On April 11, 2020, the COVID-19 Emergency Response Act, No. 2 (“Bill C-14”) received Royal Assent following an emergency session of Parliament. Our prior articles on the Canada Emergency Wage Subsidy (“CEWS”), which can be reviewed here as well as here, summarized the publicly announced details of the CEWS. As described below, Bill C-14 has substantively altered some of the previously described details.
The Amount of the Subsidy
Bill C-14 confirms that the CEWS provides a wage and salary subsidy of up to $847 per week to eligible employers for up to 12 weeks. The 12 week period of the subsidy is divided into the following three eligibility periods: (i) March 15 to April 11; (ii) April 12 to May 9; and (iii) and May 10 to June 6.
The legislation offers additional details on how an employer can calculate the subsidy.
It was previously announced that the benefit would be based on 75% of employee remuneration. A second option has now been introduced given that circumstances have forced many employers to reduce employees’ remuneration. As a result, an employer will receive a subsidy of 100% of the employee’s remuneration (up to $847 per week) if the remuneration paid to the employee decreased by more than 25% from his or her pre-crisis pay.
The maximum benefit payable is calculated under (i) or (ii) below, whichever is greater:
(i) 75% of the eligible remuneration paid to an eligible employee, up to $847 per week; or,
(ii) the lesser of:
a) 100% of eligible remuneration paid to an eligible employee, up to $847 per week
b) 75% of an eligible employee’s pre-crisis remuneration (based on the average weekly remuneration paid between January 1, 2020 and March 15, 2020, excluding any 7-day period during which the employee did not receive remuneration), up to $847 per week.
Bill C-14 has also expanded the previously announced subsidy by providing a 100% refund of the employer-paid contributions to Employment Insurance (“EI”) and to the Canada Pension Plan for the eligible employees.
However, if there is a work-sharing agreement in place that has been approved under the Employment Insurance Act, an employer’s subsidy will be reduced by the amount of the EI benefit top-up that is received by any of the eligible employees under that work-sharing agreement. See the description of work-sharing agreements here.
Eligible Remuneration
Employees’ salaries, wages and other taxable benefits that require withholding or deduction of income tax are all eligible for the subsidy. However, employers will not receive the CEWS in respect of money paid as a retiring allowance (i.e. severance).
The government’s background document that was published at the same time as Bill C-14 states that stock option benefits and personal use of a corporate vehicle do not constitute “eligible remuneration”.
Eligible Employers
Bill C-14 also offers clarity with regards to the businesses and organizations that are eligible for the CEWS (and those that are not eligible).
An “eligible entity”, as defined by Bill C-14, includes taxable corporations (excluding public institutions), individuals, partnerships (whose members are comprised of individuals and taxable corporations) and registered charities (excluding public institutions).
As a result of the exclusion of “public institutions”, the following organizations are ineligible for the CEWS: schools; public universities and colleges; municipalities and local governments; wholly owned municipal corporations; and health authorities. The Canada Revenue Agency (“CRA”) has previously stated that Indian bands or councils are public bodies and are thus likely ineligible for the CEWS.
As described in our previous article of April 9, 2020, which included the following chart, an employer must demonstrate a reduction in revenue of at least 15% in March to receive the CEWS for the first eligibility period and 30% in April and May in order to receive the CEWS during the second and third eligibility periods, respectively:
Revenue is calculated using either the accrual method or the cash method, but not a combination of the two.
Bill C-14 offers entities that are part of a corporate group considerable flexibility in determining their revenue. Even if the group of entities normally prepares consolidated financial statements, each entity may determine its revenue independently from the other entities (provided the other entities in the group do the same). Alternatively, the group of entities may determine their revenue on a consolidated basis in accordance with the relevant accounting principles.
It is also noteworthy that the government’s background document states that an employer that is found to be eligible during a specific claiming period will automatically qualify for the next claiming period (although employers should expect that they may be required demonstrate their lost revenue). This is different from previously provided information, which stated that the employer would need to re-apply for each claiming period.
The employer must keep records demonstrating its reduction in revenue and remuneration paid to employees during each claiming period.
Eligible Employees
Bill C-14 defines an “eligible employee” as an individual employed in Canada, other than a person who was without remuneration by the employer for 14 or more consecutive days during the claiming period.
This definition appears to be aimed at avoiding payments under both the CEWS and the Canada Emergency Response Benefit (“CERB”) in respect of the same employees. The government has explained that it intends to introduce a process to allow persons rehired by their employer during an eligibility period to cancel their CERB claim and repay the amounts paid.
The Application Process
The information published by the government regarding the CEWS explains that eligible employers will be able to apply for the subsidy through the CRA’s My Business Account portal.
Minister may Publish the Names of Employers Receiving the CEWS
Employers should note that Bill C-14 authorizes the Minister of Finance to publicize the names of the employers who have applied for the CEWS.
For more information on this article, please contact Ilan Burkes, Sari Wiens, Nicole Toye or Jessica Fairbairn.
Note to our Readers: Information regarding COVID-19 is rapidly evolving. We are working to bring you up-to-date articles as the legal issues develop and to keep our previous posts updated. Given that the legal issues related to COVID-19 are constantly changing, if you are looking for legal advice or are dealing with an issue in relation to COVID-19, please contact your Harris lawyer or a member of our COVID-19 response team: Sari Wiens, Ilan Burkes, Nicole Toye or Jessica Fairbairn.
To read our most recent articles and other updates on COVID-19, visit our COVID-19 Updates page.
