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Archived 2004 - Digest of Benefit Entitlement Principles


 

1.2.2    Insurable Employment - Archived May 2004

As of 1 January 1997, the insurability rules changed from the concept of insured weeks to insured hours. The principle of the hours system is simple: regardless of whether an employee is full time, part time, seasonal, casual or on and off during the year, the hours that are worked and paid for are accumulated towards eligibility for EI benefits. By using hours instead of weeks to calculate eligibility, the claimant is credited with all their paid work.

This approach applies to overtime, which is calculated hour for hour no matter what the rate of pay. As well, paid leave of any type is insured for the number of hours that would normally be worked in that period, regardless of rate of pay.

In some situations where it is difficult to determine the number of hours worked, the Commission may deem the number of hours worked1. When the insurability of employment is in question, the matter is referred to Revenue Canada for a ruling2. This employment is not included in the calculation of the claim pending the ruling3.

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  1. EIA 55; EIR 10; EIR 11;
  2. EIA 90;
  3. Jurisprudence Index/basic concepts/insurability/decision under appeal/.

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Archived version


5.7.1    Remuneration under a Contract of Employment FOR the Performance of Services -Archived May 2004

Regulation 36(4) Earnings payable under a contract of employment for the performance of services are allocated to the period in which the services were performed.
 
Remuneration under a contract of employment for the performance of services is part of the entire income arising out of any employment1. It includes those moneys that are paid for the services that an employee provides to an employer .
Remuneration for the performance of services includes such payments as wages2 or salary3; fringe benefits4; shift bonuses and shift premiums5; overtime6; commissions; isolation pay or northern allowances; call-back pay; production bonuses7; end-of-season bonuses8; tips or gratuities based on a service charge or flat rate9; and profit-sharing plans10. However, retroactive increases in wages or salary are specifically excluded from consideration as earnings11.

Earnings, payable under a contract of employment for the performance of services, are allocated to the period in which the services were performed12. It is not necessary that these earnings actually be paid before allocation can be made, just that they be payable13. However, due to the peculiarities of commission payments, commissions are allocated to the week in which the services that gave rise to those earnings are performed or to the week in which the transaction that gave rise to the earnings occurred14.

If the employer's pay period does not coincide with the calendar week, then the earnings are allocated based on the number of days for which the claimant is remunerated in the week as a fraction of the pay period15. If paid by the hour, earnings are allocated according to the number of hours worked in each calendar week.

Shifts that start on Saturday and end on Sunday overlap two weeks. As wages are allocated to the period for which the services are performed, they are allocated to two different weeks based on the hours worked in each week.16

It is the terms of the contract of employment that determines whether remuneration is payable specifically for the performance of services, or is payable for periods in which no services are performed, or for both.

Workers may be under an annual contract of employment that covers periods in which services are required by the employer and must be performed, as well as periods in which services are neither required nor performed. If the annual contract provides that the workers are only paid for the period in which they perform services, then allocation of earnings payable under these contracts of employment is only to the period in which services are performed17 and not to any period off work that is not compensated by the employer. This is true even if the claimant receives their remuneration in installments and those installments are paid during the non-working period.

It is not the frequency, method or the timing of the payments that is critical to the determination of whether the payments are for the performance of services; rather it is the reason the claimant is paid.

Wages are generally paid for the number of hours or days an employee works or for the number of units an employee produces; that is, for the services which are actually performed. Wages are allocated to the period in which the work was performed.

Employees who receive a salary generally have entered into an agreement to be paid for a period regardless of the number of hours that those employees are required to work in that period. Salary payable under the terms of a contract of employment for the period of the contract is earnings for the whole period covered by the contract, even if this period includes weeks during which no services are performed. These earnings are generally spread equally over each week of the contractual period despite the fact that the volume of work performed may vary from week to week.

Payments made to employees who are required to be available on standby during off-duty hours may be equated to wages or salary paid for services rendered and these earnings allocated to the period that the standby services occur. In the same way, call back pay18 is the wage or salary payable for being called back to work and usually represents payment for a minimum set number of hours regardless of the number of hours worked. Call back pay is really payable for the hours worked and therefore, is allocated to those hours.

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  1. EIR 35(2); see 5.3.0, "The Entire Income Arising out of Employment";
  2. money paid to an employee for work done usually on an hourly, daily, or piecework basis;
  3. a fixed payment at regular intervals for services, usually other than manual;
  4. see 5.3.2.2, "Fringe Benefits";
  5. see 5.14.2, "Shift Bonuses and Shift Premiums";
  6. for information on overtime compensatory leave granted in lieu of overtime pay, see 5.7.2.3, "Compensatory Leave for Overtime Worked";
  7. see 5.14.1, "Production Bonuses";
  8. see 5.14.4, "End-of-season Bonuses";
  9. see 5.14.7, "Gratuities from Customers";
  10. see 5.15.0, "Profit Sharing Plans";
  11. see 5.5.3, "Retroactive Increases in Wages and Salary";
  12. EIR 36(4);
  13. see 5.6.1.2, "Payable";
  14. EIR 36(6); see 5.8.0, "Commissions";
  15. EIR 36(2);
  16. CUB 9002;
  17. EIR 36(4);
  18. amount of money paid to a worker in the event of an urgent or unexpected recall.

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Archived version


1.3.2    Other Reasons for Not Being Employed in Insurable Employment -  Archived February 2004

There may have been more than one reason why a claimant was not employed in insurable employment for a particular period. It may be that one reason may constitute a valid ground for extension of the qualifying period whereas the other does not. The fact that one of the grounds for extension exists, does suffice. With respect to the four grounds1, the legislation requires that the claimant prove that, if he or she was not employed in insurable employment, it was "for the reason" that one of these four grounds for extension existed2.

It is considered that, where a claimant was unemployed and looking for work at the time when one of these four grounds for extension occurred, the conditions for an extension were met. The reason for this is that the claimant was forced to stop looking for work when the ground arose and thus lost any opportunity to be employed in insurable employment during the period considered.

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  1. see 1.3.1, "Grounds for Extension";
  2. EIA 8(2); Jurisprudence Index/basic concepts/qualifying period/extension/applicability/.

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1.3.4    Incapacity for Work - Archived February 2004

The incapacity for work that qualifies for extension purposes is the same as that which enables a person to qualify for sickness or that resulting from pregnancy. To be more specific, it must be an illness, injury, pregnancy or quarantine that has rendered the claimant incapable of performing the functions not only of his or her regular or usual employment but also any other suitable employment1.

The claimant is required to provide medical substantiation as to the illness suffered and the resulting incapacity2. The same applies in the case of incapacity resulting from pregnancy, injury or quarantine.

Incapacity of a family member that necessitates the claimant's presence at home and thus prevents the claimant from being employed in insurable employment does not suffice. It is the claimant's own incapacity for work or quarantine that must be considered3.

In one case, a teacher was forced, for all practical purposes, to wait until the beginning of the next school year to resume her employment even though she had recovered and her convalescence was over. Her argument that she was unable to resume employment in the middle of the school year due to that previous incapacity which had forced her to take a leave of absence was dismissed4.

An extension may not be granted on the grounds of incapacity if the incapacity arose during a period when the claimant was not employed in insurable employment and was not on the labour market. This was applied in the case of a student whose incapacity forced him to interrupt courses undertaken on his own initiative5. It is a different matter, however, when the incapacity forces someone to miss courses undertaken following referral by the Commission; in this case, the claimant is deemed to be on the labour market at the commencement of the incapacity6.

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  1. EIR 40(4); EIR 41(2); Jurisprudence Index/sickness benefits/meaning of incapable/;
  2. Jurisprudence Index/basic concepts/qualifying period/extension/illness/;
  3. Jurisprudence Index/basic concepts/qualifying period/extension/illness/;
  4. Jurisprudence Index/basic concepts/qualifying period/extension/illness/;
  5. Jurisprudence Index/basic concepts/qualifying period/extension/courses/;
  6. EIA 25.

Archived version


 

1.3.5    Confinement in a Prison or Similar Institution - Archived February 2004

There are three conditions that must be met in order to qualify for an extension on this ground1: (1) the claimant must have been confined in a goal, penitentiary or other similar institution and, (2) but for such confinement, would have been employed in insurable employment2; (3) these two conditions must be proven in such manner as the Commission may direct3.

In one case, a claimant who was on an extended vacation in a country other than Canada was found to be an illegal alien and was advised not to leave that country until his status was cleared up by immigration; this did not amount to confinement in a prison or similar institution4. This also applies where the prohibition to leave the other country is preceded by imprisonment, in which case only the actual period of imprisonment is taken into account for extension purposes5.

It has also been held that a remand by Court Order in a mental institution for the purpose of evaluating one's ability to stand trial as a result of criminal charges does not amount to confinement in a prison or similar institution6.

Absences granted to inmates serving a sentence of imprisonment are a different matter however. They qualify for an extension of the qualifying period provided the conditions imposed on the individual are so restrictive as to likely prevent that person from being employed in insurable employment; this was applied in the case of an inmate authorized to go and reside with his parents on condition that he work on the farm7. Indeed, it appears from the intent of the legislation that the class of individuals confined in a prison or similar institution must include those prisoners who, while not still remaining in physical confinement, are nevertheless still within the class since they are not yet available for employment.

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  1. Jurisprudence Index/basic concepts/qualifying period/extension/inmates/;
  2. see 1.3.2, "Other Reasons for not being Employed in Insurable Employment";
  3. EIA 8(2);
  4. Jurisprudence Index/basic concepts/qualifying period/extension/inmates/;
  5. Jurisprudence Index/basic concepts/qualifying period/extension/inmates/;
  6. CUB 10387; Jurisprudence Index/basic concepts/qualifying period/extension/rationale/;
  7. D. Garland A-1132-84, CUB 9397; Jurisprudence Index/basic concepts/qualifying period/extension/inmates/.

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1.3.6    Referred to a Course or Other Related Employment Activity by an HRDC Designated Authority - Archived February 2004

The period for which the extension applies commences on the day the claimant actually begins the course, or other employment activity. In cases where the referral is made after the course, or other employment activity begins, the period of extension will begin on the day the referral was made. Taking a course, on one's own initiative, i.e. without referral by such authority as the Commission may designate is not a ground for extension1.

The legislative expression "to be in attendance at a course" as well as the interpretation to be given to it where the claimant has failed to attend the course for one or more full calendar weeks, are found in judgments reported in a separate chapter2.

The argument that the course should be considered a designated program because it was approved by the provincial Department of Education and provincial government leaders vigorously encouraged students to attend has been rejected3. Only the Commission may designate the authority that may refer persons to a course, and it is not open to a Board of Referees or Umpire to intervene4.

The purpose of this ground for extension is to disregard the period of time during which a person attends a course following a referral by the HRDC designated authority and thus combine two periods of employment which, separately, would not be sufficient to establish a benefit period. Take the case, for example, of a claimant who was employed in insurable employment for a period of 280 hours which is short of the number required to establish a benefit period, who then registers with an employment center and takes a ten-month course while receiving a training allowance, then finds other insurable employment for a period of 210 hours; by extending the qualifying period beyond the usual 52 weeks, the claimant is able to accumulate 490 hours of insurable employment which may be sufficient to establish a benefit period. In that case, the person was in receipt of a training allowance and did not receive unemployment insurance benefits because there was no benefit period in existence while he or she was attending the course.

Part I benefits are paid to individuals who have acquired the number of insurable hours to establish a benefit period and have been referred to a course or other employment related activity5. These claimants will not be granted an extension, even if only one dollar is paid or payable in the weeks in question6.

Part II benefits are paid to individuals who are not able to establish a benefit period or whose benefit period has expired. They have been referred by an HRDC officer or other HRDC designated authority, to a course of instruction or other employment related activity7. Therefore, in this case the extension may be applicable8.

Taking a course or other employment related activity, following referral by an HRDC designated authority does not constitute a ground for extension if the claimant is not entitled to benefits by reason of a strike or lockout. In these circumstances, how can one adduce evidence that the course rather than the strike or lockout, is what prevented the claimant from being employed in insurable employment during the work stoppage9.

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  1. see 1.3.1, "Grounds for Extension";
  2. see chapter 19, "Training Program"; EIA 25;
  3. Jurisprudence Index/basic concepts/qualifying period/extension/courses/;
  4. see chapter 19, "Training Program"; Jurisprudence Index/basic concepts/qualifying period/extension/courses/;
  5. EIA 7;
  6. Jurisprudence Index/basic concepts/qualifying period/extension/benefits paid/;
  7. Part II of EIA 58;
  8. EIA 8(2)(c).
  9. see 1.3.2, "Other Reasons for not being employed in Insurable Employment."

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1.3.7    Payments for Preventative Withdrawal of Work - Archived February 2004

Unless there exists another ground for which the person was not in insurable employment during the weeks in question, in which case we would apply the provisions mentioned earlier1, for the purposes of extension, we would count any week in which a person was in receipt of payments under a provincial law on the basis of having ceased work for the reason that continuing to work would have entailed danger to the claimant the claimant's unborn child or the child she is breast feeding2.

The claimant, in order to prove such a situation, is required to provide documentation that specifies the exact nature of the payments as well as the period for which these payments were made3.

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  1. see 1.3.2, "Other Reasons for not being Employed in Insurable Employment";
  2. EIA 8(2)(d);
  3. EIA 8(2).

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2.1.3    Proof - Archived February 2004

A claimant's failure to submit the Record of Employment (ROE) will be regarded as failure to prove that an interruption of earnings has occurred1, unless the evidence indicates the employer failed to issue the Record of Employment at the proper time and the claimant has made reasonable efforts to obtain it.

Under a regulatory clause2, the Record of Employment shall be delivered to the insured person not later than five days after the later of

  1. the first day of the interruption of earnings, and
  2. the day on which the employer becomes aware of the interruption of earnings.

An employer may have delivered the Record of Employment to the insured person prior to the end of the seven-day period relative to the interruption of earnings. Although the fact that the lay-off may have turned out to be shorter than seven days in a particular case, this can be taken as evidence that an interruption of earnings has occurred where the employer was reasonably sure at the outset that the lay-off would be for seven or more days.

The purpose of this policy is to prevent the voiding of a claim because there was no interruption of earnings in situations where the employer issued the ROE believing that the person would not return to work for 7 or more days but was called back unexpectedly.

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  1. EIR 14;
  2. EIR 19(3)(a).

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2.2.2    Seven Day Requirement - Archived February 2004

The seven days without work and without earnings are not fulfilled where the lay-off is in fact for less than seven-calendar days1. An exception is made where an employer delivered the Record of Employment, as it was reasonably sure at the outset that the lay-off would be for seven or more days2. Work performed for another employer during the seven-day period does not preclude the occurrence of the interruption of earnings3.

A change from full-time to part-time employment is not enough to meet the seven-day requirement4 unless it results in a gap of seven or more consecutive days without work and without earnings or unless it is effected under a work sharing agreement5. Continuous part-time employment with duties performed every week will preclude the occurrence of the interruption of earnings6, unless of course a gap of seven or more days occurs in the work pattern. Equally, there was no interruption of earnings in the case where the claimant continued to work on the weekends for the same employer, after being laid-off from full-time employment7.

Where the part-time employment is such that the employer only requires and hires the services of a worker for alternate weeks, one full working week followed by one week of no work, it is considered that an interruption of earnings occurs at the end of every week worked.

An interruption of earnings did not occur in the case of a claimant who ceased to be paid wages for the off-season but nevertheless continued to perform certain work and to receive the use of living quarters8 or board9 that amounted to earnings.

The concept of hours relates to very specific areas such as insurability, entitlement conditions, and number of weeks of benefits payable but does not apply to interruption of earnings10. The definition of days is that of seven complete and consecutive days (from 12 a.m. to 11:59 p.m.) with no work and no earnings.

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  1. Jurisprudence Index/interruption of earnings/conditions required/rehired within 7 days/;
  2. see 2.1.3, "Proof";
  3. EIR 14(1);
  4. A-384-78, CUB 5052; J.A. Hartmann A-516-88, CUB 14925; Jurisprudence Index/interruption of earnings/conditions required/reduction in hours/;
  5. EIR 43;
  6. Jurisprudence Index/interruption of earnings/conditions required/7 days without work/;
  7. Jurisprudence Index/interruption of earnings/conditions required/reduction in hours/;
  8. Jurisprudence Index/interruption of earnings/conditions required/non-monetary income/;
  9. A-963-88, CUB 15703; H. EnnsA-559-89, CUB 17293;
  10. EIR 14.

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5.16.2    Working in a Corporation in which Shares are Owned - Archived February 2004

Income received from mere ownership of shares in a corporation is not earnings for benefit purposes if it does not arise out of employment, that is, if the claimant takes no part in the operation of the corporation.1 However, a claimant who owns shares in a corporation may also work for that corporation as an employee under a contract of service or may be engaged in operating that corporation as a business on his or her own account2 or in a co-adventure. Some claimants may be paid employees as well as perform some additional functions for which wages or salaries are not paid.

It must be ascertained when a claimant is receiving any income from a corporation, whether that income is from employment under an employer-employee relationship, from the claimant's self-employment activities in operating a business, or from an investment in that business.

Income from corporations normally is in the nature of wages or salaries, if the claimant is working for the corporation as an employee, and dividends, if the claimant owns shares in that corporation. Dividends are paid to shareholders to provide return on the shareholder's investment in the corporation. Directors of corporations decide if and when dividends are declared in a particular year. Additionally, there may be an increase in the value of the claimant's holdings in the corporation if the net income earned in a period is retained by the corporation and not distributed to shareholders as dividends. The claimant's role or roles in the corporation determine what type of income he or she receives.

Wages and salary arising out of contracts of employment with corporations are earnings for benefit purposes as they arise out of employment. The fact that shareholders may be paid wages or salaries to manage corporations, or for some reason the shareholders' employment is not insurable, does not automatically mean that he or she is not an employee.

For shareholders, who are solely employees and paid for all the work that they perform for the corporation, income from that employment under a contract of service is earnings for benefit purposes.3 For these shareholders any other income from the corporation resulting from ownership, such as, dividends and the claimants' share of the corporate net income for that period is not earnings as it does not arise out of any self-employment. The employee is compensated for all work performed as an employee through the wage or salary paid. Since the shareholder is not engaged in self-employment in operating the corporation, there are no earnings from self-employment. Any income from the shareholder's holdings in the corporation is considered income from an investment.

The situation is not the same when it is determined that shareholders are engaged in operating corporations as a business.4 While engaged in operating corporations as a business, shareholders may receive wages or salary from the corporation for only a portion of the hours worked or they may not be compensated as an employee for the work at all. Of course, payment for any work performed under a contract of service is earnings from employment. Whether earnings arise from the work performed without remuneration in operating the corporation must be determined.

Although, there is no provision in the legislation to attribute a value to work performed without wages or salary5, any income arising out of self-employment is earnings for benefit purposes6.

Being engaged in the operation of a business, which includes operating a corporation, falls into the category of being self-employed7. Any income arising from that self-employment is earnings for benefit purposes.

Claimants who are shareholders engaged in operating a business as a corporation have argued that due to the corporation's status as a separate legal entity, the net income of the corporation belongs to the corporation and cannot be considered earnings of the claimant. However, claimants who are self-employed in operating a business on their own account as a sole proprietor, or in partnership, or co-adventure have their share of the net income allocated as earnings. If the claimants' share of the net income of a corporation8 was not considered as earnings, it would give unfair advantage to those who choose to operate their business through the corporate form of business structure over those who do so in a partnership or as a sole proprietorship.9

To remove inequities in treatment due to the choice of the structure of a business, the corporate veil is pierced10 in order to consider earnings arising from self-employment activities of claimants who are engaged in the operation of a corporation. The legal status of the operation or business in which the self-employed person works is irrelevant.11

When the corporate veil is pierced, the claimant's engagement in the operation of the corporation is considered self-employment and any income from that self-employment is earnings. The amount of earnings arising from that self-employment must be determined.

If there has been a determination that the claimant is self-employed, actually receiving the income is unnecessary, as the mere right to receive such income is sufficient12. The amount of income to be allocated depends on whether the claimant is self-employed in farming or is self-employed in employment other than farming.

For those persons self-employed in farming, the income from self-employment is fifteen per cent of that farmer's gross income13 from farming transactions14 and any subsidies the farmer receives under any federal or provincial program15. Through the piercing of the corporate veil, the farming transactions and subsidies of the corporation become the transactions and the subsidies of the claimant. The income from being engaged in self-employment in farming through the vehicle of a corporation is fifteen percent of the claimant's share of any farming transactions made by the corporation and fifteen percent of the claimant's share of any subsidies received by the corporation.16

For those persons self-employed in employment other than farming, the income from self-employment is the amount remaining after deducting the operating expenses17, other than capital expenditures18 from the gross income from that employment19. Since the claimant only has a right to his or her share of the net income of a corporation, it is this amount that is determined as earnings for benefit purposes20 when the corporate veil is pierced. The claimant's share of the corporate net income has lost its character of investment income and has become income arising from self-employment.

If there is a finding that the claimant is self-employed, the relative amount of time spent on the operation of the business is irrelevant to the amount of earnings to be determined.21 A claimant who is self-employed has his or her income from that self-employment determined as earnings whether he or she is working a small number of hours or a substantial number of hours. The amount of time spent is one of the six circumstances for determining whether a claimant who is self-employed or operating a business is doing so to a minor extent22 or not. However, once there has been a determination of self-employment, the amount of time spent has no relevance to the amount of earnings to be allocated.

Once it has been determined that the claimant is engaged in self-employment, all income from that self-employment is earnings. There is no provision to attribute a portion of self-employed income as arising from the investment that the claimant has made in the business.23 This is true whether the claimant is self-employed and operating his or her business as a sole proprietorship, partnership or corporation.

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  1. the person's unemployed status must still be determined; see 4.6.3, "Determination of engagement or investment" and see 5.3.1.6, "Return on Investment or Return on Capital";
  2. incorporation legislation may allow a person to establish a corporation with only one shareholder; D. Laforest A-296-86, CUB 12019;
  3. determination must be made as to whether the shareholder is employed under a contract of service or is engaged in the operation of a business, see 4.6.3, "Determination of engagement or investment";
  4. determination must be made as to whether the shareholder is engaged in the operation of a business, for information on how this is determined, see 4.6.0, "Independent workers working a full working week";
  5. EIR 35(10)(d) does not allow a value to be attributed for work performed without remuneration;
  6. EIR 35(1) and EIR 35(2);
  7. D. Caron Bernier A-136-96, CUB 31814;
  8. see 5.16.3, "The Claimant's Share of the Proceeds from Self-Employment";
  9. D. Caron Bernier A-136-96, CUB 31814; D. Laforest A-296-86, CUB 12019;
  10. li Dictionary;< Law injustice–Black?s an remedy to or wrong-doing, fraud, of cases in only used is It corporation. the run own who individuals corporation actions attribute and structure corporate beyond look Courts allows veil? piercing
  11. this is the first "constant" mentioned in D. Caron Bernier A-136-96, CUB 31814; the principle is also found in D. Laforest A-296-86, CUB 12019;
  12. this is the third "constant" mentioned in D. Caron Bernier A-136-96, CUB 31814;
  13. see 5.16.3, "The Claimant's Share of the Proceeds from Self-Employment";
  14. EIR 35(10)(b)(i); see 5.16.4.1, "Farming Transactions";
  15. EIR 35(10)(b)(ii); see 5.16.4.2, "Federal or Provincial Farming Subsidies";
  16. D. Caron Bernier A-136-96, CUB 31814;
  17. EIR 35(6)(c); see 5.16.5.1, "Deductions for Operating Expenses";
  18. EIR 35(6)(c); see 5.16.5.1, "Deductions for Operating Expenses";
  19. see 5.16.3, "The Claimant's Share of the Proceeds from Self-Employment";
  20. P. Drouin CUB 33274, A-348-96; see 5.16.5, "Earnings from Self-Employment in Employment Other than Farming.";
  21. this is the second "constant" mentioned in D. Caron Bernier A-136-96, CUB 31814;
  22. EIR 30(2);
  23. EIR 35(10)(b) and (c); Jurisprudence Index/earnings/farming/definition/.

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