We previously wrote about temporary changes to BC’s Employment Standards Act (ESA) which allow employees to take temporary leaves of absence due to covid-19.
A leave of absence is different from a layoff. Effective May 4, 2020, amendments to BC’s Employment Standards Regulation now contemplate a temporary layoff lasting up to 16 weeks. Normally in BC, a layoff is deemed to be permanent once it lasts 13 weeks in any 20 consecutive week period.
The extension of temporary layoffs to 16 weeks is a temporary provision, which is expected to be repealed once it is no longer necessary.
Allowing leaves of up to 16 weeks aligns with the federal Canada Emergency Response Benefit (CERB), which permits benefits to be paid for up to 16 weeks to individuals laid off due to covid-19.
A layoff must still be otherwise legally permitted. In B.C., a layoff is permitted only if the employment agreement contains a clause permitting it. Without such a clause, unless the employee otherwise agrees, he or she is entitled to notice of termination or pay in lieu of such notice in accordance with the ESA.
Federal Wage Subsidies and Emergency Income Benefit
Among the support available to individuals is the CERB. Among the support available to employers are two covid-19 related wage subsidies: the Temporary Wage Subsidy (TWS) and the Canada Emergency Wage Subsidy (CEWS).
Canada Emergency Response Benefit for Individuals
The CERB provides a taxable benefit of $500/week for up to 16 weeks to individuals who are out of work due to covid-19, had income over $5000 in 2019 or in the 12 months before the application, and
- When submitting the first claim, have not earned more than $1,000 in employment and self-employment income for 14 or more consecutive days within the four-week benefit period of the claim; and
- When submitting subsequent claims, have not earned more than $1,000 in employment and self-employment income for the entire four-week benefit period of the new claim.
Initially, the CERB was available only to those who had stopped working, and earned no employment or self-employment income. This has now been modified to allow individuals to earn up to $1000 during an eligibility period.
More information on the CERB is available here.
Temporary Wage Subsidy for Employers
The 10% TWS allows eligible employers to reduce the amount of payroll deductions remitted to the Canadian Revenue Agency (CRA) for 3 months.
The subsidy is up to $1,375 for each eligible employee to a total maximum of $25,000 per employer. More information on the TWS is available here.
Revised Canada Emergency Wage Subsidy for Employers
Under revisions announced to the CEWS on May 1, 2020, the CEWS reimburses wages to “eligible entities” which experience a decline in “qualifying revenue” of at least 15% in March and 30% in April and May. The decline is measured by comparing the relevant month with the same month in 2019.
New businesses may measure their decline in qualifying revenue as compared to January and February, 2020.
In qualifying cases, the government may reimburse up to 75% of eligible employees’ pre-coronavirus salary up to $58,700, or to $847 per week. The subsidy is for up to 12 weeks, from March 15 to June 6, 2020, although it may be extended.
Only employees are to be included in CEWS calculations. Contractors are not eligible.
The CEWS will not be paid if employees have not been paid by the employer for more than 14 consecutive days during a qualifying period. This may affect when an employer will recall employees who have been laid off. Also, employees recalled must be paid for a sufficient number of days in the relevant period in order to be included in a CEWS application. An employer may have an incentive to pay employees a sufficient amount before recalling them, in order to allow them to be included in the CEWS calculations. If the employee was receiving the CERB, it is possible that he or she may be required to repay the relevant CERB payments.
The decline in qualifying revenue is to be determined in accordance with the business’s normal accounting practices. Extraordinary items and benefits under the CEWS and the TWS are excluded. Revenue from those not dealing at arm’s length with the eligible entity is also excluded. Various special rules apply to registered charities and tax exempt entities, groups of eligible entities that normally have consolidated financial statements, “affiliated groups of eligible entities” and joint ventures.
More information on the CEWS is available here.
A separate loan program, the Canada Emergency Business Account, is available through financial institutions to facilitate paying wages for which reimbursement may then be sought. To qualify, an organization must demonstrate it paid between $20,000 to $1.5 million in total 2019 payroll.
Employers are expected to accurately scrutinize their eligibility to claim the CEWS. Audits may be carried out in the future. Stiff penalties apply to those who seek the CEWS and are later found not to be eligible. Organizations must exercise extreme caution before taking any steps to intentionally reduce qualifying revenues for the purpose of qualifying for the CEWS, or substantial penalties could result.
UPDATE: At a May 8, 2020 press conference, Prime Minister Justin Trudeau announced that the Canada Emergency Wage Subsidy (CEWS) would be extended beyond June 6, 2020. On May 15, 2020 the Finance Minister announced that the CEWS was being extended to August 29, 2020.
This is a slightly modified version of an article that is appearing in the Kelowna Capital News and other online publications on or about May 9, 2020. The content of this article is intended to provide very general thoughts and general information, not to provide legal advice. Advice from an experienced legal professional should be sought about your specific circumstances. We may be reached through our website at inspirelaw.ca.