Yes. Under IRC Section 318 constructive ownership rules, an individual is treated as owning stock or equity held by their spouse, parents, children, and grandchildren. This means a family member on payroll with no direct ownership stake may still be ineligible for tax-free CHOICE if their family members collectively own more than 2%.
For example, if you own 100% of an S Corp and your spouse is a W-2 employee, your spouse cannot receive tax-free CHOICE benefits because they're constructively treated as owning your shares.