On May 15, 2020, the federal government announced that the Canada Emergency Wage Subsidy (“CEWS”), which we have described in detail here, will continue beyond June 6, 2020 and will be expanded in a number of important respects.
Duration of the Subsidy
The CEWS will be extended for an additional 12 weeks, until August 29, 2020.
At present, an employer is only eligible for the subsidy if it is able to demonstrate a 30% decline in revenue. The government has stated that it will be consulting with business and labour representatives over the next month to determine what adjustments are required to the subsidy to incentivise job growth.
Entities Eligible for the Subsidy
In addition to extending the duration of CEWS, the government has also expanded the entities eligible for the subsidy retroactive to the first qualifying period starting March 15, 2020. In particular, the regulations have been amended to permit the following entities to apply for CEWS, provided they meet the eligibility criteria:
- Indigenous government-owned business
Under the legislation creating CEWS, an Indigenous government-owned corporation was only eligible for the CEWS if it was taxable. The government has extended eligibility to Indigenous government-owned corporations and their subsidiaries that are tax exempt under the Income Tax Act. Eligibility is also extended to partnerships where each partner is either an Indigenous government or another eligible employer for the purposes of CEWS.
- Non-public educational and training institutions
Private colleges and private schools were initially ineligible for CEWS. The new regulations now extend the subsidy to non-public educational and training institutions.
Further, for-profit as well as not-for-profit educational institutions, such as arts schools, language schools, driving schools, flight schools and culinary schools will also be eligible.
- Partnerships with one or more non-eligible members
Under the initial CEWS legislation, a partnership was only eligible if all members were eligible entities. Under the regulations modifying CEWS, partnerships are eligible for the subsidy provided that the non-eligible partners do not, cumulatively, hold a majority of the fair market value of interest in the partnership.
- Registered Canadian Amateur Athletic Associations (“RCAAAs”)
The national-level RCAAAs were initially excluded from CEWS because they are tax-exempt. These national associations, which are responsible for the promotion of sport, will now be eligible for the subsidy.
- Registered journalism organizations
The CEWS has also been extended to tax-exempt registered journalism organizations.
Seasonal Employees and Employees Returning from Leaves of Absence
Employers have been eligible for a subsidy of up to 100% of an employee’s remuneration (up to $847 per week) under the CEWS program if the remuneration paid to the employee has decreased by more than 25% from the employee’s pre-crisis pay (i.e. January 1 to March 15, 2020). However, it is not possible for an employer to demonstrate this reduction in remuneration if the employee is only employed seasonally or was on a leave of absence prior to the crisis.
As a result, the government is now allowing employers to select between one of two periods when calculating the pre-crisis remuneration. Specifically, employers can compare the current remuneration paid to an employee to the average weekly remuneration paid to the employee:
- Between March 1 and May 31, 2019; or
- Between January 1 and March 15, 2020.
This change is retroactive to the first qualifying period, which commenced March 15, 2020.
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