Supporting Businesses and Employees During the COVID-19 Crisis
Both employers and employees have been thrust into an unforeseen situation with the arrival of the COVID-19 pandemic in Canada. This public health emergency has left everyone scrambling. While certain businesses are able to continue on in a semi-normal manner, many are not. Certain industries have almost completely shut down or had to change how they do business which often means a significant scaling back of operations. This has left many employees and businesses in a vulnerable position. While we still do not know how long this will go on, there are supports available for both employers and employees to assist them during these difficult times.
Temporary Wage Subsidy and Canada Emergency Wage Subsidy for Employers
The Federal Government initially announced a Temporary Wage Subsidy for Employers. To support small businesses that are facing revenue losses and to help prevent lay-offs, the government is providing eligible employers a temporary wage subsidy for a period of three months, March to June of 2020. This subsidy was announced to be equal to 10% of payroll for that period. The subsidy limits are $1,375 per employee and $25,000 per employer. The subsidy is retroactive to March 15, 2020 and qualifying businesses are able to benefit immediately from this support by reducing their remittances of income tax withheld on their employees’ remuneration. Employers benefiting from this measure will include corporations eligible for the small business deduction, as well as non-profit organizations and charities. Our understanding is that this subsidy is restricted to employers with no more than 18 employees.
For several days it appeared that the Temporary Wage Subsidy was being increased from 10% to 75%. However, on April 1, 2020, the Federal Government introduced a separate program with the significantly higher subsidy of up to 75% of the first $58,700 of payroll (maximum of $847 per week per employee), the Canada Emergency Wage Subsidy. Like the Temporary Wage Subsidy, the Canada Emergency Wage Subsidy program will run from March to June of 2020 and is retroactive to March 15, 2020. This subsidy is available to a wide range of businesses and non-profits. In order to qualify for the Canada Emergency Wage Subsidy, a business will have to show a drop in revenue of 30% from the same month in 2019 i.e. March 2019 vs. March 2020. Businesses will also have to demonstrate that they are attempting to pay the remaining 25% of the subsidy reference amount of $58,700.00. Application to this program will be through CRA and businesses will have to apply every month. Unlike the Temporary Wage Subsidy, this subsidy will result in payments from the Government to businesses. Further details on qualification for both of these programs as well as the application portals will be available soon.
Canada Emergency Response Benefit and Employment Insurance Benefits
The Canada Emergency Response Benefit (‘CERB’), an income support payable for a period of 16 weeks, was initially announced to be something separate and apart from Employment Insurance (‘EI’) applying to those not covered by the latter. Within the last week, the Government announced that this benefit was now open to those who qualified for EI as well. Part of the reasoning for eligibility expansion for this benefit is that fact that EI is seeing an unprecedented number of applications that cannot be dealt with quickly enough to get money into people’s hands in a timely manner. The CERB application will be much easier once it goes live in early April and is supposed to get money to claimants within 10 days of making an application. At present, the CERB program is slated to end on October 3, 2020.
For those already receiving EI, they do not need to apply for CERB. They may however be eligible for CERB should their EI benefits terminate prior to October 3, 2020. It would also appear that if you have applied for EI but are not yet in receipt of benefits, you could apply for and received the CERB. Once a person’s CERB ends, they could then receive EI benefits.
Temporary Layoffs and SUB Plans
In addition to the supports discussed above, there are certain programs also made available by the Federal Government that allow employees and employers to work together in order to assist and support each other during this period.
As noted earlier, some employees have been forced to reduce their operations on either a partial or total basis in the past days. For these employers, it has meant temporarily laying off some or all of their employees. We have been hearing a great deal about temporary layoffs over the past week. Ontario’s Employment Standards Act allows for temporary layoffs and sets out their mechanics. On the other hand, Courts have said that where an employee’s written employment contract does not contain provisions addressing temporary layoffs, then a temporary layoff by the employer can result in constructive dismissal under normal circumstances. The current crisis is far from normal and it is unclear what Courts would do with a constructive dismissal claim related to a COVID-19 layoff. Where there is a stoppage of work causing the layoff, this uncertainty could be avoided by agreement. Employees and employers could conceivably come to an agreement whereby the layoff is agreed to and the employee is able to receive a top-up payment from the employer in addition to the regular EI benefit. This would be achieved by the employer creating a Supplemental Unemployment Benefit Plan (‘SUB Plan’) that is approved by Service Canada. If the SUB Plan is approved, employees covered under the plan are able to received payment from their employer that are not deducted from their EI benefits that they received at the same time. To be part of the SUB Plan, employees have to be receiving EI. We have yet to see any direction from the Federal Government as to SUB Plans can be used alongside the CERB. Employers should consult with legal counsel and accounting professionals with respect to the implementation of a SUB Plan. The SUB Plan should also be approved by the Canada Revenue Agency.
Federal Work Sharing Program
Another program that has been extended to help employers and employees cope with the economic fallout from the COVID-19 crisis is the Federal Work Sharing Program. For eligible employers with eligible employees, this allows for the continuation of operations on a reduced basis. The employees agree to a pay/time cut and are able to collect an EI benefit. Just like the SUB Plan, a Work Sharing Program has to be approved by Service Canada.
The Work Sharing Program assists eligible employers avoid layoffs when there is a temporary reduction in the normal level of business activity that is beyond the control of the employer. In the program, Employment Insurance Benefits are provided for eligible employees as income support and affected employees agree to work a reduced schedule and share available work over a specified period of time. The program is available to both federally and provincially regulated employers, in business for more than two years, that can demonstrate a decrease in business activity of more than 10%.
Both the employer and the employee must apply to participate in the Work Sharing Program together. Benefits must be maintained for impacted employees during the Work Sharing Program. Given that the Work Sharing Program changes significant elements of the employment relationship, parties looking to enter into an agreement should obtain legal advice. Additionally, employers should consult with a lawyer and financial professional to determine the feasibility of such an arrangement in their workplace.
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