11 January 2002 External T.I. 2001-0115545 - UNPAID LEAVE UNION OFFICIAL EMPLOYMENT

Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the CRA.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'ARC.

Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the Department.

Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle du ministère.

Principal Issues:

Would a person on unpaid leave that is an official with a union (being paid by the union and participating in the union's pension) be considered an employee of his former employer where he has a right, under the collective agreement, to re-employment at what his current seniority would be had he continued to be with the employer?

Position: No.

Reasons:

There is no evidence of an employment relationship while the employee is on leave.

XXXXXXXXXX 2001-011554
M. P. Sarazin, CA
January 11, 2002

Dear XXXXXXXXXX:

Re: Eligible Service for Retiring Allowance

This is in reply to your letter of December 18, 2001, requesting an opinion as to whether, in determining his eligible service for purposes of paragraph 60(j.1) of the Income Tax Act (the "Act"), an individual would be considered employed by his employer when he was on approved leave from his employer for ten years as a result of being elected or appointed an official for his union.

Comments

In your letter you have outlined what is an actual fact situation related to a proposed transaction. As noted in Information Circular 70-6R4 entitled Advance Income Tax Rulings, this directorate can only provide an opinion concerning the tax consequences associated with specific proposed transactions in the form of an advance income tax ruling. We note that Information Circulars and Interpretation Bulletins are available at your local tax services office or on the internet at www.ccra-adrc.gc.ca/formspubs/menu-e.html. Consequently, we can only provide you with the following general comments.

A retiring allowance is an amount received by an individual upon or after retirement from an office or employment in recognition of one's long service, or in respect of a loss of office or employment. The Canada Customs and Revenue Agency's general views regarding retiring allowances are found in Interpretation Bulletin IT-337R3, entitled Retiring Allowances.

Paragraphs 12 and 13 of IT-337R3 deal with the determination of the amount that may be transferred to a registered pension plan or a registered retirement savings plan under paragraph 60(j.1) of the Act. Clearly, the amount determined under clause 60(j.1)(ii)(A) will depend on the number of years that the employee was employed by the employer.

The determination of whether an individual is employed by an employer at any point in time is a question of fact. To make this determination we would have to review all of the facts. However, where an individual is elected or appointed an official with his union and the individual ceases to be paid by an employer while on unpaid leave from the employer and ceases to participate in the employer's registered pension plan, we would not consider the individual to be employed by the employer while that individual is an elected or appointed official with the union. We are of the view that the existence of a right to re-employment on the basis of a person's accumulated seniority at the time that he or she ceases to be a union official under a collective agreement would not, in and by itself, create an employment relationship for purposes of the Act.

We trust these comments will be of assistance.

Yours truly,

Roberta Albert, CA
for Director
Financial Industries Division
Income Tax Rulings Directorate