On April 8, 2020, the Government of Canada announced changes to the eligibility criteria for the Canada Emergency Wage Subsidy (“CEWS”), further details on and changes to how reductions in revenue may be calculated for the purposes of determining eligibility, and details on the penalties for those that abuse the CEWS, as well as further information about the Business Credit Availability Program (“BCAP”).
Employers should note that the wage subsidy legislation is still in the drafting stages, and that the government is still in the process of negotiating details with the opposition parties. As such, there could be additional changes to the CEWS before it becomes available, and further details will likely be revealed as the legislation is discussed and once it is passed.
Changes to the CEWS Eligibility Criteria
The government has announced that employers will only need to show a 15% decline in revenue in March 2020 to qualify for the CEWS for wages they paid to employees between March 15 and March 31, 2020. The government stated that this change was made to help more employers and to recognize that the economic consequences of COVID-19 were still evolving in March 2020, so the actual revenue reduction may be lower for some employers in March as the impacts of the pandemic were not yet felt.
Employers will still be required to show a 30% reduction in revenue to be eligible for the CEWS in respect of wages that they pay/paid to employees in April and May 2020.
How to Calculate Revenue to Determine CEWS Eligibility
Employers will have the option of comparing their current revenue with two possible benchmarks to determine if they have experienced a large enough revenue reduction to receive the CEWS in any given month. In addition to comparing current revenue with revenue in the same month last year, employers will have the option to compare their revenue in a given month with their average monthly revenue across both January and February 2020 to demonstrate the required drop in revenue for CEWS eligibility.
As with the changes to the eligibility criteria, these changes were made to ensure that the CEWS is available to all employers that have been significantly impacted by COVID-19, and in recognition that new businesses and businesses that have grown substantially in the last year may be disadvantaged if they can only demonstrate the required drop in revenue by using last year as a benchmark.
Moreover, employers will be able to calculate their revenues using either of two accounting methods: the accrual method, or the cash method. This change is also intended to provide employers with more flexibility and to ensure that affected employers that need the CEWS will be able to receive it. Non-profits and charities will also be allowed to choose whether or not they include government funding that they have received as revenue for the purposes of CEWS eligibility.
The government also announced today that it is proposing to refund employer contributions to Employment Insurance and the Canada Pension Plan, but failed to offer any further details.
Penalties for Abuse of the CEWS
Employers that receive the CEWS and that are subsequently found to have been ineligible will be required to repay all the money that they received under the CEWS. Anyone that is found to have “abused” the CEWS (i.e. applied fraudulently and/or misused the funds received) will face severe penalties, including fines of up to 225% of the amount received under the CEWS, and up to five years in prison.
Further, the government announced that employers that apply for the CEWS will be required to designate an individual that has control over their finances, to make sure that their wage subsidy claims are appropriate.
New Details on the BCAP
The government also announced new details on the BCAP, which will provide interest free loans of up to $40,000 to small businesses and non-profits that have been impacted by COVID-19 through banks and other financial institutions.
The government clarified that up to 25% of loans under the BCAP will be forgivable if the loans are repaid by December 31, 2022. Moreover, applications for such loans will open tomorrow, April 9, 2020, at least for loans through banks. The government stated that loans under the BCAP will also be available through credit unions later, once the program unfolds. Employers that are interested in applying should contact their existing bank or credit union.
This blog is provided as an information service and summary of workplace legal issues. This information is not intended as legal advice.