Government support and COVID-19

by Nadia Zaman and Stuart Rudner

You have probably been inundated with information regarding COVID-19 over the last few weeks. The reality is that almost everyone is struggling to get through this unanticipated and unprecedented situation. Many businesses are faced with a situation where they cannot afford to pay their staff but they may not have the right to lay them off temporarily; they are stuck between the proverbial rock and hard place, and something has got to give.

All levels of government have announced various measures in order to assist businesses, individuals, and families during the pandemic. Recently, there have been some significant developments, including the Canada Emergency Wage Subsidy and the Work-Sharing Program. The Wage Subsidy is a federal program offering a subsidy of up to 75 per cent of wages and may prevent or end a significant number of layoffs if it can be implemented quickly. We know that many of our clients believe that it will change their situation significantly.

The purpose of this blog post is to provide an overview of some of the key supports that are currently available in order to help employers avoid layoffs and help employees keep their jobs. Given that the information is constantly being updated, it can be difficult to keep up with the changes, and we encourage readers to access our firm’s running blog on COVID-19 workplace issues on a regular basis to get the latest information.

Canada Emergency Wage Subsidy

Prime Minister Justin Trudeau recently announced that qualifying businesses could receive a wage subsidy of up to 75 per cent in order to help them to keep and return workers to the payroll. The key details are outlined below, although there will be further updates in the coming days.

Who? The temporary wage subsidy is available to employers of all sizes and across all sectors of the economy, including non-profit organizations and registered charities. However, public sector entities are excluded.

In order to be eligible, the employer has to show that the company’s sales have decreased by at least 30 per cent on a monthly basis when compared with the same month in the prior year (for example, if the wage subsidy is for April 2020, then the sales for April 2020 have to be at least 30 per cent less than April 2019). Refer to the section on Eligible Periods for further details. It sounds as though there may be some flexibility in the approach to this calculation, and obviously employers that have been in operation for less than a year will have to find a different way to satisfy this requirement.

Organizations that do not qualify for this wage subsidy may qualify for the previously announced wage subsidy of 10 per cent of remuneration paid from March 18 to before June 20, 2020.

What? The temporary wage subsidy will provide up to 75 per cent of gross regular wages to a maximum of $847 per week or $58,700 annually. There is no limit on the total amount an employer can claim, as there is no limit on the size of an employer which can benefit from this program.

Eligible remuneration may include salary, wages, and other remuneration for which employers would generally be required to withhold or deduct amounts on account of the employee’s income tax obligation. Notably, it does not include severance pay or items such as stock option benefits or the personal use of a corporate vehicle.

When? The temporary wage subsidy will apply for or up to 12 weeks, retroactive to March 15, 2020 and ending on June 9, 2020 unless it is extended. Employers will have to reapply each month for the subsidy.

Funds are expected to be available to be paid to the employer in about six weeks from April 1, 2020 (around the middle of May 2020), which is significantly different from the 10 per cent wage subsidy announced earlier.

Why? This program is designed “to help employers hardest hit by the COVID-19 pandemic to keep and retain workers.” This wage subsidy aims to prevent further job losses, encourage employers to re-hire workers previously laid off as a result of COVID-19, and help better position employers to more easily resume business-as-usual following the crisis.

While the government has designed the proposed wage subsidy to provide support to employers, it was done with the expectation that employers will do their part by using the subsidy in a manner that supports the health and well-being of their employees.

How? Employers can apply online through the CRA portal which will be available soon.

There have been indications that anyone who abuses the system would face severe penalties, although it remains unclear what the penalties would look like. There have also been indications that businesses must show that they are doing everything they can to pay the remaining 25 per cent, but how this would be applied remains unclear.

 Interaction with Canada Emergency Response Benefit

An employer would not be eligible to claim the Canada Emergency Wage Subsidy for remuneration paid to an employee in a week that falls within a four-week period for which the employee is eligible for the Canada Emergency Response Benefit (CERB).

Employers that are not eligible for the Canada Emergency Wage Subsidy would still be able to furlough employees who will receive the CERB of up to $2,000 a month. Accordingly, it appears that at any given time, for any specific employee, either the CERB or the Canada Emergency Wage Subsidy may be applicable, but not both.

Work-Sharing Program

Who? The Work-Sharing (WS) Program is for eligible employers and employees where the employer can demonstrate a recent decline in business activity of at least 10 per cent that is directly or indirectly related to the impact of COVID-19, and a temporary decrease of employee hours of work in the range of 10 to 60 per cent.

There are multiple eligibility criteria that must be met for both the employer and the employees. To be eligible for a WS agreement, a business must:

• be a year-round business in Canada for at least one year,

• be a private business, a publicly held company or a not-for-profit organization

• have at least two employees in the WS unit.

To be eligible for WS, employees must:

• be "core staff",

• be eligible to receive EI benefits (see below)

• agree to reduce their normal working hours by the same percentage and to share the available work.

The eligibility requirement for WS is the same as for regular employment insurance (EI) benefits, and employees must have 420 to 700 hours of insurable employment during their qualifying period which is the 52 weeks prior to the start of their EI benefit period.

Employers should consult the detailed eligibility criteria as well as the non-eligibility criteria to determine whether or not their business or certain employees qualify.

What? The WS program provides EI benefits to eligible employees who agree to reduce their normal working hours and share the available work while their employer recovers from the impact of COVID-19.

For most people, the basic rate for calculating EI benefits is 55 per cent of their average insurable weekly earnings, up to a maximum amount. As of Jan. 1, 2020, the maximum yearly insurable earnings amount is $54,200. This means that the employee can receive a maximum amount of $573 per week.

When? COVID-19 temporary special measures are effective March 15, 2020 to March 14, 2021. The temporary special measures extend the qualifying weeks for the WS program from 38 weeks to 76 weeks. The minimum duration is six weeks.

An application for a WS agreement must be submitted a minimum of 10 calendar days prior to the requested start date, which is a significantly shortened period from the pre-COVID-19 30-day rule. All agreements must begin on a Sunday.

Employees do not have to serve a waiting period for WS benefits. The EI benefits are processed through the EI payment system.

Why? The WS program is intended to help employers and employees avoid layoffs when there is a temporary decrease in business activity beyond the control of the employer. In particular, the WS program allows employers to retain talent, and allows employees to keep their jobs and maintain their job skills.

How? If you are applying for a new agreement, you must submit the application 10 calendar days prior to the requested start date. Applications can be sent to Service Canada by email at: [email protected].

Conclusion

In the coming days, there will be further information regarding the various government measures to support employers and employees. We will continue to monitor the situation and encourage you to do the same. The bottom line is that this situation was entirely unexpected and everyone is scrambling to adapt to it – businesses, individuals, and governments alike. Things are changing rapidly; for example, many layoffs that seemed to be inevitable a week ago have now been cancelled or at least postponed while everyone assesses the options for support that are available.

Too many businesses and individuals are making decisions without understanding the legal implications. Know your rights so that every decision is an informed one. Stay safe, and stay informed.