Tax Court of Canada


Public Law

Social programs

Employment insurance

Owners of shares in company not in arm’s length position to company so not in insurable employment

M was chartered professional accountant; D was chartered professional accountant and auditor; and L was tax expert in training. Appellants M, D, and L worked for ARCI. M bought 51 per cent of shares in ARCI and L the remaining 49 per cent. D was brought in and M, D, and L each owned one-third of shares. During period in dispute, neither appellants nor ARCI provided any services to other accounting firms. Minister determined that M, D, and L were in insurable employment. M, D, and L appealed. Appeals allowed. Relationship that existed between appellants and ARCI was “employer-employee” relationship, so there was employment contract between appellants and ARCI. Appellants and ARCI were not dealing at arm’s length. Section 5(3)(b) of Employment Insurance Act not applicable as it dealt with persons who were related. To determine whether unrelated employer and employee not dealing at arm’s length, court must analyze all the circumstances of employment to determine whether they will be considered not to deal at arm’s length. Salary was well below what appellants could have obtained if they had worked in an accounting firm. Appellants’ salary fixed regardless of hours worked. Appellants could choose length of vacations and were paid for them. Appellants could refuse clients or to work for client. M and L were guarantors of ARCI’s line of credit. Appellants were not in arm’s length position to company so not insurable employment.

Martel c. M.R.N. (2017), 2017 CarswellNat 7587, 2017 CCI 238, Johanne D’Auray J. (T.C.C. [Employment Insurance]).


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