THE WORKPLACE SAFETY AND INSURANCE BOARD
APPEALS RESOLUTION OFFICER DECISION
DECISION NUMBER: 20090016
OBJECTION BY: Employer
WORKER: Not Participating
REPRESENTATIVES: Employer
FIRM NUMBER: XXXXXX
ACCOUNT NUMBER: XXXXXXX
HEARING DATE: N/A
ISSUE
The employer representative objects to the decision of the Workplace Safety and Insurance Board (“WSIB”) that amounts paid to the employer’s spouse (whom I will refer to in this decision as “KD”) in 2006 and 2007 are insurable.
HOW THE ISSUE ARISES
The employer registered with the WSIB in 1997, under the ownership and trade name listed above.
A Notice of Audit Visit was sent on September 24, 2008, advising that an audit would be performed starting on October 15, 2008 relating to payrolls for 2006 and 2007. In her review, the auditor confirmed that the employer is a sole proprietorship, having been given a copy of a Master Business Licence that refers to it as such. In addition, the auditor noted that the firm had not reported amounts paid to KD, “who performs bookkeeping and receptionist duties… was not on payroll and was not issued a T4.” The amounts paid to KD were noted in a T2124 (Statement of Business Activities) filed by her husband with the Canada Revenue Agency (“CRA”). The auditor found that KD was a worker, not a partner, and therefore that amounts paid to her were insurable. The auditor adjusted the firm’s insurable earnings accordingly for 2006 and 2007, and advised of her decision in a letter dated March 4, 2009.
KD completed an objection form on March 31, 2009, the auditor denied the objection, and the matter was referred to the Appeals Branch. After the referral, the employer representative made written submissions to the auditor, the auditor responded, and these additional pieces of correspondence have been added to the record for the appeal.
RESOLUTION METHOD AND PROCESS
The employer representative has completed a 60-Day Decision Option Form, indicating her desire to have an Appeals Resolution Officer render a decision within 60 days based on information already on file and without further review processes.
AUTHORITY REFERENCES
Operational Policy Manual document 12-01-01 (“Who is an Employer?”).
Operational Policy Manual document 14-02-08 (“Determining Insurable Earnings”).
ASSESSMENT OF EVIDENCE AND SUBMISSIONS
Subsection 2(1) of the Workplace Safety and Insurance Act (“the Act”) defines “earnings” or “wages,” in part, as including “any remuneration capable of being estimated in terms of money.” Therefore, amounts paid to workers of a compulsorily covered employer are insurable. Operational Policy Manual (“OPM”) document 14-02-08 contains a non‑exhaustive list of examples of things that are insurable, as well as an exhaustive list of things that are not insurable. Forms of remuneration that are not on the non-insurable list are considered insurable. There is nothing on the list of non-insurable items that relates to the situation under review in this objection.
The question that lies at the heart of the appeal is whether KD is a worker in the first place, because if she is not then she is not covered under the Act and nothing that is paid to her is insurable.
In her submissions, the employer representative argues that KD is not a worker, because she has no employment contract, she does not receive a salary, amounts paid to her are not subject to source deductions, she does not receive a T4, and she does not receive a vacation allowance or other employment benefits. Further, the representative states, KD is not guaranteed a drawing from the business, but rather “may perform work for the business and not receive any drawing if the business is not profitable. Her drawing is directly related to the profitability of the business and not to any form of salary or wages.” In addition, KD “is personally at risk for the liabilities of the business.” On the basis of all of these considerations, the employer representative submits that KD should be treated as a partner, in which case amounts paid to her are not insurable.
Having reviewed the record, I find the information provided is not sufficient to demonstrate that KD is a partner. While KD’s spouse has filed a T2124 with the CRA, indicating that he is in partnership with KD and splits the net income or loss with her on a 60%/40% basis, other information on file runs counter to the assertion that KD is a partner.
The firm has always reported to the WSIB as a sole proprietorship of KD’s spouse, and has never expressed that that is inaccurate.
The Master Business Licence indicates that the business is a sole proprietorship.
In her own objection form, KD has put herself forward as a person who does work and shares income, with her husband (and possibly her son) owning and operating the business. On the form, she stated, “My husband is the owner of the company and I just help out in the office which is based out of our home,” and, “This business is owned and operated by my husband and son who is on the payroll. We own a small company.” The use of “we” in that last sentence is inconsistent with the rest of what I have quoted, so it is possible that she meant the three family members are active in the business in some capacity and are affected by its success or failure.
It would be helpful to be able to clarify what KD meant in her objection form, and to see if there is an explanation for the other things that appear to be inconsistent with an assertion of partnership. However, the choice of the 60-day expedited decision option removes the opportunity for me to probe further.
In addition, the record does not demonstrate whether the factual circumstances exist that would indicate the existence of a partnership. OPM document 12-01-01 says a partnership “exists when two or more persons or employers carry on business together. A partnership is not a legal entity separate from its partners. The partnership is the person in law that is responsible for the liabilities of the partnership.” It has not been shown that KD “carries on” business with her spouse in the manner of a partner. In fact, as I have said, she has stated that is it her spouse and son who own and operate the business. Further, there is no evidence as to whether any of the liabilities of the business are the responsibility of KD. The only evidence available to me is that the WSIB account, and its liabilities, belong to KD’s spouse, since prior to this objection no one else has ever been identified to the WSIB as being a partner in the business.
Another relevant consideration in the analysis of whether KD is a partner is the Ontario Partnerships Act. Section 2 of the Partnerships Act defines a partnership as “the relation that subsists between persons carrying on a business in common with a view to profit,” but excludes enterprises that are incorporated. Section 3 of the Partnerships Act sets out “rules for determining existence of a partnership,” but the information on file in the objector’s case is not sufficient to establish whether the rules have been satisfied. In addition, section 24 of the Partnerships Act provides, in part, that, “subject to any agreement express or implied between the partners … all partners are entitled to share equally in the capital and profits of the business, and must contribute equally toward the losses, whether of capital or otherwise, sustained by the firm.” It has not been asserted, much less proven, that KD has any risk of loss if the business were to be unsuccessful, or that there exists any agreement to the contrary. It appears that the money KD receives depends on whether the firm is profitable, but there is nothing to indicate that if it suffers a loss she is legally bound to cover any part of it.
It may very well be that, as a spouse, KD’s economic fate is tied up in whether the business operated by her husband does well. However, that could be true in any small business, and does not make the spouse of the person who operates the business a partner in their own right, either in the workplace safety insurance scheme or under the Partnerships Act.
Finally, subsection 2(3) of the Business Names Act says, “No persons associated in partnership shall carry on business or identify themselves to the public unless the firm name of the partnership is registered by all of the partners.” There is no evidence that this has been done in the case under review, which further indicates the absence of a partnership and the existence of a sole proprietorship of KD’s husband.
In light of the above, based on the little information that is available on file I am not able to find that KD is a partner in the business.
Whether or not the manner in which KD’s spouse reported to the CRA was technically correct, and whether the situation meets the CRA’s criteria for income splitting, are not things I can comment or rule on. My jurisdiction relates to whether, for WSIB purposes, KD was in an employment relationship with the business during 2006 and 2007. Since KD performs work in the business and receives payment for it (albeit in amounts that might vary depending on how the business is doing and/or depending on what amount produces the least tax liability), and since the evidence regarding the assertion of a partnership is contradictory and not very comprehensive, I find that she is a worker in receipt of remuneration, not a partner. In accordance with OPM document 14-02-08, KD’s remuneration as a worker is insurable. Therefore, it was correct for the auditor to have added it in for the calculation of premiums for the audited years.
CONCLUSION
KD performed work in the business and was remunerated, and the evidence does not support that she was a partner during 2006 and 2007. Therefore, amounts paid to her by the company during those years were insurable for workplace safety and insurance purposes.
The objection regarding the insurability of amounts paid to KD during 2006 and 2007 is, therefore, denied.
DATED August 12, 2009.
B. Patlik Appeals Resolution Officer Appeals Branch