One of the factors marking the line between employees and independent contractors has been eligibility for employment insurance (EI) coverage. As a result of changes to federal legislation, the line just became somewhat more blurry.

Historically, only employees were eligible for EI coverage. The risk of not having that aspect of the social security net to fall back on was just one of the many risks of being an independent contractor.

In December, the Fairness for the Self-Employed Act (who says government isn’t warm and fuzzy?) was passed. It permits self-employed persons to opt into the EI program to receive special benefits.

The EI coverage for which the self-employed will now be eligible includes maternity, parental, sickness, and compassionate care benefits. They will not be eligible for regular EI wage replacement benefits.

The new eligibility rules are effective as of the beginning of 2010. Due to the way the rules work, however, self-employed persons who opt into the EI program will not be able to collect any benefits payments until January of 2011.

Generally speaking, people who operate their own business are considered to be self-employed. Some occupations will, however, be ineligible (including barbers, hairdressers, taxi drivers, certain other drivers of passenger-carrying vehicles, and certain fishers).

To become eligible for coverage, a self-employed person must enter into an agreement with the Canada Employment Insurance Commission. This can be achieved on-line.

Once a self-employed person enters into the agreement, he or she has 60 days to reconsider. This window of opportunity should not be taken lightly because the implications of opting into the EI program are significant.

Once the self-employed person has opted into the EI program, he or she can opt out but only if benefits payments have not been received. If benefits have been received, the person must continue to pay EI premiums on income for as long as he or she remains self-employed.

If the self-employed person does opt out, he or she must continue to pay EI premiums until the end of that calendar year. No refunds of EI premiums will be made upon opting out.

To qualify to receive these special EI benefits, the self-employed person must have experienced an interruption of earnings due to the birth of a child, the need to provide care to a newborn (or adopted) child, illness, injury, quarantine, or the need to provide care to a gravely ill relative. The self-employed person must also have earned a minimum specified amount of earnings in the year prior to the claim (for 2010 the specified amount is $6,000).

Benefits payments cannot be received until one year after the person opted into the EI program. There is a 2 week waiting period after an application to receive benefits payments is made. EI maternity benefits payments last up to 15 weeks’ duration, parental benefits up to 35 weeks, sickness benefits up to 15 weeks, and compassionate care benefits up to 6 weeks.

It seems me there are several reasons why most independent contractors, or self-employed persons, will take a pass on this new entitlement to opt into the EI program.

First, for many of them, avoiding the burden of payments such as EI premiums is one reason they chose to be self-employed to begin with.

Second, if they do opt in, they won’t be eligible to receive regular EI benefits in the event of a normal, lack-of-work interruption of earnings.

Third, once they have received any benefits at all, they must continue to pay premiums for the entire balance of their self-employed career. (Like the Hotel California, you can check out anytime they like, but you can never leave…)

If you’re a self-employed person, you might think this isn’t much of a bargain. If that’s your view, you’ll stay true to your independent contractor roots and avoid this aspect of the social security net.

Robert Smithson is a partner at Pushor Mitchell LLP in Kelowna practicing exclusively in the area of labour and employment law. For more information about his practice, or to view past “Legal Ease” columns, log onto www.pushormitchell.com. This subject matter is provided for general informational purposes only and is not intended to be relied upon as legal advice.

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