Is the Union Local required to pay Employer Health Tax on honorariums paid to union representatives?
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Interpretation Letter 10-0156, June 2010
We refer to your letter of XXXX, regarding whether XXXX (the union) is required to pay Employer Health Tax (EHT) on honorariums paid by the union to elected workplace union representatives.
Employers are required to pay EHT on the remuneration paid to employees who report for work at a permanent establishment (PE) of the employer in Ontario, and to employees who do not report for work at a PE of the employer, but who are paid from or through a PE of the employer in Ontario.
Under section 1 of the EHT Act, "employee" includes an individual who holds office with an employer and receives remuneration in respect of the performance of the duties of the office. For EHT purposes, "remuneration" includes all payments, benefits and allowances received or deemed to be received by an individual by reason of section 5, 6 or 7 of the Income Tax Act (Canada) (ITA).
From the information provided, we understand that:
- The union has an office in XXXXXX, Ontario and XXXXXX, XXXXXX.
- The union has approximately XXXXXX union members, all of whom are employees of XXXXXX different corporations in every part of Canada.
- Union members elect fellow employees from their own workplaces to become "in the workplace" union representatives. These representatives continue to perform their normal work duties for their corporation employer.
- The elected union workplace representatives are not hired by the union but are in place only after election by their own workplace peers.
- The union does not pay these elected workplace union representatives a salary.
- The union cannot fire the elected representatives who may be recalled only by membership vote or for violations of the Union Constitution or illegal activities.
- From time to time throughout the year, elected workplace union representatives may utilize personal time on an "ad hoc" basis over and above their regular work hours at their corporate employer to take care of paperwork or otherwise assisting union members with issues related to their employment.
- Union workplace representatives may also be invited to voluntarily attend various meetings or training, some of which may occur at times outside of their regular corporate work hours.
- In recognition of personal time sacrifices made, they may be awarded an honorarium of $XX per hour flat rate of compensation up to a maximum of 8 hours per day, for days in which personal time was utilized.
Based on the information provided, it is our opinion that the individuals elected as representatives of the union are holding office from the union and therefore fall within the definition of employee for EHT purposes. The amounts received by the union representatives by virtue of holding the office are taxable under paragraph 6(1)(c) of the ITA and therefore fall within the definition of remuneration for EHT purposes.
The union is required to pay EHT on the honorariums that it pays to the union representatives who report for work at the XXXXXX, Ontario office. The union is also required to pay EHT on the honorariums paid to the representatives who do not report for work at any PE of the union if the individuals are paid from or through the Ontario PE.
