Changes to the Canada Emergency Response Benefit and Wage Subsidy

Changes to the Canada Emergency Response Benefit and Wage Subsidy

Amidst criticism from business owners and associations, the Federal government is working to revise the Emergency Wage Subsidy Program before the first dollar is even paid out. They have also announced changes to the Canada Emergency Response Benefit (CERB). In both cases, they are trying to find ways to loosen the restrictions and make assistance available to more people.

We have been updating the Federal Government’s efforts to help small businesses and, by extension, their workers on an ongoing basis and all of our updates can be found on our running blog on COVID-19 workplace related issues. 

Initially, of course, there was a 10% wage subsidy. Then Prime Minister Trudeau announced a massive change, with subsidies up to 75% of wages. This was a clear effort to avoid or at least reduce layoffs and claims for Employment Insurance benefits. Many businesses have expressed an interest in taking advantage of the subsidy, particularly since, as we have discussed extensively, most do not have the right to impose temporary layoffs, and they and risk liability by doing so.

The details of the subsidy that were announced on April 1st included:

  • It will apply from March 15 to June 9, 2020
  • The wage subsidy is 75% of Gross “Regular” Wages to a maximum of $847\week or $58,700 annually
  • Sales must have decreased by at least 30% on a monthly basis when compared with the same month in the prior year (ie. March 2020 sales have to be 30% less than March 2019)
  • Funds will be available to be paid to the employer in approximately six weeks from today’s date (around the middle of May 2020)
  • There have also been indications that the company must show that they are doing everything they can to pay the remaining 25%, but how this would be applied remains unclear.

Many business associations were critical of the details, including the timeline to receive payments and the fact that many businesses would not qualify. As a result, the government has drafted proposed legislation that was revealed yesterday. Among other things, the changes include:

  • Allowing companies the option of using January and February as reference periods instead of the same month in the prior year, under certain conditions; and
  • reducing the threshold for reduced revenue in March to 15% instead of 30%.

The government has estimated that the program would cost about 71 billion dollars as it was originally proposed; this will, of course, increase that amount.

With respect to the CERB, one of the strongest criticisms has been that in order to qualify, applicants must not have any income during the relevant time period. The proposed revisions would mean that it will be available to those with drastically reduced earnings; speculation is that it will apply to people working 10 hours or less in a week or earning less than $500 in a month.

In addition, the government is working on a plan to provide interest-free loans to small businesses that would be guaranteed by the government up to 25 billion dollars.

We encourage employers to assess all of the options and support available before making any decisions. They should understand the legal implications of each option and then make an informed choice. While one option may result in greater cost savings, it might also come with increased liability.

We also encourage employees to know their rights: just because your employer introduces a layoff or wage reduction as a fait-accomplis does not mean that you have no rights.

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