Williams HR Law LLP

CANADA EMERGENCY WAGE SUBSIDY

April 2, 2020

The government provided more detail on April 1, 2020 about the new Canada Emergency Wage Subsidy being offered to employers in an effort to limit layoffs and keep Canadians employed during this COVID-19 pandemic, as an additional measure to the 10% Temporary Wage Subsidy for small businesses announced earlier.

On March 30, 2020, the Government of Canada announced that the Canada Emergency Wage Subsidy will be available to all employers, regardless of size, that had suffered a 30% reduction in revenues due to COVID-19. Moreover, all non-publicly funded employers will be eligible to apply for the subsidy, including charities and non-profits.

In particular, the government stated that the subsidy would cover 75% of the first $58,700 of wages for each worker employed by an eligible business, which is up to $847 per week, for up to 12 weeks, backdated to March 15.

On April 1, 2020, the government provided further details on the proposed wage subsidy, including that:

  • To be eligible, employers must have experienced a 30% reduction in gross revenue compared to 2019, calculated by comparing revenues from each month with the same month in 2019 (e.g., a 30% decline in March 2020 as compared to March 2019) using the employer’s normal accounting method, and excluding revenues from extraordinary items and amounts on account of capital;
  • Employers will be required to reapply for the wage subsidy each claiming period, as follows:

 

                                Claiming period                Reference period for eligibility

Period 1               March 15 – April 11         March 2020 over March 2019

Period 2               April 12 – May 9                April 2020 over April 2019

Period 3               May 10 – June 6                May 2020 over May 2019

 

  • Employers will be required to attest that they are “doing everything that they can” to provide their employees with the remaining 25% of their wages, to receive the subsidy;
  • Employers will be able to apply online through a portal on the Canada Revenue Agency’s website that will be available “soon”;
  • Funds under the subsidy will be available in mid-May; and
  • There will be “severe consequences” for anyone who abuses this subsidy or uses the money for fraudulent purposes.

If an eligible employer was established after February 2019, revenues would be compared to a “reasonable benchmark” to determine eligibility for the subsidy.

The government estimates that the federal wage subsidy will cost roughly $71 billion, but that it will reduce the cost of the Canada Emergency Response Benefit (“CERB”) to about $24 billion.

The government has stated that anti-abuse rules will be proposed to ensure that employers do not obtain the subsidy inappropriately, and that employees receive the amounts they are owed. The government is considering proposing to create new offenses for individuals, employers, and business administrators who provide false or misleading information to obtain the wage subsidy, or who misuse funds provided through the program.

The government has indicated that it will recall parliament early the week of April 6, 2020 to pass new legislation to deliver the enhanced COVID-19 emergency measures, including this temporary wage subsidy. We anticipate that further details about the subsidy will become available then.

Key Considerations for Employers

As the government has stated, the wage subsidy provides employers with an opportunity to prevent layoffs and to bring employees who have already been laid off back to work. As employers consider whether they can use the wage subsidy to keep their employees at work, or recall those who are laid off, there are a few things that employers should carefully consider in amending their business continuity plans as a result of the wage subsidy.

Where an employer’s workplace is still operating as a result of being declared an essential workplace, and work-from-home arrangements are not feasible for the employer’s business, employers should carefully revisit and revise their social distancing guidelines  for the workplace as necessary before bringing significant numbers of employees back into the workplace. This should include hygiene requirements, and an assessment of whether workstations need to be (and can be) moved to ensure that employees are sufficiently distant from one another. Failure to do so could put the health of employees and the community at risk and expose the employer to liability under Occupational Health and Safety Act and the Emergency Management and Civil Protection Act.

Further, all employers that are considering applying for the wage subsidy should also carefully consider the requirement of “doing everything that they can” to pay the remaining 25% of employees’ wages, if there is any possibility that they may not be able to pay these remaining wages each month. Although the circumstances in which an employer may be found to have failed to have met this “best efforts” requirement are presently unclear, as the government has stated that abuse of the wage subsidy may result in “severe consequences”, it will be important for employers to take that requirement seriously.

Additionally, employers that are eligible for both the Canada Emergency Wage Subsidy and the previously announced 10% Temporary Wage Subsidy should consider how the two benefits will interact. Generally, if employers are receiving benefits from the Temporary Wage Subsidy, those benefits would reduce the amount employers can claim under the Canada Wage Subsidy in the same period.

Finally, employers should be aware that if they do bring employees who have been laid off back to work, and need to lay them off again in the future, the time for which they were originally laid off may still count towards the maximum period allowable for temporary layoffs, depending on the jurisdiction in which the employer is operating. For example, provincially regulated employers in Ontario can generally only place employees on temporary layoff for a maximum of thirteen (13) weeks within a twenty (20) week period, or for up to thirty-five (35) weeks in a fifty-two (52) week period where certain criteria are met. Accordingly, if an employee is brought back to work after being laid off, the first layoff could still be relevant to the maximum allowable period of layoff for up to a year if it becomes necessary to lay the employee off again in the future. Therefore, employers should keep this in mind to ensure that they do not unintentionally lay employees off for longer than is allowable such that the employees’ employment is deemed to have been terminated.

This blog is provided as an information service and summary of workplace legal issues. This information is not intended as legal advice.

Expertise