Hiring a family member or a related person

Under the Employment Insurance Act, employees who are related to their employer (individual or corporation) might not be in an insurable employment. This means that they would not have EI premiums deducted from their pay and would not be able to get EI benefits.

There are several ways employees are considered to be related to the employer. They can be related:

• by marriage (including common-law relationship);
• by adoption; or
• by blood (for example, parents, brothers, sisters, or children);
• to a corporation if they are related to a person or group of persons that control the corporation.

Note
This does not mean the employment of a family member is automatically not insurable. For more information, see Meaning of "not dealing at arm's length" for purposes of the Employment Insurance Act (EIA).

An employee that is related to the employer can be in an insurable employment if it is reasonable to conclude that the employer would have hired a non-related person under a similar agreement (contract of employment).

You have to look at all the circumstances of the employment to see if someone else would have been hired under a similar contract of employment. The circumstances that are looked at include:

• remuneration;
• terms and conditions of the employment, such as the hours of work;
• length or duration of the employment;
• nature of the work being done by the employee; and
• importance of the work being done.

If you are still not sure if you should deduct EI premiums, you can request a ruling from CRA up until June 30 of the year following the year in which the employment occurred.

If you have already deducted EI premiums and you think you shouldn't have, you can request a refund of the EI premiums. Normally this requires that we complete a ruling. You must make your request for a refund no later than three years after the end of the year in question.

Example
You deducted EI premiums in 2009 and the employment was not insurable, you could get the premiums refunded up until the end of 2012.

Forms and publications

• IT419R, Meaning of Arms Length (Dealing with related person)

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