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We write to summarize our current understanding of the federal and provincial programs announced to assist employers and employees through the ongoing COVID-19 pandemic. Given the rapidly changing nature of both the epidemic and the governmental response(s) thereto, we write to provide you with an update on the assistance programs that are available to you, your business, and to your employees as you work to navigate through this challenging and unprecedented time.
Advice for businesses
We understand that businesses need to be able to respond to downturns in economic activity swiftly. We also understand that this may involve making difficult decisions about laying off or terminating staff.
However, businesses must act cautiously when making such decisions as the Courts in both British Columbia and Ontario have consistently held that employers do not have a free standing statutory right to lay off their employees. An employee may be laid off only if such a right is:
Employers who lay off employees in contravention of their employment contracts are liable to provide those employees with reasonable notice or pay in lieu, resulting in potentially costly litigation and severance obligations. Similarly, employees who decline to consent to a layoff must be treated, and provided with notice, as though terminated without cause. The refusal of an employee to accept the proposed layoff is not a sufficient basis to allege cause for termination.
Whether the or not right to lay off an employee is contemplated by an employment contract, and whether or not a temporary lay off is appropriate for your business, requires both legal and factual analysis. As such, we suggest that you consult with our workplace law group before deciding to lay off or terminate an employee.
The Federal Programs
Assistance for Businesses
The Federal Government has put forth a three pronged response plan to assist Canadian individuals and businesses during the COVID-19 crisis. The following assistance programs are available to businesses which have suffered a loss in revenue as a result of COVID-19:
The CEWS is intended to help businesses stay open and retain employees during this period of economic downturn. The CEWS will subsidize 75% of the first $58,700 of every employee’s salary for a period of 12 weeks. This is equivalent to a maximum payment of $847 per week, backdated from March 15, 2020. The CEWS is available to businesses of all forms, sizes and sectors, from non-profits and charities, to large for-profit corporations. Moreover, there is no limit on the number of employee wage subsidies for which a business may apply.
Since publishing our last article on this subject we have learned more about the eligibility requirements of the CEWS. In order to qualify for the CEWS, a business must show that it has suffered a loss of at least 30% of its monthly gross revenue when compared to its gross revenue from the same month is 2019. Businesses that are not eligible for the CEWS may still qualify for a smaller wage subsidy, covering 10% of employee salaries up to a total of $25,000 per employer.
Where possible, businesses that are in receipt of CEWS assistance are expected to make “best efforts” to recall employees who have been laid off, and to pay the portion of their employees’ salaries that are not covered by the subsidy. Moreover, businesses have been warned that every dollar received through the CEWS must be used to cover employee salaries and that abuse of the CEWS will result in sanctions. Lastly, a business will not be able to claim a salary subsidy for an employee who is also in receipt of the CERB.
Applications for the CEWS will be administered though an online portal managed by CRA. More information regarding CEWS applications is expected to be announced in the coming weeks.
The Federal Government also recently announced that it will be making low interest credit available to businesses that have been impacted by COVID-19. The BCAP is composed of a number of programs administered by the Federal Government in conjunction with major financial institutions. The BCAP will make approximately $65 billion in direct lending available, at market rates, to viable businesses which may not otherwise be able to access credit. Businesses are advised to consult with their financial institutions to assess their credit and financing needs.
The BCAP includes the following programs:
The CEBA will provide interest-free loans of up to $40,000 to small businesses and not-for-profits to help cover their operating costs during the current economic downturn. Up to $10,000 of the loaned amount is eligible for forgiveness if the remaining $30,000 is fully repaid on or before December 31, 2022. To qualify for the CEBA, businesses will need to demonstrate that they paid between $50,000 and $1 Million in total payroll in 2019.
The Small and Medium Sized Enterprise and Loan Guarantee System will make cash flow term loans of up to $6.25 Million available to qualifying SMEs.
Lastly, the Co-Lending Program for Small and Medium Sized Enterprises will permit eligible businesses to obtain incremental credit amounts of up to $6.25 Million.
Additionally, the Federal Government has also announced that it will permit businesses and self-employed individuals to defer Goods and Services Tax and/or Harmonized Sales Tax payments, as well as duties charged on imports, until June 2020.
The programs that make up the BCAP will become available by April 17, 2020.
Assistance for individuals
The third, and final, prong of the Federal Government’s response package is the Canada Emergency Response Benefit (CERB). This benefit that will provide $2,000 per month to eligible Canadians who have lost their income as a result of COVID-19. The benefit period under the CERB is backdated to begin on March 15, 2020 and will extend until October 3, 2020.
While the CERB is taxable, deductions will not be made at the source, ensuring that the full $2000 monthly payment makes its way into the recipient’s pocket.
The CERB is available to individuals who:
For the purposes of the CERB, an applicant’s 2019 income may have been received from a combination of any of the following sources:
The CERB is available to employed or self-employed individuals who “cease working for reasons related to COVID-19 for at least 14 consecutive days within the four week period in respect of which they applied for assistance” and who have not received, or do not expect to receive income or benefits during that 14 day period. This contemplates those who have been laid off, terminated, or who have otherwise lost their ability to earn an income but who remain attached to their employment.
The Federal Government estimates that applications for the CERB will be available as soon as April 6, 2020.
In addition, the Government of British Columbia recently announced the B.C. Emergency Benefit for Workers (BCEBW). The BCEBW is a one-time, tax free payment of $1,000 which is available to B.C. residents who have lost the ability to work due to COVID-19. The BCEBW is intended to compliment the CERB and other available financial assistance programs. More information regarding eligibility and the application process will become available in the coming weeks.
We will continue to monitor the Federal and Provincial Governments’ responses to the COVID-19 pandemic to ensure that we can provide you and your business with the information you need to successfully navigate these uncertain economic waters.
We advise on, and are skilled in, all aspects of employment and labour law, including a wide range of issues which impact the workplace from both the employer and employee perspectives.
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