April 2, 2020

McLennan Ross Update for Thursday

By McLennan Ross Labour & Employment Team

What we are seeing
  • The Government of Canada has finally announced the details for its proposed 75% wage subsidy program. The press release can be found here.
  • The following are some key takeaways:
    • Most businesses are eligible, with only public bodies being specifically exempted. The Government has indicated it will work with non-profits and charities to ensure the program eligibility requirements do not exempt them; 
    • The subsidy will be provided for up to 12 weeks retroactive to March 15, 2020;
    • Entitlement to the subsidy for the 3 four-week claiming periods will be measured by comparing monthly revenues for March, April and May 2020 with the corresponding monthly revenues for 2019. If an applicant company was formed after the applicable months in 2019, past monthly revenues will be compared to provide a reasonable benchmark; 
    • Employers will be eligible for a subsidy of up to 75% of the salary and wages paid to employees with the maximum subsidy being $847 per week per employee, including new employees, with no limit on the total subsidy paid to any employer. The subsidy will assist up to $58,700 in annual salary; 
    • The subsidy can be calculated on the employee’s current or pre-crisis remuneration, whichever is greater, with further guidance on how to determine pre-crisis remuneration to be provided shortly; 
    • Certain elements of remuneration will be exempted, as will severance pay, and special rule will apply to employees who are not arms-length from the employer (i.e., an owner-operator) 
    • Employers will have to make best efforts to top-up the remaining 25% of the eligible employees’ salaries. 
    • Any subsidy amount received by an employer will be considered government assistance and is to be included in the employer’s taxable income. Further, as amounts received are reimbursement of wages paid, statutory remittances on the wages themselves, including funded by the subsidy, still must be paid. 
    • It appears that applications will be processed without strict review of supporting financial information from the employer to verify eligibility. Amounts paid out to businesses who applied in good faith but who are subsequently determined to not qualify will have to be repaid. Penalties will be applied in cases of fraudulent claims. 
    • The Government may create new offences that will apply to employers who provide false or misleading information to obtain access to this benefit or who misuse any funds obtained under the program. The penalties may include fines or even imprisonment so will appear to apply not only to the employer as an entity, but also to a person who knowingly submits a fraudulent application on behalf of an employer.
  • Details regarding the application process are still to be released; however, employers will apply through the CRA’s My Business Account website. It appears that the portal to apply may not be open for approximately 6 weeks so employers should be prepared to wait up to 2 months before receiving the subsidy. The Business Credit Availability Program (BCAP) may be able to provide short-term liquidity for employers until the wage subsidy amounts are received. See details regarding the BCAP here
  • Although previously stated be a replacement for the temporary 10% wage subsidy program announced earlier, it appears both programs will remain; however, if an employer is eligible for both programs, any benefit from the 10% wage subsidy would generally reduce the amount available to be claimed under the 75% subsidy for the same period. 
  • As the Canada Emergency Response Benefit (CERB) to be provided to employees requires the applicant employee to have lost all income, these two programs cannot overlap. In other words, as per the press release, an employer would not be eligible to claim the 75% subsidy for remuneration paid to an employee in a week that falls within a 4-week period for which the employee is eligible for the CERB. Employers who are not eligible for the 75% subsidy would still be able to layoff employees who will receive the CERB.
What we are hearing
  • Government bodies appear to be still attempting to move matters forward, perhaps acknowledging the escalated demands which will be placed on them following the end of the current state of emergency. McLennan Ross LLP has continued to receive correspondence from the Alberta Employment Standards Board, the Court of Queen’s Bench, the Labour Relations Board, and the Alberta Human Rights Commission on outstanding matters. We expect this will continue so employers should expect that they may still be required to give instructions to legal counsel and to participate in hearings and meetings, albeit remotely.
  • We continue to watch for possible amendments to Alberta Employment Standards requirements, as has occurred in other provinces. This may occur very soon.
What we are saying
  • Some employers are having to terminate employees for reasons other than the pandemic or are faced with employees who have effectively resigned by subjectively refusing to attend at work despite there being no incidence of COVID-19 infection in the workplace. The question arises as to what information to provide on the departing employee’s Record of Employment (ROE) . We have provided some earlier guidance on completing ROEs here
  • Notwithstanding the pandemic and a desire to put the departing employee in the best position to apply for the CERB or for Employment Insurance benefits, we strongly advise against completing the ROE in a way which is not reflective of the true circumstances surrounding the employee’s departure. Not only is it important to be truthful on government documents, indicating that an employee was laid off or terminated in the circumstances when it was a resignation could create severance liability for the employer down the road. As with most things, honesty is the best policy.

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