COVID-19: Federal Relief Options to Assist Employers in Light of COVID-19
As of April 1, 2020, the federal government was in receipt of over 2.1 million EI applications. This is a staggering total to be sure, especially when you consider that the number of people who are out of work due to COVID-19, but are not eligible for any type of EI, are not counted in that figure. By the end of next week, we will have a much clearer picture in concrete terms, of the total number of Canadian workers seeking government assistance in light of COVID-19.
In our last newsletter, we highlighted a number of considerations for employers at this time, including a series of supports being put in place by the BC Government and Federal government to support businesses and their employees. This newsletter expands upon the details provided on the federal supports, based on currently available information.
Canada Emergency Response Benefit
On Monday April 6, 2020, the online portal for the new Canada Emergency Response Benefit (“CERB”) will be active. The CERB is intended as an emergency source of taxable income to a much broader number of Canadian workers, including self-employed Canadians who no longer have any income as a direct result of COVID-19. Non-exhaustive examples given by Minister Morneau of persons potentially eligible for this benefit given included personal trainers at gyms, taxi drivers, and consultants to businesses no longer operating.
The government is asking eligible persons to get ready for next week now by taking several steps, including creating a CRA My Account and registering for direct deposit. They have outlined the eligibility criteria, how to prepare, how to apply, and what to do after submitting your application, here: https://www.canada.ca/en/revenue-agency/services/benefits/apply-for-cerb-with-cra.html. If you feel you or your workers may qualify, we urge you to review the eligibility criteria and disseminate the application link to the workers you believe qualify for it.
Note: In light of the high volume of applications anticipated for the CERB, the government is taking applications on particular days from people born in particular months:
- Mondays, beginning April 6: January, February, and March birthdays may apply
- Tuesdays, beginning April 7: April, May, and June birthdays may apply
- Wednesdays, beginning April 8: July, August, and September birthdays may apply
- Thursdays, beginning April 9: October, November, and December birthdays may apply
- Fridays, Saturdays, and Sundays, beginning April 10: any birthday may apply
Please remember: If an employee has applied for EI before or since March 15, they do not need to apply for the CERB. Employees applying for EI since March 15 will first be considered for the CERB, and if ineligible, for EI.
It is unclear currently whether the CERB payments can be “topped up” by an employer, but workers in receipt of the CERB should also be aware of provincial supports they may be able to access, such as the BC Government’s one-time, non-taxable $1,000.00 payment for each eligible employee in receipt of federal benefits, and in some cases, rental assistance funds.
Canada Emergency Wage Subsidy
Get ready to re-hire people. That is the message from the Canadian government to businesses following the announcement of the new Canada Emergency Wage Subsidy (“CEWS”).
The goal of the CEWS is to get private businesses in Canada of all sizes, whether individuals, partnerships, or corporations, as well as non-profits and charities, into working order and in a steady idle, such that they are ready to race again when the worst of COVID-19 is behind us and more workplaces begin to re-open. The overarching strategy is to keep workers on payroll and if possible, working, so as to best position the economy to bounce back from the tremendous COVID-19 slump we are experiencing. Minister Morneau specifically drew attention to the hospitality sector in his April 1, 2020 press briefing on the CEWS as one sector this is intended to substantially benefit.
Further details continue to be fleshed out and will solidify up to and following the passage of legislation supporting the CEWS. We have yet to see draft legislation. At present, the CEWS is intended to cover 75% of each employee’s “eligible remuneration” up to $58,700.00, for a total of up to $847.00 per week, per employee, with no limit on the number of employees it covers. If an employee’s eligible remuneration totals less than $58,700.00, the subsidy for that employee is 75% of their actual eligible remuneration. Eligible remuneration includes salary, wages, and other forms of remuneration that are subject to tax withholdings, except that it does not include severance pay, stock option benefits, and likely perquisites such as use of a company vehicle.
The CEWS is intended to cover the 12-week period from March 15 to June 6, 2020, though the government may consider an extension depending on how the situation evolves.
The latest details on determining eligibility include:
- The eligible employer must have experienced a 30% decrease in gross revenue as a result of COVID-19, calculated in relation to the same period last year. Thus, to be eligible for the subsidy for March 2020, the employer must have experienced a 30% gross revenue drop when compared with March 2019. The same applies moving forward for April, and for May, and employers must reapply for the subsidy for each of the three months.
- Importantly, there are currently no specific parameters detailing how it is to be determined that the decrease in revenue is related to COVID-19. Employers must be cautious, particularly where there is no clear link between a decrease in their revenues this year and COVID-19. However, the precise mechanisms for calculating “gross revenue” and “revenue” have been released by the government and we advise checking the link below for details regarding those definitions.
- For start-ups and businesses which did not have income in March, April, and May 2019, but have had revenue since, the government has indicated there may be some flexibility in looking at other months before March 2020 to determine whether the business has suffered a 30% or greater decline in revenue due to COVID-19. More details are to come as the government considers this segment of the business community further.
- For non-profits and charities, revenue determinations and comparisons will be dealt with in a different manner, with further details also still to come.
- Salaries or wages must have been paid already to the employees for whom the employer seeks the subsidy, and the employer must have proof to demonstrate this. Employers cannot claim the subsidy for a period of time during which an employee was laid off and in receipt of Employment Insurance benefits. Therefore, employers are urged to re-hire workers whose employment may have been terminated and to bring back workers who were temporarily laid off, in order to take advantage of the subsidy.
- The employer must attest in each application that it is doing everything it can to pay the additional 25% of each employee’s income.
Practically speaking, the employer continues to pay the employee at least the amount of the subsidy for that employee, and the subsidy is paid by the government to the employer, not its employees directly. In contrast, the CERB is paid to workers directly, not to their employers or the companies with which they contracted.
An active application portal for the CEWS is expected to be rolled out soon. The government hopes to begin flowing money to businesses within the next 3-6 weeks. Similar to how the government is urging workers to take steps to prepare to apply for the CERB, the government is also urging employers to prepare for this benefit by not only bringing back or keeping their workforce, but by ensuring the employer is set up to receive direct deposits from the federal government.
We anticipate further nuances to the various components of the CEWS to continue to be fleshed out in the coming days. The full backgrounder for the CEWS as of April 1, 2020 can be found here: https://www.canada.ca/en/department-finance/news/2020/04/the-canada-emergency-wage-subsidy.html
CERB versus CEWS: What’s the interplay? Can workers receive both?
A worker can receive either the CERB or the CEWS for an applicable 4-week period within the eligibility windows. Given that the CEWS benefits may be greater for a given employee than the CERB, it may be in the best interests of some workers for the business to re-hire them and to obtain the CEWS so as to ensure greater income for those workers during the CEWS period.
A Note on the Previously announced 10% wage subsidy
Organizations that do not qualify for the CEWS may continue to qualify for the previously announced 10% wage subsidy. Organizations that qualify for both in a given period will have their CEWS offset by an amount received for the 10% wage subsidy.
The government has made very clear that these new COVID-19 related benefits, in particular the CERB and CEWS, have been put together quickly, using Canadian know-how, as well as information gathered internationally from other countries in responding to the economic fallout from the COVID-19 crisis. It has stressed that it is putting a significant amount of trust and good faith in Canadian workers and businesses in the implementation of these benefits, and that everyone needs to contribute to the best of their ability to put these benefits to use only to those who need them, and for the purposes for which they have been designed.
In light of that, the announcement of these benefits has also come with a warning: severe consequences will be levied against anyone found to be abusing the benefits. While details on these consequences are currently unknown, we can expect the tabled legislation to include details on new offences with penalties ranging from fines to imprisonment. With these benefits being largely administered from within the walls of the Canada Revenue Agency, individuals and businesses would be foolhardy to attempt to pull a fast one with fraudulent applications that do not meet eligibility criteria, or legitimate applications for the CEWS that meet the criteria but fail to properly pass that subsidy on to the employees it is intended for.
Employers needing bridge financing may want to available themselves of the various new credit options being extended by the federal and provincial governments, and other sources, some of which were touched upon in our last newsletter, including the new Canada Emergency Business Account. Various tax deferrals and other sources of credit have also been announced provincially and federally to give employers increased liquidity on a temporary basis while weathering the worst of COVID-19.
A Reminder: Pre-Existing Programs of potential benefit
In light of the fact that this situation appears likely to continue for a few months – with July being a current realistic estimate and the potential for a resurgence in the fall of 2020 – employers may want to consider enrolling in two programs the Federal Government already had in place: the Work Share Program, and the Supplemental Unemployment Benefits (SUB) Program. We will cover these programs in more detail in a future newsletter.
The situation evolves rapidly, sometimes in less than 24 hours. What is certain is that more details and changes to what is included in this newsletter are yet to come, and thus, this information is subject to change.
We too, are a small business, an employer, and employees. We appreciate the difficulties our clients are experiencing and are here to be a resource for you regarding, among other things, all labour, employment, human rights, privacy, workers’ compensation, and occupational health and safety questions you have throughout this challenging time. Our lawyers continue to work remotely throughout the COVID-19 crisis and are ready to advise you as necessary.