April 17, 2020

McLennan Ross Update for Friday

By McLennan Ross Labour & Employment Team

What we are seeing

  • Prime Minister Trudeau confirmed that the government was expanding eligibility requirements for businesses to qualify for the Canada Emergency Business Account (CEBA). Previously, eligible businesses had to have a payroll between $50,000 and $1,000,000 annually. Following the expansion, businesses with a payroll between $20,000 and $1,500,000 are now eligible. The CEBA is a $40,000 interest-free, government-backed loan to help cover operating costs for eligible businesses during a period where revenues have been temporarily reduced.   
  • The $40,000 CEBA loan is interest-free, with a quarter of the loan being eligible for complete forgiveness if $30,000 is fully repaid on or before December 31, 2022. If the loan is not repaid by December 31, 2022, it can be converted into a 3-year term loan with interest starting to accrue.
  • The Government plans to introduce the Canada Emergency Commercial Rent Assistance Program, which will provide loans, including forgivable loans, to commercial property owners who will be required in turn to provide small businesses with rent reductions for April, May and June. The assistance is being rolled out in collaboration with the provinces and territories as rent policy is largely the responsibility of provinces and municipalities.
  • After a long wait, the Government of Canada today announced the following support for the energy industry:
    • $1.7 billion to clean up orphan and inactive wells in Alberta, Saskatchewan, and BC. This is expected to support jobs, including maintaining 5,200 jobs in Alberta, and help landowners affected by abandoned wells.
    • $750 million for an emission reduction fund to reduce methane emissions and create and maintain jobs in pollution reduction:
      • $75 million to help offshore industry.
      • repayable contributions to firms to reduce waste and pollution and protect jobs.
      • fixing issues such as methane leaks.
      • Re cash crunch for energy companies.
      • an estimated 10,000 jobs will be maintained.
    • BDC/EDC to expand credit support for at-risk medium sized companies.
  • The following additional support for small businesses was also announced:
    • $962 million to regional development agencies and the community futures network, to help smaller employers, especially in rural areas and businesses that do not have a relationship with traditional financial institutions
    • $270 million to support innovators and early stage firms who do not qualify for the CEWS.
  • $500 million is being provided to Heritage Canada for wage support and funding for liquidity problems.

What we are hearing
  • After a period of leveling off, the number of COVID-19 cases is again trending up based on the most current statistics provided by Alberta’s Chief Medical Officer , who believes that we have not yet seen the peak of COVID-19 in Alberta. However, the number of cases, hospitalizations, and deaths from COVID-19 are all below the expected levels based on the provincial models.
  • Dr. Hinshaw confirmed again the safety of working in meat packing plants and the steps being taken to maintain that safety.
  • Dr. Hinshaw reminded Albertans that golf courses and driving ranges are not an essential service, though many petitioners hope that status will be changed soon.
  • Alberta Health Services has issued 15 enforcement orders throughout the province related to COVID-19 concerns referred to as “a public health nuisance.”  
  • Despite the fact that all individuals within a business found to be in violation of public health, including owners, workers, volunteers, and patrons, are subject to a $1,000 penalty, some businesses have been trying to continue to generate revenue in order to survive the state of emergency.  Some have estimated that the restaurant industry has already lost 95,000 jobs since the start of the pandemic, with Restaurants Canada opining that it believes 10% of Alberta eateries have already permanently closed and another 18% of its Alberta members could be lost if conditions don’t improve by early May. It is not clear if these estimates take into account the additional assistance for small businesses recently announced by the Federal Government, though clearly there will be businesses lost as a result of current restrictions.

What we are hearing
  • Some employers were forced to implement a wage reduction once the statement of emergency was implemented as their revenue drop was immediate. These employers may now be seeking assistance through the Canada Emergency Wage Subsidy (CEWS), which provides a 75% wage subsidy to eligible employers for up to 12 weeks, retroactive to March 15, 2020 https://www.canada.ca/en/department-finance/economic-response-plan/wage-subsidy.html
  • We have been asked if the employer, when applying for the CEWS, must return employees to their pre-crisis wage. The answer appears to be yes. According to the CEWS information page:
    • The subsidy is up to 100% of the first 75% of pre-crisis wages or salaries of existing employees. 
    • Employers are expected where possible to maintain existing employees’ pre-crisis employment earnings.
    • The pre-crisis remuneration for a given employee is based on the average weekly remuneration paid between January 1 and March 15 inclusive, excluding any 7-day periods in respect of which the employee did not receive remuneration.
  • The intention of the CEWS continues to be that employees will receive 100% of their pre-crisis earnings, with the employer paying the remaining 25%, but this employer top-up is still described as an expectation, but not a program requirement and something an employer is only required to try to do on a best efforts basis. We have been provided with no guidance as to how the government will evaluate whether employers indeed made their best efforts to pay the 25% top-up amount.

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