Unemployment Benefits: Owners and Spouses

March 21, 2020

From the NJ Department of Labor
If you are an officer of a corporation, or you own more than a 5 percent equitable or debt interest in the corporation, and your unemployment claim is based on wages with the corporation, you will not be considered unemployed during your term of office or ownership. Your claim will not be valid and you will not receive benefits.

Equitable Interest means that, as an employee, you own more than 5% of the capital stock of the corporation, either by yourself or with your spouse.

Debt Interest means that, as an employee, you hold debt from the corporation that exceeds 5% of the total corporate debt (except trade payables).

From the NYS Department of Labor
An officer of an ongoing corporation may be considered employed for NYS unemployment insurance purposes and may not be eligible for unemployment insurance benefits, even during a period in which, because of a temporary suspension of operations, he/she performs no services and receives no remuneration. A temporary suspension of corporate operations may result from a lack of business, seasonal or otherwise, an emergency such as fire or flood; or other reasons.

The courts have upheld the denial of benefits because of lack of total unemployment in cases described by the above rule. The basis for the ineligibility is that, since it rests within the power of corporate officers to fix their salaries and the time for their payment, it must be presumed that the salaries so fixed are intended to constitute compensation on an annual basis. In other words, such claimants are presumed to be employed throughout the year and are not eligible for unemployment insurance benefits.

The only exception to the above rule would be in those cases in which corporate operations have permanently ceased because of the impending dissolution of the corporation. However, even in such cases, a corporate officer is considered employed if he/she performs substantial services related to winding up the affairs of the corporation. Similarly, a corporate officer is considered employed if he/she performs substantial services related to the formation and commencement of a corporate enterprise.

NJ Spouses who work for Spouses (definition of NY corporate officer includes family members)

If your business is a corporation where your spouse works for you and it is closed either voluntarily or involuntarily, your spouse may be eligible for unemployment benefits for lack of work.

DISCLOSURE
LLI Advisory Group provides this information as a service to clients and other friends for informational purposes only. It should not be construed or relied on as legal or tax advice.