March 30, 2020
Author: Bryan Gallant
The COVID-19 pandemic has forced many employers to face the difficult prospect of temporarily laying off (or at least reducing the hours or salaries) of some or all of their employees. Many of those employees will qualify for EI benefits, with a maximum payment of $573 per week. Others may qualify for other relief, such as the recently announced Canada Emergency Response Benefit (CERB). This benefit provides eligible workers who lose their income as a result of the COVID-19 pandemic (and do not otherwise qualify for EI benefits) with $2,000 per month for up to 4 months. These forms of relief may simply not be enough to meet the employees’ financial needs.
We have summarized a number of options available to employers to help maximize benefits to their employees facing temporary layoff or reduced income.
Hours Reduction VS. Temporary Layoff
Reducing an employee’s hours or issuing a temporary layoff where a specific contractual right to do so does not exist creates risk of an employee declaring constructive dismissal. However, if a business decides to implement a cost-reduction program having considered those risks, it is important to also give thought to whether certain employees are key to a business and should be placed on a reduced-hours schedule rather than a temporary layoff.
Employees who have their earnings reduced may still be able to apply for relief as described below, while also remaining available to conduct necessary operations. Some employees may also prefer to work reduced hours as opposed to receiving a temporary layoff; resulting in consent to implement a change rather than an employer implementing change unilaterally.
Strategic Use of Accrued Time
Employers can consider implementing mandatory use of accrued time including:
- vacation days
- sick days or personal days
- banked overtime
The effectiveness of this strategy will depend on how much time the employee has accrued, the degree to which their hours must be reduced, and the duration of the expected reduction. We recommend consulting a member of the Carbert Waite Employment Law Group to ensure compliance with applicable employment standards legislation if implementing this in your workplace.
Depending on the circumstances, it may be more beneficial to the employee for the employer use one of the other federal government programs described below.
Wage Subsidy Program
The federal government announced the Canada Emergency Wage Subsidy (CEWS) program to help businesses cope with the economic impacts of this pandemic. The program gives a wage subsidy to eligible employers who experience at least a 30% drop in revenue. The amount of the subsidy is up to 100% of the first 75% of pre-pandemic wages and salaries to a maximum benefit of $847/week/employee. The program covers the period from March 15 to June 6, 2020. There is no overall limit on the subsidy amount that an eligible employer can claim.
Employers not eligible for the Canada Emergency Wage Subsidy may still be eligible for the Temporary Wage Subsidy for Employers (TWS) announced on March 18. This program allow eligible employers to reduce the amount of payroll deductions they are required to remit to the Canada Revenue Agency (CRA).
Employers eligible for both the CEWS and the TWS will have the amount they receive from the CEWS reduced by the amount they receive from the TWS.
Carbert Waite’s Employment Law Group would be happy to speak to you to discuss whether your business is eligible for one or both of the wage subsidy programs.
Supplemental Unemployment Benefit Program
Under the EI Supplemental Unemployment Benefit (SUB) Program, an employer can increase an employee’s weekly earnings during periods of unemployment by making supplemental (i.e. “top up”) payments that will not be deducted from the employee’s EI benefits. These payments are not considered insurable earnings and so EI premiums are not to be deducted from them.
Employers may participate in this program by registering a Supplemental Unemployment Benefit Plan (“SUB Plan”) to provide supplemental payments to EI benefits received by their employees during a period of unemployment due to:
- temporary stoppage of work;
- training; or
- illness, injury, or quarantine.
Employers should be able to estimate the date of the employee’s return to work. Termination of employment caused by a reorganization or a shutdown of a plant or operation is not considered temporary unemployment. In the case of illness, injury or quarantine, the employee must be receiving EI sickness benefits to qualify for employer payments under a SUB Plan.
This program does not apply to employers offering supplements to maternity, parental, compassionate care, or family caregiver benefits. Information on those supplements can be found here.
Employers must submit a copy of the SUB Plan along with a Registration Form to Service Canada’s Supplemental Unemployment Benefit Program, and receive approval from that program, before implementing the Plan and making SUB payments.
Financing of the SUB payments must be done in one of three ways:
- by making payments from general revenues of the company;
- by making deposits into a trust fund established to provide the SUB payments; or
- by paying 100% of the insurance premiums that are required to finance the SUB payments.
The Plan must be in effect for at least one year, and can be in effect for as long as five years. If the plan forms part of a collective agreement, it will be in effect until the expiry of that agreement.
A sample Plan provided by the Government of Canada can be found here. You can consult with a member of the Carbert Waite Employment Law Group for further information about mandatory and optional terms to include in a SUB Plan.
Under the EI Work-Sharing (WS) Program, an employer can avoid layoffs during a temporary decrease in business activity beyond the employer’s control. It provides EI benefits to eligible employees who agree to temporarily reduce their normal working hours and share the available work with coworkers while the employer recovers.
To participate in a WS Program, an employer must enter into an agreement with its employees and Service Canada (the “WS Agreement”), whereby the employees work reduced hours and share the available work over a specified period of time. Employers and their employees apply to the WS Program together, and must submit their application at least 30 days prior to the requested start date.
Under a WS Agreement, participating employees are part of a work-sharing unit (“WS Unit”), based on the fact that they perform similar work, or that their jobs impact one another. The WS Unit should not include employees who are needed to generate work or are essential to the recovery of the business (such as senior management, sales agents, persons involved in product development, etc.).
Increases and decreases in available work must be shared equally among members of the WS Unit.
Under a WS Agreement, the employer is required to maintain all existing employment benefits (such as health and dental insurance, pension benefits, vacation, etc.) for the duration of that agreement.
WS Agreement Duration and Extension
The general rule is that a WS Agreement must be in effect for at least 6 weeks, to a maximum of 26 weeks. This period can potentially be extended up to a further 12 weeks (subject to Service Canada’s assessment and approval) for a total of 38 weeks. However, there are exceptions. For businesses experiencing a downturn in business due to COVID-19 the maximum period has now been extended to 76 weeks (effective from March 15, 2020 to March 14, 2021).
EI Work-Sharing Benefits
Employees participating in a WS Agreement do not have to serve a waiting period for EI Work-Sharing benefits. However, because these benefits are processed through the EI payment system, there may be a delay in the initial receipt of benefits. This delay can be as long as 28 days after issuance of the Record of Employment.
EI Work-Sharing benefits are based on the employee’s normal average weekly earnings at the start of the WS Agreement. Earnings received by an employee from Work-Sharing employment are not deducted from the Work-Sharing benefits.A member of the Carbert Waite Employment Law Group would be happy to discuss details about your business’s eligibility for this program.
Employees Facing Temporary Layoffs Due to COVID-19
These represent a number of strategies an employer can use to help its employees facing temporary layoff (or reduced hours or salary) maximize their benefits and weather the COVID-19 “storm”. These strategies can also benefit the employer by helping to retain valued employees who will be needed to restore the business to pre-pandemic operations and productivity once the COVID-19 storm has passed. A summary of federal government support programs for individuals and businesses can be found here.
We also invite you to review our blog post COVID-19: What Employees Need to Know.