Digest of Benefit Entitlement Principles Chapter 4 - Section 6
4.6.0 Independent workers working a full working week
Employment Insurance is intended to insure individuals employed under a contract of service, by a person or business. As such, self-employed persons generally are not covered under the Employment Insurance program (EIA 7; EIR 2, 3, 4; EIR 5, 6; EIR 7,8; EIR 9). The legislation is designed to provide temporary benefits to those who are unemployed and actively seeking work. It cannot be used to subsidize persons who are self-employed or engaged in the operation of a business, unless under an authorized employment activity (EIA 59(c); EIR 50; Digest 4.6.12), or under the Employment Insurance Fishing Regulations. Self-employed persons may qualify for benefits if they have accumulated the required number of hours of insurable employment from other employment. A claimant may commence self-employment activities while on claim, but must continue to meet all other entitlement conditions to receive benefits.
Once a self-employed person meets the qualifying conditions to establish a claim for benefits, in order to be entitled to receive benefits, they must demonstrate that they are unemployed for each week claimed. A person is unemployed if they do not work a full working week. Generally, a self-employed person is regarded as working a full working week, and therefore is not unemployed (EIR 30(1)). However, when the self-employment activity is so minor in extent that a person would not normally rely upon it as a principal means of livelihood, the claimant may be regarded as not working a full working week (EIR 30(2); 30(3); Digest 4.6.4). When this test is met, and all entitlement conditions for the type of benefits claimed are also met, they would be entitled to EI benefits as with any other claimant. Any earnings from the self-employment activities must be considered and may reduce the amount of benefits payable (EIR 35; Digest 5.16.0).
Part VII.1 of the EI Act provides for the payment of special benefits to self-employed persons. Special benefits include sickness, maternity, parental, compassionate care and family caregiver benefits. Qualifying and entitlement conditions for self-employed persons to receive these types of benefits are discussed in detail in Chapter 24 of this Digest.
Because of the uniqueness of farming, special considerations apply when determining if a disentitlement applies for a full working week during the period that begins with the week in which October 1st falls, and ends with the week in which the following March 31st falls (EIR 30(4); Digest 220.127.116.11). However, farming is a business and must be examined using the same criteria as would apply to any other type of business (Digest 4.6.5).
4.6.1 Types of self-employed workers
As previously discussed, there is a regulatory provision that addresses specific types of workers who are considered to be working a full working week, and are therefore not considered unemployed (EIR 30). This includes:
- self-employed persons, also known as independent workers
- persons engaged in the operation of a business on their own account
- persons engaged in the operation of a business in a partnership
- persons engaged in the operation of a business as co-adventurers, and
- persons employed in any other employment in which they control their own working hours
The consistent factor for these types of workers is that they can determine when they will perform the work, and even whether they will work on any given day. In the case of persons employed in any other employment in which they control their own working hours, they are unique in that they may be in an employer-employee relationship, however, they too determine if and when they work.
All of these types of workers may be able to satisfy the primary condition of entitlement, namely the condition of being unemployed (EIA 9; EIA 11), if they can overcome the presumption of a full working week (EIR 30(2); Digest 4.6.4).
4.6.2 Unemployment status and availability: Two distinct requirements
To be entitled to benefits, the first basic condition is to be unemployed (EIA 9; EIA 11; CUB 72138; CUB 35691). The second essential condition is to prove capability and availability for work (EIA 18; EIA 50(8); Digest Chapter 10). The fact that a claimant is available for work is not decisive, as it does not necessarily mean that the claimant is not working a full working week. Consequently, claimants who claim to be available while working a full working week meet only one of the 2 required conditions. Even when such claimants prove they are prepared to accept a job and are making efforts in that direction, they do not prove they are unemployed.
The factor to consider is the extent of the person's participation in a business, and not solely their availability to accept other employment. When it is decided that the claimant is not unemployed for a given period because they have worked a full working week, that decision cannot be overturned simply because the claimant had sought other employment during that period. The mere fact of having worked a full working week disentitles the claimant to benefits.
4.6.3 Determination of engagement or investment
The claimant’s level of participation in a business will determine whether they are actually engaged in the operation of the business (EIR 30(1)), or only an investor in the business. A person may own a business as an investment but may not participate in its operation.
It is essential to differentiate between engagement (Digest 18.104.22.168) and investment (Digest 22.214.171.124). When a person simply demonstrates a natural concern for an investment as an investor in the business, the person is not working in the business and therefore does not fall under the full working week provision (EIR 30(1)).
In cases where some business activities are performed, assessment must be made as to whether the activities are those of a person operating a business or those of a person showing a natural concern for an investment. The key is the level of participation or involvement in the operation of the business. The time involved, as well as the nature of the activities performed are essential elements to consider in order to determine the extent of that claimant’s engagement in the operation of the business. Once it has been determined that the claimant is engaged in the operation of a business, there are 6 factors included in the regulatory provision, that must be examined to determine the extent of that engagement (EIR 30(3); Digest 126.96.36.199).
188.8.131.52 Engagement in a business
Self-employment means being engaged in work or labour on one's own behalf, in a partnership, or as a co-adventurer, rather than being employed by someone else under a contract of service. It involves some work or labour by the claimant, in the business (Appendix A – Type of contract).
Self-employment involves working and striving to achieve the results desired for a business. The efforts of the self-employed person are part of what makes the business run. Investment involves contributing money and capital, and as a result benefiting from the business operation through no work or effort on the investor's part, in achieving those results.
Mere ownership of a business enterprise is not sufficient to warrant a finding that the claimant is self-employed. Something more than the status of shareholder or owner of a business, is required, since merely owning a business is not cause to be disentitled from benefits under the provisions of the legislation. The issue to consider is the level of participation of the claimant, in the running of the business. For self-employment to exist, there must be involvement in activities necessary to the operation of the business, such as those designed to generate business income, or involvement in the managing of people attempting to generate that income.
184.108.40.206 A natural concern for an investment
Investors usually hold an investment and derive income from the ownership of that investment or asset, not from their labour or work. People who are not engaged in self-employment, but have only invested in a business, expect profits through the efforts of the people who are running the business, such as, a business operator, promoter or a third party who is acting on the owner's behalf. Generally, those not engaged in self-employment benefit from the results of the business operation through ownership, and not through labour, work, or effort on their part. Without a personal engagement or involvement in the operation of a business, the business is simply an investment (Digest 220.127.116.11) and the full working week provisions do not apply (EIR 30(1)).
A natural concern for an investment may include:
- activities that demonstrate care for the proper administration of the investment, that is, concern with whether or not the persons running the business are protecting the assets, or managing and reporting the results of the business accurately. It does not include supervision of the persons actually running the business, or involvement in the administration of the business
- activities that monitor the return on the moneys invested in a business, such as reviewing the financial statements to determine how much money is being made from the investment. It does not include directing the persons running the business in how to obtain a greater profit
- activities that involve some actual participation in the business itself. However, that participation should be very negligible or extraordinary. Participation in the business should be unusual, occasional and exceptional and of little consequence compared to the overall operation of the business. A natural concern for an investment does not include activities that are performed on a regular basis even if these activities are only for an hour each week because those activities cannot be considered to be unusual, occasional, and for an exceptional purpose. For example, one is not considered to be engaged in the operation of a business if the individual participates in the yearly stockholder meetings to determine the future projections of the company or the direction that the company may take. These are activities of someone showing a natural concern for an investment rather than someone engaging in the operation of a business
A natural concern for an investment should not be confused with a person who is operating a business to a minor extent (EIR 30(2); Digest 4.6.4), for example, a person who performs their business activities only a few hours per week. The fact that the extent of the person's involvement is only a few hours per week cannot be used to establish that the business is an investment only, because they are performing the very work that the business requires. This person is engaged in the operation of the business and is not just showing a natural concern for an investment; however, that involvement may be minor in extent.
When a claimant is not engaged in the operation of a business but is just showing a natural concern for an investment, there is no disentitlement for not being unemployed (EIA 9; EIA 11). Any income arising from that business is not earnings for benefit purposes (Digest 5.16.1).
When the agent determines that the claimant is self-employed or engaged in the operation of a business, the next step is to determine if the claimant is working a full working week or if the claimant is only engaged in the business to a minor extent (EIR 30(1); 30(2)).
4.6.4 Exception to overcome the presumption of a full working week
There is a clear and specific exception in the legislation, to overcome the presumption of a full working week. Self-employed workers, persons engaged in the operation of a business, and persons employed in any other employment in which they control their working hours, may be able to show that their work is performed to such a minor extent that a person would not normally rely on that employment or engagement as a principal means of livelihood (EIR 30(2)). If that is the case, there is no presumption that they work a full working week.
To determine whether these claimants' employment-related activities are minor in extent, their employment is compared with others who normally rely on similar employment as their principal means of livelihood. The onus of proof is on claimants to demonstrate that their employment is to a lesser extent and that they devote less time and effort to it (EIA 50; Digest 4.2.0). When their employment-related activities are similar to those who follow the same occupation as a principal means of livelihood, they do not establish the requisite proof.
This exception must be explored every time a claimant's not unemployed status is examined. To this end, the factors listed in the regulatory provision must be an integral part of the fact-finding and the decision-making process (EIR 30(3); Digest 18.104.22.168). An evaluation of these factors will assist in determining the extent to which the self-employment or employment in which the claimant controls their own hours, impacts their unemployed status (FCA A-418-97, CUB 35899).
This exception also applies to claimants who are self-employed in farming or engaged in the operation of a farming business, other than during the period that begins with the week in which October 1st falls and ends with the week in which the following March 31st falls (EIR 30(4); Digest 4.6.5; Digest 22.214.171.124).
126.96.36.199 Factors determining whether a claimant's involvement is minor in extent
The 6 factors to be considered in determining whether the claimant is employed or engaged in the operation of a business to such a minor extent they would not rely on that employment or engagement as a principal means of livelihood are the:
- time spent
- nature and amount of the capital and resources invested
- financial success or failure of the employment or business
- continuity of the employment or business
- nature of the employment or business, and
- claimant's intention and willingness to seek and immediately accept alternate employment
These 6 factors are stated in the text of EIR 30(3). This regulatory provision specifies that the extent of claimants' participation in self-employment, in the operation of a business, or in any other employment in which they control their working hours, should be judged in light of numerous factors rather than solely on the amount of time spent on that activity. Jurisprudence stressing consideration of all 6 circumstances should be used to support decisions under the present regulation (FCA A-418-97, CUB 35899; FCA A-58-94, CUB 23879; FCA A-614-94, CUB 25617).
All of these factors must be considered in order to:
- obtain an overview of the situation
- assess the claimant's credibility with regard to the hours spent on the employment or business
- define their role and responsibilities with regard to participation in that employment or engagement, and
- determine whether the relieving conditions set forth in EIR 30(2) have been met
If the claimant's employment-related activities are minor in extent, the claimant is considered not to have worked a full working week and therefore is unemployed. If the claimant's employment-related activities are more than minor in extent, the claimant is disentitled from benefits because they are working a full working week and therefore not unemployed.
Financial statements can assist in fact finding as they may provide information on the extent of the claimant's involvement in the business. In practical terms:
- if a quick check of the income statement reveals no salaries, this may mean the claimant is operating the business on their own, without assistance
- If there are automobile, gasoline and travel expenses, this may indicate the claimant travels for the business
- high rent, heat, and hydro expenses may indicate occupancy of a store or office, presupposing a considerable financial expenditure and the claimant's intention to work on their own account
Financial statements can also provide information about the circumstances to be considered under EIR 30(3):
- the balance sheet can show the moneys invested: the equipment owned by the business and its value, owners' equity, and debt-load, as well as continuity of the business: assets and liabilities
- the income statement can show financial success or failure in that it sets out profit or loss for a specific period
The question of unemployment must be considered on an individual basis, since each person's situation is different, and must be examined in light of these differences. Each of the 6 factors must be taken into account. Examination of the 6 factors may reveal that some of them do not necessarily apply in all cases, since some are more relevant than others in different situations. Nonetheless, the result of the examination of the 6 factors must be fully documented in order to support the Commission's decision.
188.8.131.52 Time spent
The time spent is an important consideration, but it is not the only one applied to determine whether the claimant's activities are minor in extent. All types of efforts made by claimants to set up or continue their business or other employment in which they control their working hours, must be examined. The time of day or week that claimants devote to their business or other employment is also an important element to consider. Of course, the more time a person spends on activities, the greater the likelihood that they will be considered to be engaged to more than a minor extent.
The fact that a claimant spends an amount of time on activities for approximately the same duration as a regular working week, may demonstrate that the activities are not minor in extent. This is particularly relevant if the person is obligated to keep a relatively strict schedule (EIR 30(2); CUB 37086; CUB 32849; FCA A-699-02; CUB 53297A). For example, the less time spent and the more flexible the hours, weekends or evenings, the greater possibility the activities are minor in extent. When the number of hours devoted to the activity is less than the number spent by someone following a similar activity as a principal means of livelihood, the conclusion that the claimant's engagement is more in the nature of a sideline may be supported.
Normal labour market conditions with respect to the self-employment activity or other employment in which claimants control their working hours must be considered. Whether the claimant works at it during the day, in the evenings or at night is irrelevant if it is an activity which people normally carry out at any time, as a principal means of livelihood. The claimant's time spent must be compared against those following that type of employment as a principal means of livelihood (FCA A-113-97; CUB 36744).
Slow periods or seasonal fluctuations do not automatically make the self-employment activity or other employment in which claimants control their working hours, minor in extent. A person's intentions during the period in question are often a good indicator of the claimant's unemployed status. The fact-finding should determine if the claimant is merely going through a slow period and if the activity is now a sideline, or if it is still a principal means of livelihood. Numerous businesses are seasonal in nature, so that the activities required of them cease during part of the year, or the tasks to be performed become substantially less. Claimants who pursue a seasonal activity may establish that they are working full working weeks during the on-season and are unemployed during the period in which the business ceases its activities (Digest 184.108.40.206).
220.127.116.11 Nature and amount of the capital and resources invested
The larger the financial commitment to an enterprise, the more likely it is that the business is intended to be or become the claimant's principal means of livelihood. Claimants who put practically everything they have into the endeavour reflect their intention at that time to make it a permanent, viable business (CUB 34019; Jurisprudence Index/week of unemployment/business/).
Indicators of whether or not claimants intend to make the endeavour a principal means of livelihood include but are not limited to:
- the capital and resources invested, material or equipment purchased, conversion of premises when the business is set up, or signing of a personal lease for the premises where the business is located (CUB 27866; CUB 24574)
- debt-load and line of credit, or moneys or salary from the business reinvested to ensure its continuity
It must be determined whether the moneys and securities involved are those which are normally invested to make such an endeavour profitable to the extent that it will become a person's principal means of livelihood, or alternatively whether they are normally expended for an occupation which is clearly secondary in nature.
The person's contribution will not always be in the form of a monetary contribution. When persons enter into a business, the contribution of each of the participants may or may not constitute a capital outlay. Such contributions can be very different: real or personal property, credit or money, skill, experience, contracts, reputation or work.
When the business experiences a major decline or finds itself in financial difficulties, claimants may indicate that they no longer intend to operate the business as a principal means of livelihood. The financial commitment and the efforts made to save the business can test the credibility of a claimant’s statement regarding a change in intentions. For example, substantial amounts invested to revive the business may diminish the credibility of such a statement.
18.104.22.168 Financial success or failure of the employment or business
The consequences to the claimant of the financial success or failure of the business or the other employment in which they control their working hours must be examined. The success of the business or the other employment is certainly a factor that strengthens the presumption that the claimant devoted the necessary time and effort to the endeavour. Conversely, failure to derive a return from the business or the other employment does not necessarily mean the claimant's activities are minor in extent. Nor can it be said that because profits are not satisfactory to the claimant, the business or the other employment is not the claimant's principal means of livelihood.
The gross income derived from the business or other employment may constitute an important factor when a significant number of hours are being worked, and when it accurately reflects the size of the endeavour. It may serve to indicate whether or not the claimant's activities are minor in extent.
Some claimants may reinvest all or most of their returns back into the business to strengthen it, instead of drawing a salary, then claim their involvement to be a simple investment because the business is not yet generating sufficient returns to pay their salary (Digest 22.214.171.124). The lack of financial success of a claimant’s endeavours does not prove that they are engaged in self-employment activities to a minor extent. Low profit levels are very common for a new business.
Financial return is not a decisive factor, and has no importance when claimants are engaged full time in setting up or ensuring the continuity of their business or their other employment. When claimants intend to make the business or the other employment their sole occupation or their principal means of livelihood, the amount of money derived from those activities is not an essential factor to consider in determining whether they are engaged in their employment to a minor extent (FCA A-699-02, CUB 53297).
Fluctuating sales levels are also not sufficient to establish the right to benefits. If the conditions of the business change, leading to a sufficiently large drop in sales or to the possibility of the business being forced into bankruptcy, the claimant's intentions may change as well. Facing a bankruptcy may cause the claimant to either devote more time to the business, or to devote much less time to running the business and more to actively looking for other employment. Such facts might lead the claimant to request a reconsideration of their situation. The agent will take into account the claimant's new intentions in conjunction with the circumstances mentioned in EIR 30(3), to decide whether the claimant is still working a full working week while operating the business.
126.96.36.199 Continuity of the employment or business
The continuity of the business or of other employment in which claimants control their own working hours, is relevant insofar as it demonstrates the intentions and the real nature of the claimants' participation in these employment-related activities. The fact that the business continues to operate during the period claimants are claiming benefits, is a relevant consideration because it may indicate that the business is serious enough to require more than mere minor interest on the part of the claimant.
The business' level of activity is important to consider; has it increased, decreased, or remained constant?
- An increase could mean the business is no longer a sideline or secondary occupation but a principal means of livelihood. It could also mean the claimant is simply spending a few more hours in the self-employment activities but these hours still remain less than those spent by someone following it as a principal means of livelihood
- A decrease could be because of a temporary decline in business, common at that particular time of year, because the claimant has hired someone to do their work, or due to the business activities having been permanently scaled back. Remaining constant could mean it has always been the claimant's principal means of livelihood, or may be a sign of minor in extent participation. For example, a claimant may have held a full-time job while running a business to which they devoted little time, and the time spent has not substantially changed following the termination of the full-time employment (FCA A-707-94, CUB 26138)
Claimants may hold another job at the same time as they are self-employed or engaged in the operation of their business. That other job may constitute their principal means of livelihood. The issue is to decide whether their activity within the business, for the period they are claiming benefits, is carried out to such a minor extent that a person devoting the same time and effort would not normally rely on that activity as a principal means of livelihood.
Continuity of the business can be used to substantiate that claimants are self-employed to a minor extent. This may occur when they have operated a business for many years while holding a full-time job elsewhere, and when the participation in the business is minimal and there has been no significant change in the participation following separation from full time employment (FCA A-707-94, CUB 26138). However, the continuity of the business may not be relevant when claimants use the period that they are unemployed from their full-time job, to spend significantly more time in self-employment activities.
There are many endeavours of a seasonal nature where there is an established pattern of shutdown, such as where there is no activity for the business during the summer or winter period, according to the type of business. In such a situation, a person may be considered to work a full working week during the active season and be unemployed during the period in which the business ceases its activities. However, should the person undertake activities necessary to the operation of that business during the seasonal closure, such as, marketing the services of the company, a determination as to whether or not these activities are minor in extent must be made (FCA A-614-94, CUB 25617).
188.8.131.52 Nature of the employment or business
The nature of the employment or business in which a claimant controls their working hours is used to determine if it is the same as the claimant's usual line of employment. When it is, it is more likely that the claimant intends to make it their principal means of livelihood and devote a significant amount of time and effort to it (CUB 27886; CUB 21931). The occupation practiced may tend to confirm or refute the claimant's allegations that the business is a sideline, as opposed to a principal means of livelihood.
The claimant's real intentions and time devoted must be considered. When the business or the other employment relates to or depends upon the claimant's skill or experience, then their participation becomes essential, and it is reasonable to assume that participation will be significant. Consideration must be given to the fact that claimants in this situation may become competitors of any employer who hires them, making it difficult for them to pursue their own trade anywhere but in their business. In this case, claimants may be making a principal means of livelihood out of the activity being set up, rather than relying on the remote possibility of securing work with a competitor.
When the work performed falls outside the claimant’s skill or experience, this may indicate that their participation is of only secondary importance unless of course, substantial time is devoted to the activity, or the claimant intends to make this work their principal means of livelihood.
184.108.40.206 Claimant's intention and willingness to seek and immediately accept alternate employment
The claimant’s availability serves to enhance or diminish the weight to be given to their statements as to whether or not they are primarily engaged in the operation of a business or in any other employment in which they control their working hours.
This factor makes it possible to verify a claimant’s willingness to accept another job and the genuineness of their job search efforts (FCA A-104-00, CUB 44548A). The proof of availability required of such claimants is no different from that required of claimants in other circumstances (EIA 18; Digest Chapter 10). They must be prepared to immediately accept any suitable employment they are capable of performing, they must not set conditions, which unduly limit their employment opportunities, and, finally, they must behave in a manner which demonstrates their real desire to work. In the absence of a precise definition in the act, availability is verified by analysis of these 3 elements (FCA A-56-96, CUB 30987; CUB 72138).
An intensive job search may be an indication that a claimant’s involvement in operating a business or working in employment in which they control their working hours, is to such a minor extent, that a person would not rely on it as a principal means of livelihood. Conversely, the absence of efforts to find other work, or restrictions made on availability tend to suggest the opposite.
Where the claimants' employment-related activities may appear to cause a restriction on availability, evidence that someone can take over if the claimant finds employment elsewhere, may support the claimant’s statement that they can accept employment without any restrictions.
On the other hand, claimants may restrict their availability because of their business or other employment in which they control their working hours, or may impose certain requirements with respect to acceptance of a job. For example, they may impose undue conditions on acceptance of a job because of work required in the business, by restricting their availability to a few days a week or by making no effort to find a job. When this happens, there is reason to believe that the activity is not minor in extent.
Claimants engaged in their business or in other employment in which they control their working hours, to a minor extent, can receive benefits provided they look for work on their own behalf, rather than on behalf of the business. Seeking employment and seeking contracts to work on one's own account are different. Seeking contracts for the business is not a job search within the meaning of the act. Client follow-up, marketing for the business' products or services, or searching for new clients for the business are not regarded as active job search activities under the act. The same applies during the farming period defined in EIR 30(4) or during a seasonal closure.
Claimants may take advantage of the fact that they are unemployed to devote more time to their business. However, this may affect their unemployed status and availability, particularly in terms of 3 factors: time spent, continuity of the employment or business, and claimant's intention and willingness to seek and immediately accept alternate employment (EIA 18; Digest Chapter 10).
4.6.5 Engaged in the operation of a farming business
Farm operators are non-salaried individuals whose occupational activity consists of working or operating a farm. They may look after all operations, such as the production, distributing and marketing of farm products, with a view to realizing a profit from them. Activity may extend to maintenance of buildings, equipment and fences.
Persons engaged in operating a farm are subject to the same regulatory provisions as those who operate any other business, whether as self-employed individuals, or as partners or co-adventurers (EIR 30(1); 30(2); 30(3)).
To demonstrate they are unemployed and not considered to be working a full working week, claimants must prove that their farming activities are performed to such a minor extent, that a person would not normally rely on that employment as a principal means of livelihood (EIR 30(2)). The agent must therefore examine the 6 factors provided for by EIR 30(3), to determine whether the claimant works full working weeks, during any weeks EI benefits are claimed.
Once it has been found that a person is engaged in farming as a principal means of livelihood, that person is regarded as working full working weeks and therefore not unemployed (EIR 30(1), (2), (3); FCA A-725-99, CUB 46122; Jurisprudence Index/week of unemployment/farming/). However, that person may still prove entitlement to benefits during the period that begins with the week in which October 1st falls, and ends with the week in which the following March 31st falls. To do so, they must prove that during that period, they did not work, or they were employed to such a minor extent, that it would not have prevented them from accepting full-time employment (EIR 30(4); Digest 220.127.116.11).
A farm is an agricultural enterprise that combines capital and elementary production factors, such as plant and animal products and buildings, in a single economic and accounting unit, in order to draw from them a farm product destined for sale, with a view to realizing a profit.
The Canada Revenue Agency defines farming as:
- tillage of the soil (in other words, plowing, sowing, and raising crops)
- raising or exhibiting livestock
- maintaining horses for racing
- raising poultry
- fur farming
- dairy farming
- fruit growing, and
- bee keeping
Farming includes other activities such as:
- engaging in an aquaculture operation
- operating a woodlot
- planting, growing, and harvesting Christmas trees
- operating a nursery or greenhouse
- growing tobacco or medicinal marijuana, but not the manufacturing or processing associated with these crops
- operating a chick hatchery
- operating a maple sugar bush, which may include extracting and collecting maple sap, or
- cultivating crops in water and hydroponics
It is not compulsory that farming be the person’s principal occupation in order to be eligible for a farm loan from Farm Credit Canada. Since 1992 that agency has been authorized to grant or guarantee loans to full-time or part-time farmers. Consequently, the fact that a claimant has obtained a farm loan does not in itself prove that they are operating an agricultural enterprise on a full-time basis. However, obtaining such a loan does become an indicator for exploring the role the claimant plays in the agricultural enterprise.
18.104.22.168 Period defined in regulation 30(4) – Farming
Persons engaged in farming are subject to the same regulatory provisions as persons engaged in the operation of any other business on their own account or in a partnership or co-adventure (EIR 30(1); 30(2); 30(3)). Once it has been found that a person is engaged in farming as a principal means of livelihood, that person is regarded as working full working weeks and therefore not unemployed (CUB 30067; Jurisprudence Index/week of unemployment/farming/).
However, farming, because of the uniqueness of the business, has been given special considerations when determining the application of a disentitlement during the period that begins with the week in which October 1st falls, and ends with the week in which the following March 31st falls (EIR 30(4); CUB 68684) . This period is clearly defined in a regulatory provision and is not subject to any modification, regardless of the climatic conditions from one province to another.
Unlike other types of business, a person engaged in farming as a principal means of livelihood may prove entitlement to benefits during the period that begins with the week in which October 1st falls and ends with the week in which the following March 31st falls. In order to prove entitlement for this period, the person must show that at any time during this period, they will not work in farming, or will be employed to such a minor extent that it would not prevent them from accepting full-time employment (EIR 30(4); FCA A-256-07, CUB 67904A). It is the entire period, taken as a whole that must be considered. The decision remains unchanged for the entire period, unless of course the claimant's situation changes, for example the farm is sold or expanded. However, it must be kept in mind that the provision defined in EIR 30(4) only needs to be considered if the person does not meet the relieving provisions of minor extent under EIR 30(2).
The nature of the operation, seasonal activities for that type of operation, and the size of the farm are determining factors in deciding the extent of the work in farming during the period defined in EIR 30(4). The claimant's occupational history is an important indicator for determining whether the claimant is able, or has been able in the past, to accept full-time employment elsewhere during the defined period.
If the facts on file show that the off-season related to the claimant's employment in farming does not coincide with the period provided for in EIR 30(4), that regulatory period cannot be modified or extended to meet the local farming conditions of individual farmers. In such a case, the claimant is subject to the same rules as any other person engaged in the operation of a business who claims EI benefits outside the period set out in the regulation (EIR 30(1), 30(2), 30(3)).
4.6.6 Period prior to the opening of the business
The period prior to the opening of a business is the beginning of the period where a person's unemployment status may be at issue. When the claimant is actively involved in the preliminary stages of opening a business, that is, while the business is not yet completely set up, the agent will review this period from the perspective of unemployment status. During this stage, the claimant is considered as already in business, similar to someone engaged in a newly opened business.
However, the claimant may demonstrate that the work they perform during the preparatory period of the business, is so minor in extent that a person would not normally rely on that activity as a principal means of livelihood (EIR 30(2); FCA A-616-95, CUB 28870; Digest 4.6.4). If that is the case, the claimant is able to overcome the presumption that they work a full working week. The 6 factors also apply to the preparatory period (EIR 30(3); Digest 22.214.171.124).
A disentitlement for being not unemployed cannot be imposed for only part of a week because it is based on the finding that the claimant is considered to be working a full working week. As such, the decision of not unemployed is based on full weeks only (EIA 9, EIR 30(1)). The decision is whether each of the weeks under review constitutes a week of unemployment. However, if it is determined that the claimant is unemployed for only part of a week, they may be found to be not available for the part of the week they started self-employment activities, and receive benefits for the days they are not considered self-employed (EIA 18; Digest Chapter 10). This principle is also applicable for the part of the week in which the self-employment activities end.
4.6.7 Form of business organization
When claimants act as self-employed workers or are engaged in the operation of a business either on their own account, in a partnership or as a co-adventurer, their role, responsibilities and actual status within the business must be examined to determine whether they are truly unemployed. This is not always obvious, because the role, responsibilities, actual status and the level of liability differs according to the form of the business in which the claimant is engaged.
Self-employment may take different forms:
- self-employed worker
- sole proprietorship
- partnership: general partnership or limited partnership
- corporation or limited company
126.96.36.199 Self-employed worker
The self-employed worker or independent worker is engaged in an occupation on their own account. Occupation means any regular activity, or trade carried out to earn a living. Self-employed workers may not own a business as such. They may offer their services to companies or individuals according to certain terms and conditions fixed in advance by contract. When these persons are party to a contract of service, they are regarded as an employee (EIR 29; EIR 31; Digest 4.3.0). When such persons are party to a contract for services, they are regarded as self-employed workers (CUB 76074, Appendix A - Type of contract).
Self-employment exists even when the payment of the contract for service is deferred until completion of the contract. The timing of the payment has no relevance as to whether or not the claimant is working (FCA A-697-95, CUB 29511).
Self-employed workers may demonstrate that, during the period for which they are claiming benefits, their engagement is to such a minor extent that a person would not normally rely on that activity as a principal means of livelihood, thus overcome the presumption of working a full working week (EIR 30(2)).
188.8.131.52 Sole proprietorship
An unincorporated proprietorship is composed of a single owner who directs all of the enterprise's activities. Such persons assume all authorities and obligations, and are personally liable for the business's debts. The sole proprietorship may hire someone to run the business. The sole proprietorship is extremely simple to create and meets the needs of small entrepreneurs who wish to operate a business without bothering with the legal worries involved in an incorporated business (Digest 184.108.40.206).
Business people who operate as a sole proprietorship are increasingly forming business corporations for their distinct business advantages. Federal and provincial legislation governing business corporations may permit the creation of companies with a single shareholder and administrator.
When considering the unemployment status of a sole proprietorship it is important to establish the exact nature of the claimant's status in the business, this is whether the claimant is engaged in the operation of their business or whether they have engaged someone to run the business (CUB 72035A).
220.127.116.11 Partnership: general or limited
A partnership is an organization that brings together 2 or more people for the purpose of carrying on a business in common, with a view to profit. There are 2 principal forms of partnership: a general partnership and a limited partnership. Both are based on a contract between 2 or more persons who pool their property, money and/or skills to operate an unincorporated business and to distribute profit from it to each partner. A partnership agreement may be written or verbal. A written contract normally sets out the responsibilities, the capital contributions and the time and energy that each partner will devote to the firm's business, as well as the respective shares of profits and losses that each partner will take.
Theoretically, each partner participates in the administration of the partnership, signs contracts, and makes commitments on its behalf. However, the control and responsibility held by each partner varies depending whether the partnership is general or limited.
In a general partnership, every partner may take part in the management of the partnership business. All partners are administrators, unless otherwise designated, and are jointly liable for the partnership's obligations, and personally liable for its debts. This form of business is preferred by persons engaged in a professional activity (accountants, lawyers, doctors, architects, engineers, etc.) and by certain commercial concerns.
Claimants may establish a limited partnership. This is a form of commercial enterprise composed of 2 kinds of partners: general partners and limited partners.
The important factor to remember is that general partners are those who set up, manage, administer and work in the business, while limited partners are those who contribute capital or property in the business, but are prohibited from taking an active role in its administration.
When considering the unemployment status of a partner it is important to establish the exact nature of the claimant's status in the partnership, that is, whether the claimant is a general or a limited partner. By definition, a limited partner cannot be involved in the administration of the business, however if the claimant is a general partner, the nature and extent of their participation in the business activities must be determined (CUB 47156).
Claimants are engaged as a co-adventurer in a business when, regardless of the legal form of the business, they have an interest in it with others and they involve themselves personally in the activities deemed necessary for its operation (CUB 50122). It makes no difference whether the business is registered or incorporated (FCA A-136-96, CUB 31814; FCA A-348-96, CUB 33274).
As long as the claimant has an interest in the business and is engaged in its operation, the question of who actually owns the business is not a decisive factor for determining whether the claimant is acting as a co-adventurer.
Co-adventurers include individuals who contribute, without pay, to various tasks in a corporation in which others may be the sole shareholders, even though the individuals have no legal relationship with it.
A claimant's interest in a business can take many forms, from money given or invested to assist the owner of the business, to the expectation of gaining from the profits or success of the business.
To determine if the claimant is a co-adventurer in the business, the agent must examine the real extent of the claimant's interest in the business, and the activity in which they are engaged (Digest 4.6.3). In the framework of this activity, the agent must ensure that the claimant controls their own hours of work and is not bound by a contract of service, or arrangements similar to a contract of service (EIR 29; EIR 31; FCA A-771-88, CUB 15420).
The agent must have an overview of the business: the owners, the shareholders, and the claimant's relationship with the owners, details about the job performed and, finally, the claimant's employment history.
The agent must bring out the elements that demonstrate the claimant's interest in the affairs of the company, as those elements distinguish between co-adventurer, and volunteering assistance to a business enterprise (Digest 4.6.9). In some cases, claimants may assert that they are merely giving the company a hand, but analysis of the facts in the file may demonstrate that the opposite is true. Claimants alleging volunteer work must prove that the assistance is provided free of charge, in a disinterested manner, and without obligation (CUB 70769).
When a claimant has been found to be acting as a person engaged in a co-adventure, the 6 factors provided for by EIR 30(3) must be considered to determine if the claimant worked a full working week (EIR 30(2); Digest 18.104.22.168).
22.214.171.124 Corporation or limited company
A business corporation is a type of enterprise usually referred to as a limited company or corporation. Ownership is divided into shares. Its legal name ends with Limited (Ltd.), Incorporated (Inc.) or Company (Co.). Throughout this chapter, rather than using the full term "corporation or limited company", "corporation" alone will be used.
A corporation is an artificial being, invisible, intangible and existing only in the eyes of the law. This definition has led legal experts to affirm that a corporation is a legal entity, separate and distinct from those who own it, the shareholders. This characteristic confers upon the corporation, all the rights and responsibilities of a person. One of the significant differences between a sole proprietorship, a partnership and a corporation is that a corporation has a separate legal existence in law and it can own property, make contracts and be responsible for debts, just like any individual. One of the advantages of a corporate structure business organization is that the shareholders are able to invest and receive a regular return, without having to take any additional risk beyond the sum invested, or take an active part in management of the corporation's business affairs.
Although shareholders are the true owners of the corporation in which they hold shares, a corporation is managed by a board of directors, which sees to its proper operation, appoints the employees it deems necessary, and determines their functions and remuneration. The board is elected by the shareholders who, in that respect, have some control over who will manage the corporation. However, the board itself is responsible for managing the corporation.
Some corporations have a few shareholders, or, even only one. In these types of situations, there may be no real distinction between the owners and managers, and between the shareholders and the board of directors. The shareholders would likely be the people who manage the corporation. However, it is possible that not all shareholders participate in the running of the corporation.
4.6.8 Piercing the corporate veil
The expression "piercing the corporate veil" means to ignore the separate existence of a corporation and look beyond the corporate veil, which shields the individuals controlling the corporation. This allows the Commission to consider the reality of the claimant's situation (CUB 47156; FCA A-698-95, CUB 29518; Jurisprudence Index/week of unemployment/working for own company/; Jurisprudence Index/week of unemployment/shareholders/; Jurisprudence Index/week of unemployment/co-adventure/). It is necessary to pierce the corporate veil in cases where claimants participate in the operation of the corporation other than as a paid employee.
Piercing the corporate veil enables the Commission to:
- determine the claimant's true relationship with the corporation
- eliminate the technicalities of corporate law that give a company a separate legal personality from that of its shareholders, and
- consider any earnings from the self-employment activities of a claimant who is engaged in the operation of the corporation (Digest 126.96.36.199)
Some people allege that the business' activities in which they are engaged are on behalf of the corporation, not on their own account, and that they are therefore not self-employed. However, the legal status of the operation or business in which the self-employed person works is irrelevant (FCA A-136-96, CUB 31814; FCA A-348-96, CUB 33274). It is the claimant's activities in the operation of the corporation that are relevant. This is true no matter what percentage of shares a person may own.
The fact that the employment of a corporate shareholder was ruled insurable does not mean the claimant is not self-employed when they are engaged in the operation of the corporation. It is not the intention of the legislation to consider that a person who works on their own behalf, or as co-adventurer, is not self-employed simply because they formed a corporation within which they worked in insurable employment (EIA 5(2)(b); FCA A-247-96, CUB 32697; CUB 68677; Digest 188.8.131.52).
When fact-finding shows that the person is essentially engaged in the operation of a corporation, or is its directing authority, it is reasonable to conclude that the individual is engaged in the operation of that business (CUB 75971; Jurisprudence Index/week of unemployment/shareholders/). It is not equitable to pay EI benefits to one claimant and not another, when the only difference between the 2 is that one business is incorporated, and the other is not (CUB 62304B; CUB 31527; Jurisprudence Index/week of unemployment/working for own company/; Jurisprudence Index/week of unemployment/shareholders/).
184.108.40.206 Claimants who are corporate shareholders
Budget 2021 measures alert – Temporary measures are in place from September 26, 2021 to September 24, 2022 which affects the following information:
- only the last reason for separation (employment before the initial claim for benefits with the latest last day paid) or any employment within the benefit period requires adjudication if the reason for separation is contentious
Claimants may hold shares in a corporation where they work as employees; they may also participate in its operation. The agent must identify the claimant's role in the corporation. The fact of being a shareholder in a corporation does not mean that the person is participating in the running of the business (Digest 220.127.116.11). When considering a matter relating to the unemployed status of claimants who are shareholders in a corporation, it is particularly important to establish the position they hold in the corporate structure and its related responsibilities, in order to determine whether they have a role in the operation of the business. The claimant could be acting as an investor (Digest 18.104.22.168), as an employee subject to a work schedule (EIR 29; EIR 31), as a person engaged in operating that corporation as a business on their own account or in a co-adventure (Digest 22.214.171.124), or a combination of these positions.
Some claimants may be both a paid employee of the corporation and perform functions for which salary or wages are not paid.
When the Canada Revenue Agency (CRA) rules that the claimant's employment is insurable, it can be concluded that, for the working hours ruled insurable, the claimant acted as an employee subject to the work schedule of the corporation, and therefore may be eligible to receive EI benefits. However, the fact that CRA ruled the claimant's employment insurable does not mean the claimant will receive EI benefits. They must first demonstrate that they are unemployed, in relation to the corporation (FCA A-247-96, CUB 32697; FCA A-999-96, CUB 35986). Though the employment may be ruled insurable, the claimant could still be considered not unemployed if they are also participating in running the business.
When the claimant continues to participate in the operation of the corporation, they will be considered to have worked a full working week unless the "minor in extent" exception is proven (EIR 30(2), 30(3)). The fact that the claimant worked in insurable employment is not relevant, nor is it a determining factor regarding the claimant's unemployed status in the period for which benefits are claimed. As well, the fact that the self-employment under review is the same employment used by the claimant to qualify to establish a claim for benefits, is irrelevant (FCA A-247-96, CUB 32697; FCA A-999-96, CUB 35986). It is the total number of hours a claimant spends in pursuing the business that must be considered, including the hours worked as an employee as well as those worked in the operation of the corporation. Consequently, when the claimant continues to participate in the operation of the corporation, the decision is made under the not unemployed provisions for self-employed workers, taking into account the number of hours worked as an employee, as well as those hours worked in the operation of the corporation (EIR 30).
There are certain documents that can assist in determining whether the person is involved in the running of the enterprise. The corporation maintains its articles, regulations, charter, list of directors, minutes of meetings, and is required to produce and archive an annual report that contains a significant amount of useful information about its activities.
When a shareholder-employee of a corporation can lay themselves off, it raises the question of voluntary lay-off (EIA 30). That issue must be resolved, giving full consideration to any circumstances that may prove just cause (Digest Chapter 6).
4.6.9 Volunteering assistance to a business enterprise
Claimants may lend a hand in a business owned by someone they know. Lending a hand in a business means different things to different people. The agent must consider all the facts surrounding such assistance and establish the real situation between the parties to verify whether some type of compensation is received in return for that assistance. This consideration is necessary to determine if the claimant is truly a volunteer, or acting as an employee or as a co-adventurer in the business (Digest 126.96.36.199).
Claimants are truly volunteers when:
- they receive no pay for their work
- they neither derive nor hope to derive any benefit, profit, financial or economic advantage from the work
- the assistance is provided in a disinterested way without obligation, and
- they are not bound by a contract of service, or arrangements similar to a contract of service (FCA A-962-88, CUB 15702)
When a claimant receives or expects to receive something in return for their assistance, it can no longer be said that it is volunteer work (CUB 70769; FCA A-105-98, CUB 39928; Digest 188.8.131.52). In fact, claimants do not truly volunteer when they offer their services with the expectation of receiving, in the short or medium term:
- monetary or material benefit (CUB 32650)
- a promise of an eventual position (FCA A-1009-90, CUB 18752)
- accommodation and meals (CUB 21373)
- company shares (CUB 25125), or
- any gain due to the success of their relative's company (CUB 26139; FCA A-986-88, CUB 15699)
When a claimant provides assistance to another, it is not considered employment if it is determined that the claimant is not acting as a co-adventurer, as there is no contract of service (EIA 11; Digest 184.108.40.206). The assistance is provided in a disinterested way without obligation, and the claimant will not receive any benefit from it (FCA A-986-88, CUB 15699). In such a situation, it cannot be said that the claimant is engaged in the operation of a business, or that they are working under a contract of service because of the assistance given, even if the assistance is provided on a regular basis (CUB 50107; FCA A-341-79, CUB 5560). Therefore, the claimant will have proven that they are unemployed. This applies regardless of what the relationship is between the individuals (i.e. friend, relative or spouse).
When it is determined that the person is truly a volunteer, and therefore unemployed, the agent must then rule on the question of availability. Volunteering assumes that the person provides assistance solely to fill up free time, while remaining available and looking for work (Digest Chapter 10.14.1). It is not the fact that the claimant is lending a hand that makes them not available, rather it is the absence of efforts to find work, or restrictions made on their availability because of the time spent assisting in the business.
4.6.10 Claim for special benefits
Persons who are self-employed, who operate a business on their own account or as partners or co-adventurers, or who have any other employment in which they control their own working hours are generally considered to have worked a full working week and therefore are not considered unemployed (EIR 30(1)).
Despite this, such persons may qualify for sickness (EIA 18(1)(b), EIA 21; Digest Chapter 11), maternity (EIA 22; Digest Chapter 12), parental (EIA 23; Digest Chapter 13), compassionate care (EIA 23.1; Digest Chapter 23) and/or family caregiver benefits (EIA 23.2, EIA 23.3; Digest Chapter 22). They must still have accumulated sufficient insurable hours to establish a benefit period and meet the entitlement conditions applicable to the specific type of benefits being requested (EIA 7; Digest 1.2.0). However, payment of such benefits is considered only in respect of a week of unemployment: in other words, only for those weeks during which the claimant did not work a full working week (EIA 11).
Claimants demonstrate that they are unemployed and not working a full working week when they prove that their employment-related activities in their business are performed to such a minor extent, that a person would not normally rely on that employment as a principal means of livelihood (EIR 30(2); Digest 4.6.4). The agent must examine the 6 factors provided for by EIR 30(3) to determine whether or not the claimant works a full working week for the period in respect of which special benefits are being claimed (CUB 25211; Digest 220.127.116.11).
When a claimant engaged in the operation of a business also works as an employee in insurable employment, it is particularly important to establish the position and the related responsibilities the claimant holds in the corporate structure, in order to determine whether the claimant has a role in the operation of the business (Digest 4.6.8). Even when the employment is ruled insurable, the claimant may still be considered not unemployed if, in addition to working as an employee, they are participating in the running of the business.
When the claimant continues to participate in the operation of the corporation, for the period in respect of which special benefits are being claimed, they will be considered to be working full working weeks unless the "minor in extent" exception is proven (EIR 30(2), 30(3)). When claimants do not meet the minor in extent exception, no sickness, maternity, parental, compassionate care or family caregiver benefits are payable in respect of such weeks.
Earnings from self-employment are only allocated when the claimant's involvement or engagement in the self-employment is determined to be minor in extent (EIR 35; Digest 5.16.0). If it is not, a disentitlement for full working weeks is imposed, rather than allocating earnings.
When persons claiming and satisfying the conditions to receive maternity, parental, compassionate care and/or family caregiver benefits meet the minor in extent exception, such benefits are payable for each week of unemployment within the period of leave.
There is an additional provision that applies to persons claiming sickness benefits. These claimants must also prove that, had it not been for their incapacity, they would have been otherwise available for work (EIA 18). This second condition provided for by the act is aimed at limiting the payment of sickness benefits solely to persons who would have been eligible for regular benefits, had it not been for their incapacity for work (Digest 11.3.0). Sickness benefits are payable for each week of unemployment in the period when claimants meet both the first entitlement condition, that they are unemployed, and the second condition, that they would have been otherwise available for work. Claimants in receipt of parental, compassionate care or family caregiver benefits are exempt from proving they would have been otherwise available for work.
4.6.11 Issue of earnings
The entire income of a claimant arising from any employment, including self-employment, is earnings for benefit purposes (EIR 35(2); FCA A-136-96, CUB 31814). For practical purposes, when it is determined that a claimant is not unemployed or self-employed, and disentitled from receiving benefits, the earnings are not allocated; the earnings are only allocated when the claimant's involvement or engagement in self-employment is minor in extent, even though income from all self-employment activities is earnings (Digest 5.16.0).
When the claimant does not participate in running a business, that is, there is no finding of self-employment, minor or otherwise, any income arising from the ownership of the business is not income arising out of employment (Digest 18.104.22.168; Digest 22.214.171.124).
Persons who are employed in any other employment where they control their own working hours are often remunerated by way of commissions and in some cases, a basic salary. These earnings are allocated pursuant to the appropriate regulations (Digest 5.8.0; Digest 5.7.0).
4.6.12 Employment benefits for self-employment
The Commission may establish employment benefits to enable insured participants to obtain employment, including benefits to help them start a business or become self-employed (EIA 58; EIA 59(c); EIR 50). In this context, when a person is approved to take part in the employment benefit program called Self-Employment, that person is regarded as unemployed, capable of and available for work, for the duration of the program (EIA 25).
Persons who are not accepted under this employment activity and who decide to start a business without being approved by an authority delegated by the Commission, are required to prove that they meet all the entitlement conditions for the type of benefits claimed, as is required for any other claimant. A decision by an authorized official about the referral of a claimant to this program is not subject to appeal (EIA 25(2)).
While efforts made by claimants to create employment by starting their own business are commendable, without approval from a designated authority, this activity places them outside the purview of the EI scheme. The act is designed to provide temporary benefits to those who are unemployed and actively seeking other work. It cannot be used to subsidize entrepreneurs who are starting their own business, unless under an approved employment activity (FCA A-366-94, CUB 24632; FCA A-383-86, CUB 12132).
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