What the law says: This issue is discussed in Sections 43(g) and 46(d) of the Michigan Employment Security Act.

Generally, Section 43(g) of the law prevents a worker from receiving any unemployment benefits based on work for the worker’s child or spouse, and based upon work for the worker’s parent if the worker was under age 18 at the time the work was performed. The work is considered to be performed for one of these relatives if the relative was the sole proprietor of the business (that is, the sole owner of a business that was not incorporated). The work is also considered to be performed for these relatives if the business was a partnership (that is, owned by several people but not a corporation) owned entirely by two or more of the relatives mentioned above.

Generally, Sections 46(g) and (h) of the law limit a worker’s unemployment benefits based on work for a corporation to not more than 7 weeks, if more than 50% of the shares in the corporation are owned by either (1) the worker alone, or (2) the worker’s child or spouse, or (3) the worker in combination with the claimant’s child or spouse, or (4) the worker’s parent(s) if the worker is under age 18 at the time the work was performed. However, to receive even the limited weeks of benefits, both the worker and the employer must inform UIA of the fact that some or all of the interest owners of the corporation are related to the worker, or that the worker owns an interest in the corporation.

Example 1: The worker works for his wife, who is the sole owner of a business that is not incorporated. The worker cannot be paid unemployment benefits based on services performed for his wife’s unincorporated business.

Example 2: The worker works for his parents who are the two partners in a partnership. While working for this partnership the worker turned age 18. Since the partnership was owned entirely by the worker’s parents, he could not draw benefits on that service until he turned age 18. The week after the week in which the worker turned 18, he could start accruing qualifying wages for that partnership.

Example 3: The worker worked for a corporation in which he owned 25% and his wife owned 25%. Because he and his wife, even in combination, did not own more than 50%, the worker’s unemployment benefits were not limited.

Example 4: The worker worked for a corporation in which his daughter owned 60% of the shares and his mother owned 40% of the shares. Because the worker's daughter owned over 50% of the shares, the claimant's benefits would be limited to 7 weeks (but even these limited benefits could only be paid if both the worker and the employer notified UIA of the family relationship with the shareholder(s) of the corporation).

Proof at the Hearing: If the question at the hearing is whether the worker is entitled to any benefits, or to limited benefits, the burden of proof is on the worker to show that the worker is not related to the owners or shareholders of the employer, or that the worker and employer notified the UIA of the relationship, or that the worker was over age 18 at the time the services were performed, if the claimant was the child of the owner(s) or shareholder(s).

For Further Help: The Unemployment Insurance Agency (UIA) Advocacy Program can provide further assistance to employers and unemployed workers in preparing for Administrative Law Judge and Board of Review hearings on this issue. Call 1-800-638-3994.

The information on this sheet is intended to provide a general understanding of the subject matter. It does not have the force of law or regulation.