COVID-19: Updates to the CEWS and CERB

By Preston I.A.D. Parsons and Gurpreet Gill

CERB Eligibility Expansion, Essential Worker Wage Top-Up, and Other Updates

Prime Minister Justin Trudeau announced today an expansion to the Canada Emergency Response Benefit (CERB) eligibility rules:

  • Seasonal workers, part time workers and those who have run out of Employment Insurance since January 1st are now eligible to apply.
  • Those earning less than $1,000.00 per month can now apply.
  • Seasonal workers who were expecting to work but due to the COVID-19 crisis are unable to work may now apply.

A wage top up for essential workers was also announced. Those making less than $2,500.00 per month are intended to receive the top up, such as long term care home workers. The federal government and provinces will be discussing the details of this wage top up, in the coming days.

Further expansion details are expected in the near future for post secondary students and those with businesses worried about making commercial rents.

Canada Emergency Wage Subsidy (CEWS) Legislation Enacted

Parliament was recalled over the Easter long weekend for a rare sitting to pass and implement Bill C-14, the COVID-19 Emergency Response Act, No. 2, pertaining principally to the CEWS. [1] The legislation includes support to eligible employers most impacted by the COVID-19 crisis.

The intent of the CEWS is to prevent further job losses by encouraging employers to keep on their workforce, or re-hire workers who have been previously laid off due to substantial impacts to their business from COVID-19. The hope is that this program will ensure a faster transition to resuming normal operations when isolation restrictions are lifted and businesses begin a return to normality.

As noted in our prior publications [2], the CEWS will cover 75% of eligible remuneration to employees of eligible employers up to $847 per week per employee. The initial period of the CEWS is 12 weeks for the period of March 15 to June 6, 2020.

Key Points

  • Eligibility for CEWS for March 2020 is confirmed to require only a revenue reduction of 15%, while it remains at 30% for April and May.
  • The accounting method employers choose can be against the same month in the prior year - March, April and May 2019 - or against their average revenues for January and February 2020. If the business had no income in March 2019, then the business must use the average revenues of January and February 2020 as the comparator. Whichever method is used for determining the payment for the first claiming period - March 15 - April 11, 2020 - must be used for all three qualifying periods.
  • An employer found eligible for a specific claiming period automatically qualifies for the next period of the program.
  • Revenue reduction may be calculated by using the accrual or cash method. The method selected must be used for all qualifying periods.
  • Non-profit organizations and charities have more flexibility in determining revenue reduction, including by choosing whether or not to include revenue from government sources as part of the calculation. Whichever process they establish must be used for all periods claimed.
  • Employers operating as Joint ventures and in corporate groups have their own eligibility for the CEWS.
  • 100% refunds for employer-paid contributions to Employment Insurance, Canada Pension Plan, Quebec Pension Plan and Quebec Parental Insurance Plan, for eligible employees are on leave with pay during the claiming periods.
  • The CEWS programmed may be extended to September 30, 2020 (previously it was until June 6, 2020).
  • The legislation gives the Minister of National Revenue the authority - but not the obligation - to publish the name of any business that claims CEWS. This is a means to ensure good faith.
  • Employers are to make "best efforts" to top employee salaries to pre-crisis levels but there is no legal requirement to top up 100% of pre-crisis salaries. At this time there is no clarity yet on how "best efforts" is to be determined. The CEWS application includes as attestation from the person who has "principal responsibility" for the financial activities of the eligible entity to the completeness and correctness of the application to include details on those best efforts.

How to Apply

Eligible employers can apply for CEWS through the CRA's My Business Account portal after each 4 week claim period and before October 1, 2020. While not committing to a specific timeline, the government has indicated payments will be deposited to the employer shortly after the application is made.

Compliance

To ensure the integrity and good faith use of the program, employers are required to repay amounts paid under the CEWS if they do not meet eligibility requirements. Penalties will apply in cases where fraudulent claims are made, including fines and imprisonment.

Anti-abuse rules are being put in place to ensure the subsidy is not being obtained inappropriately and that employees are paid the amounts they are owed. Those employers who partake in artificial transactions to reduce their revenue for the purposes of claiming CEWS will face a penalty equal to 25% of the amount of the subsidy claimed, plus repayment of the improperly obtained subsidy.

Finally, employers need to keep records showing reduction in their arm's length revenues and remunerations paid to employees.

Closing Remarks

With new developments in labour and employment law, and adjacent areas affecting Canadian employers and employees nearly every day, we continue to strive to keep you informed and updated as soon as new information becomes available.

Both the CERB and CEWS program continue to evolve with details being fleshed out continually. Full details of the CEWS program can be found here: https://www.canada.ca/en/department-finance/economic-response-plan/wage-subsidy.html


[1] https://www.parl.ca/Content/Bills/431/Government/C-14/C-14_3/C-14_3.PDF

[2] See our Overholt Law Blog Post https://www.overholtlawyers.com/blog/2020/04/covid-19-april-8-2020-government-update-on-emergency-wage-subsidy.shtml. See also our [email protected] Newsletters at: https://www.overholtlawyers.com/Newsletters/