to the Commission that because of the laws of a country other than Canada a duplication of contributions or benefits will result;
   2. (b) the entire employment of a person who is engaged by one employer partly in insurable employment and partly in other employment;
   3. (c) any employment if it appears to the Commission that the nature of the work performed by persons employed in that employment is similar to the nature of the work performed by persons employed in employment that is not insurable employment;
   4. (d) the employment of a member of a religious order who has taken a vow of poverty and whose remuneration is paid directly or by the member to the order;
   5. (e) any employment in which persons are employed hardly at all or for nominal remuneration; and
   6. (f) any employment provided under regulations made under section 24 or under employment benefits
7. 7 (1) Unemployment benefits are payable as provided in this Part to an insured person who qualifies to receive them.
8.  (2) An insured person qualifies if the person
   1. (a) has had an interruption of earnings from employment; and
   2. (b) has had during their qualifying period at least the number of hours of insurable employment set out in the following table in relation to the regional rate of unemployment that applies to the person.

9. Table

   Regional Rate of Unemployment	Required Number of Hours of Insurable Employment in Qualifying Period
   6% and under	700
   more than 6% but not more than 7%	665
   more than 7% but not more than 8%	630
   more than 8% but not more than 9%	595
   more than 9% but not more than 10%	560
   more than 10% but not more than 11%	525
   more than 11% but not more than 12%	490
   more than 12% but not more than 13%	455
   more than 13%	420

10. (3) to (5) [Repealed, 2016, c. 7, s. 209]
11. (6) An insured person is not qualified to receive benefits if it is jointly determined that the insured person must first exhaust or end benefit rights under the laws of another jurisdiction, as provided by Article VI of the Agreement Between Canada and the United States Respecting Unemployment Insurance, signed on March 6 and 12, 1942.

Employment Insurance Regulations

1. 9.1 Where a person's earnings are paid on an hourly basis, the person is considered to have worked in insurable employment for the number of hours that the person actually worked and for which the person was remunerated.
2. 9.2 Subject to section 10, where a person's earnings or a portion of a person's earnings for a period of insurable employment remains unpaid for the reasons described in subsection 2(2) of the Insurable Earnings and Collection of Premiums Regulations, the person is deemed to have worked in insurable employment for the number of hours that the person actually worked in the period, whether or not the person was remunerated.
3. 93 (1) An insured person who does not qualify to receive benefits under section 7 of the Act and who is claiming special benefits qualifies to receive the special benefits if the person
   1. (a) has had an interruption of earnings from employment; and
   2. (b) has had 600 or more hours of insurable employment in their qualifying period.
4. (2) Notwithstanding section 9 of the Act, where an insured person who qualifies under subsection (1) to receive special benefits makes an initial claim for benefits, a benefit period shall be established in respect of the person and, once it is established, special benefits are payable to the person in accordance with this section for each week of unemployment that falls in the benefit period.
5. (3) Subject to subsection (4), sections 22 to 23.2 of the Act apply to the payment of special benefits under this section.
6. (4) Notwithstanding section 18 of the Act, a claimant is not entitled to be paid special benefits for a working day, in a benefit period established under this section, in respect of which the claimant fails to prove that on that day the claimant was
   1. (a) unable to work because of an illness, injury or quarantine referred to in subsection 40(4) or (5) and that the claimant would otherwise be available for work; or
   2. (b) entitled to benefits under section 22, 23, 23.1 or 23.2 of the Act.
7. (4.1) A claimant to whom benefits are payable under any of sections 23 to 23.2 of the Act and whose claim for benefits because of illness, injury or quarantine is made for a week that begins on or after the day on which this subsection comes into force is not disentitled under paragraph (4)(a) for failing to prove that they would have been available for work were it not for the illness, injury or quarantine.
8. (5) Subject to section 18 of the Act, regular benefits and additional special benefits are payable for a week of unemployment to a claimant who has received special benefits under this section where
   1. (a) the claimant has accumulated, since the beginning of their benefit period, a number of hours of insurable employment that, when added to the number of those hours in their qualifying period, equal or exceed the number of hours set out in the table to subsection 7(2) of the Act in relation to the regional rate of unemployment that was applicable to the claimant at the beginning of their benefit period; and
   2. (b) any regular benefits or additional special benefits are payable to the claimant in that benefit period in accordance with the Act, based on the hours of insurable employment in the claimant's qualifying period.
9. (6) Except as otherwise provided in this section, the provisions of the Act and these Regulations apply to claimants claiming benefits under this section.