Canadian Government Proposes Significant Changes to Emergency Wage Subsidy in Bill C-20

Since its initial launch in the spring, the Canada Emergency Wage Subsidy (or “CEWS”) – a temporary program intended to protect jobs by helping employers keep their employees on payroll while navigating the ongoing COVID-19 pandemic – has already benefited approximately 3 million Canadian workers. On July 20, 2020, the Federal government introduced Bill C-20, An Act respecting further COVID-19 Measures. Bill C-20 not only proposes a number of significant changes to the CEWS, but also introduces additional measures intended to address other consequences of the pandemic.

Proposed Changes to the CEWS

Bill C-20, which passed in the House of Commons by unanimous consent on July 21, 2020 and is now before the Senate, is intended to expand CEWS eligibility criteria, as well as to make the temporary program more targeted, so that it can benefit a greater number of workers while the economy continues to gradually reopen. If passed, it would also extend the CEWS program to November 21, 2020 (with further extension to December 31 permitted by regulation).

More specifically, Bill C-20 proposes changes to the Income Tax Act and to the Income Tax Regulations that would make the CEWS accessible to a greater number of employers by expanding eligibility criteria and redesigning the temporary program itself. Whereas before there was a single eligibility threshold for all employers (i.e., the requirement to show a decline of 30 percent in revenue due to the pandemic), Bill C-20 would divide the CEWS into two parts:

A base subsidy available to all eligible employers but where the subsidy amount would vary depending on the scale of the revenue decline. This change would provide a benefit not only to employers who have lost less than 30 percent of their revenue due to the pandemic, but also to those who previously qualified for the CEWS under the previous threshold but no longer do as their business is gradually recovering; and
A top-up subsidy of an additional 25 percent for employers who have been most adversely affected by the pandemic. This change would primarily be intended to benefit employers in sectors that are recovering more slowly.

In addition to the foregoing, Bill C-20 attempts to address technical issues that have been identified by various stakeholders since the launch of the CEWS including, for example, with respect to the establishment of continuity rules in situations of asset sales.

Employers should note that Bill C-20 provides a revised method for calculating the CEWS for the fifth and subsequent qualifying periods. As a result, if passed, employers who have been in receipt of the CEWS in past qualifying periods will need to make sure to review their calculations to ensure compliance with any such new rules on a go-forward basis if they intend to continue participating in the temporary program.

Proposed Changes to Other COVID-19 Response Measures

In addition to the proposed amendments to the CEWS detailed above, Bill C-20 also proposes amendments to other pieces of legislation as part of the government’s ongoing response to the pandemic. Specifically:

It proposes changes to the Pension Act, the Department of Veterans Affairs Act, the Children’s Special Allowance Act, the Veterans Well-being Act and the Income Tax Act that would facilitate the administration of a one-time $600 payment to persons with disabilities in order to assist them with any new or additional expenses related to COVID-19; and
It proposes changes to the Time Limits and Other Periods (COVID-19) Act that would provide additional flexibility in relation to certain time limits and other time periods established by or under federal legislation and that have become difficult – if not impossible – to respect because of the consequences of the ongoing pandemic.

In Our View

Employers who have been able to recall employees from temporary lay-off as a result of the implementation of the CEWS may be pleased to hear that the Canadian government is taking steps to extend the program, as well as to widen its scope. Further details on these complex changes to CEWS can be reviewed in the Federal government’s Backgrounder: Adapting the Canada Emergency Wage Subsidy to Protect Jobs and Promote Growth, which provides tables and examples to outline the rate structure of the base subsidy and the top-up subsidy.

Emond Harnden will continue to monitor and report on developments related to the Federal government’s response to the ongoing COVID-19 pandemic and in particular, those that affect employers.

For further information or advice on your rights and obligations as an employer when dealing with COVID-19 and similar issues, please contact Kecia Podetz at 613-940-2752, Lauren Jamieson at 613-563-7660 ext. 236 or Erica Bennett at 613-940-2748.