At Arm’s Length

Guest contribution by Adam Soliman. First posted at The Fisheries Law Centre.

On June 11 Mark Eyking, the Member of Parliament for Sydney-Victoria in Cape Breton, presented the problem of hundreds of fishermen being cut off from their employment insurance (EI) in the House of Commons. Indeed, over 180 people living in communities north of Cape Smokey — such as Bay St. Lawrence — were denied their insurance claims after a Service Canada investigation into claims between 2007 to 2010.

The investigation concluded that claimants were working for family members, which no longer satisfies the arm’s-length doctrine. Moreover, 80 people received letters saying they owe the government $5000 to $80,000 in overpayments from EI. These EI repayments can cause families to go bankrupt, which will be highly devastating for Cape Breton communities that consist of only a couple of hundred people- many of whom are, of course, fishermen. At the congressional meeting, Eyking pleaded Crystal MacKinnon’s case, a widow with two children who has worked on her uncle’s fishing boat for 20 years. This past winter, she was rejected from insurance benefits and has been asked to pay back $45,000 of overpayment from previous years. Her appeals for claims were also denied.

Bay St Lawrence, Cape Breton. Photo by Gary Shotel.

Bay St Lawrence. Photo by Gary Schotel.

The arm’s length rule is a legal concept which is used in several different areas of law. The way it affects Canadian fishermen, however, is through the Employment Insurance Act. Under this act, which in turn references the Income Tax Act for the definition of “arm’s length”, any employment relationship which does not meet this requirement is “excepted employment”, meaning that there is no qualification for employment insurance. Canadian jurisprudence has been moving from whether the relationship was at an “arm’s length” to the question of whether the specific employment itself was at an arm’s length.

Is it not justifiable for people living in small remote communities to work for relatives in order to have employment and to keep the local economy afloat?

What is more, dozens of people in Cape Breton have been cut off from EI, and 80 appeals in the Bay of St. Lawrence have been rejected by the Canada Revenue Agency, because these seasonal workers worked for relatives. It is respectable that the agency follows the arm’s length doctrine to ensure that working conditions are fair for all workers at a place of employment. However, the arm’s length relationship only implies that hours and working conditions offered by the employer to all employees be similar to conditions offered in an open labour market.

Meat Cove. Photo by Susanna Fuller.

Meat Cove. Photo by Susanna Fuller.

The government has taken deductions from boat captains and the fishing crews, but are now refusing to pay out their insurance benefits. Rather than completely cut off EI payments which fishermen depend on, the government can enforce checks and balances to ensure labour conditions are fair across the board, and that income taxes are paid. This would mitigate the financial burden placed on seasonal workers and the negative economic impact in small fishing communities across Atlantic Canada.

In practice, the arm’s length labour requirement means that the employment will be compared to what is generally available on the market for similar positions, or through the use of disinterested third parties where available. This evolution of the law, however, may be difficult to apply to small fishing communities. If these small communities are largely related familial affairs, then the “market” is ostensibly the same. Conversely, it seems improper that these smaller fishing ventures should be compared to large commercial fishing ventures.

Small-scale fisheries have continuously suffered from ill policies that are not geared towards their special circumstances, and the arm’s length doctrine is another example where laws and policies should be changed.

Adam Soliman is the director and founder of The Fisheries Law Centre. He is an agricultural economist and legal researcher focused on legal and economic issues in Fisheries & Seafood sectors.  He holds graduate degrees in Agricultural Economics (BSc & MSc), Law (JD), and Agriculture and Food Law (LLM).

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