Insurable employment (EI)

Whether a worker is in insurable employment decides whether the business owes EI premiums on that worker’s pay. A buyer meets the question when reviewing people the seller treats as contractors, because the answer decides whether EI premiums were owed on what the seller paid them.

What the Act and the CRA say

Section 5(1)(a) of the Act covers employment in Canada by one or more employers under any express or implied contract of service or apprenticeship, written or oral. The CRA says insurable employment includes most employment in Canada under a contract of service, and section 5(2) of the Act lists employment that insurable employment does not include. Its employment-status guidance sets out how to decide whether a worker is an employee or self-employed, and whether the work is pensionable, insurable or both.

What to check or ask

• Which workers the seller paid without deducting EI, and why
• Whether any CRA ruling on a worker’s status exists
• Whether an exclusion in the Act or its regulations was relied on

The wider risk is covered in the employee classification risk when buying a business. Pay that counts once a worker is insured is described under insurable earnings.