CRA Abuse of employess working in a family business

Family businesses confront touchy EI rulesThe Canada Revenue Agency disputes that a third party is much help navigating the rules

By Bill Steinburg – Business Edge
Published: 10/13/2005 – Vol. 5, No. 35

Note from Dan White. Grants specializes in getting money back on behalf of abused Canadians. You can do it yourself if you are good at these types of things.

 

The fact that a business can survive solely on being in the business of getting money back from CRA shows just the tip of the iceberg when it comes to unfair and unreasonable positioning of CRA.

 

Like many employees in a Canadian family-owned business, Joseph Pariselli has paid employment insurance premiums for many years.

However, the Concord, Ont. construction manager recently learned he would not be eligible to collect those employment benefits if he lost his job with his older brothers’ landscaping company, Par-Bro Design/Build Ltd.

Pariselli is among thousands of people working for relatives in a family business whose eligibility for EI might be questioned by government. He applied for employment insurance several years ago, when Par-Bro closed during the off-season, and was initially turned down. He eventually did receive benefits but “had to jump through hoops” to get them, according to Par-Bro controller Vince Cappelli, who filled out a mountain of paperwork over many months.

The problem stems from the roles relatives often play in family-owned businesses. “In the legislation it says that if you work for a family member, you are automatically deemed excluded unless you can show that you work under the same working conditions as any other workers,” says Francine Blouin Wilkinson, director of benefit entitlement and coverage for the federal department Services Canada.

Employment Insurance Act states that if a family employee is paid about the same, works roughly the same hours and has the same status within the company as other workers with similar jobs, EI premiums should be deducted and the person is eligible to claim EI benefits.

Pariselli’s situation, as the brother of Par-Bro owners, raised questions as to whether his role in the company was, in fact, the same as other employees. These are questions Darren Earn, president of Winnipeg-based Grants International Inc., deals with on a daily basis. The company helps employers such as Par-Bro and employees such as Pariselli clarify their rights with the government.

“There are roughly half-a-million family members right now deducting and paying close to $2,000 a year (to EI),” says Earn. “That’s $1 billion a year in over-collected EI for people who may or may not be eligible to collect it.

Earn says many companies and affected employees truly want to pay the premiums and receive the protection of EI, so they never investigate their eligibility. “They don’t know until they actually make a claim for … benefits,” he says. “They find out the hard way.”

Earn started Grants International in 1991 to help companies access government grants.

The services eventually expanded to include the review of records for possible payroll tax overpayments and the issue of EI premiums came to light.

Now, Grants International calls itself “the EI refund specialists.”

Hearing a Grants International commercial on the radio, Cappelli called to find out more about Pariselli’s eligibility – an exemption means as much to the company as it does the employee, since both pay premiums.

Earn says the same sort of scenario happens in family businesses across the country.

“These are all very, very subjective areas where the government has to make a decision on whether or not to let you collect,” he says.

“If they decide not to let you collect, you remain excluded. It isn’t the other way around: ‘Oh, you paid your premiums all these years, so you can collect.’ It’s the opposite: ‘Oh, you’ve paid your premiums all these years, but you’ve been ineligible all this time. You can’t make a claim for benefits.’ You’ve got to prove to them that you should get them.”

Complicating the issue further, according to Earn, is that a ruling made today has little bearing on the future.

“That letter that says you can collect EI means nothing because in three years, the reason why you would be collecting employment insurance is that something must have happened to the family business,” Earn explains.

“When things happen to the family business, you’ll see on a regular basis, other employees will be laid off over time and the last standing members are the family members. They do things that are so not substantially similar at the end when times are tough, and they become immediately ineligible for benefits as soon as those circumstances change.”

Blouin Wilkinson says such situations can change a person’s eligibility, but stressed that the system is fair, adding that anyone who wants to confirm their EI status can contact the Canada Revenue Agency (CRA), which collects premiums and rules on eligibility for Services Canada.

“Most people who work under regular conditions will be eligible to pay in, and they do pay in and they want to be paying in,” she says. “Most people want to be covered because you want to be paid your EI. That’s your insurance and most people want to be covered by that insurance because if they get laid off … then they can collect EI. All they have to do is have CRA rule on it and CRA will give them the answer.”

The reality, according to Earn, is that trying to secure an exemption from paying premiums is more complicated if you have already been making contributions. Once employees are in the system, he suggests the government wants to keep them there.

“Keep in mind, (the CRA) is collecting your money at this point,” he says. “They are trying to figure out all the reasons why you should pay. They are trying to make you look substantially similar (to others) in your contract of employment at that moment because if they can, that means you have to continue to pay and you’re not making a claim for benefits.

“When you do (make a claim), they are doing the exact opposite: Protecting the system, figuring out all the reasons why you are not eligible. That’s their job and I don’t blame them for that. If their job was to give out refunds, everything would be really easy.”

Wilkinson admits that some people find it difficult to deal with the government. “Every day, we are trying to simplify that – though I know we have a long way to go.?

She says people do not need Grants International working for them to determine their EI eligibility.

“The way that the website (www.grantsinternational.ca) of Grants is set up, it gives the impression that people should not be paying and that there are big dollars out there to be refunded. And in some cases it may be true because the person has always remitted an EI premium and never really asked whether they should be or not.

“But if they do ask, they will get the premiums back,” Wilkinson says. “I would be surprised that the majority of people who thought they worked as an employee and paid premiums have found that they should not have been paying all those years.”

That said, Grants International has obviously been busy enough securing exemptions and refunds that the CRA has taken notice.

“The CRA in 2003 has checked whether Grants International’s activities didn’t contravene any laws,” she says. “And they found, no, what they are doing is simply assisting individuals in the process that they could have done themselves, but they are just assisting them.”

(Bill Steinburg can be reached at at steinburg@businessedge.ca)


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