Written by Michael J Weiler Labour Relations Code amendments—Why are BC Fed officials smiling? On April 30th, 2019 the NDP government introduced Bill 30, the Labour Relations Code Amendment Act that fundamentally alters the law in favour of unions Bill 30 – Labour Code. The Act largely follows the recommendations of the Labour Relations Code Review Panel (the “Review Panel”) in its August 31st, 2018 Report (the “Report”) see Report of Review Panel.While employers may be thankful that Andrew Weaver stuck to his guns and forced the NDP to retain the secret ballot vote in certification applications, the reality is that employers, especially nonunion employers, need to take note of these changes as they may well have a profound impact on how business is done in BC. Further, the Report makes it clear that there may well be other changes following further consultations.Bill 30 comes on the heels of proposed amendments to two other pieces of employment legislation, namely:

• significant “worker favourable” changes to the Workers Compensation Act that have been introduced or will likely be introduced following further consultations; and
• significant changes to the Employment Standards Act that were introduced on April 29th 2019 in Bill 8. We will be posting a summary of Bill 8 on our blog website in the week of May 13th,

Nonunion employers in particular should become familiar with the certification process and the potential impact of the changes on your particular business once Bill 30 becomes law in order to develop effective strategies to respond to a union organizing drive.Bill 30 is aimed at increasing union power and union density. BC Fed President Laird Cronk summed it up nicely:“British Columbia remains a low-wage province, and precarious work is on the rise. The best antidote to economic inequality is greater union density.”Furthermore, the changes proposed in Bill 30 create uncertainty for employers and will undoubtedly increase litigation as the Labour Relations Board (the “LRB”) sorts out what the changes mean and how they are to be applied. Further consultations recommended by the Review Panel will likely produce more legislation down the road (for example, in the forest industry). One thing remains certain—the changes in Bill 30 are, for the most part, intended to increase union density and security and will likely be interpreted by the LRB with that in mind. The LRB will likely rely on the Report as well as Hansard debates in interpreting the new provisions as well as the old (e.g. sections 6(1) and 8) of the Code.Here then is a brief summary of the provisions. As noted, this summary is prepared based on the legislation tabled in First Reading. The reader will have to consider any changes between now and the time Bill 30 is proclaimed into law. DEFINITION OF BUSINESS DAY SECTION 1(1)(a)Section 1 of Bill 30 adds a new definition, namely, “business day”. That term is defined as a day other than Saturday, Sunday or another holiday. This amendment is made to define the 5 business days notice now required between the application for certification (or decertification) and the secret ballot vote (see sections 24 and 33 discussed below).DEFINITION OF PICKETING SECTION 1(1) (b)In 1999, the Supreme Court of Canada struck down the definition of “picketing” under the Code because the definition encompassed consumer leafletting. The SCC held that consumer leafletting was freedom of expression protected by the Charter. Section 1 of Bill 30 excludes from the definition of “picketing”, consumer leafletting that does not unduly restrict access or egress or prevent employees from working at their place of employment. Hopefully this will be seen as a housekeeping measure and not a call to increased consumer picketing.CONTINUING REVIEW OF THE CODE SECTIONS 3(3)-(6)Every 5 years the Minister must appoint a committee of special advisors to undertake a review of the Code and make recommendations. See section 2 of Bill 30.EMPLOYER FREE SPEECH SECTIONS 6(1), 8 and 123.In 2002, the Liberal government made two fundamental changes to the Code that had been amended by the NDP in 1992. The 1992 NDP amendments introduced sweeping changes in favour of unions and, not surprisingly, union density increased. The 2002 Liberal amendments restored some of the balance lost in 1992 by (a) reinstating the secret ballot vote in union certifications; and (b) expanding and widening employer free speech.Bill 30 returns to the restrictive practices of the 1992 Code by reversing the 2002 Liberal amendments to sections 6(1) and 8. We will have to go back and look at the LRB’s jurisprudence from 1992 to 2002 to consider how restrictive these changes might be and how the current LRB might interpret those changes. It is difficult to reconcile the Review Panel’s desire to modernize the Code in a changing world through “déjà vu all over again” amendments like these.Recognizing the return to restrictive employer freedom of speech, the Review Panel noted in its Report that the LRB was better equipped to provide “objective neutral information that best assists the exercise of employee choice”. The Review Panel recommended detailed provisions on how that information should be provided. Bill 30 does not follow the specific recommendations but rather amends section 123.1 of the Code to require the LRB to make available to the public information about rights and obligations under the Code. It also gives the LRB the power to direct employers to make available to employees “information about rights and obligations under this Code” as “provided or approved by the board.”REMEDIAL CERTIFICATION WITHOUT A VOTE SECTION 14 (4.1)The Code provides the LRB with a very broad remedial authority including requiring an employer to reinstate an employee; ordering a second vote; and requiring an employer to post its decisions at the employer’s place of business. The LRB has always had the power in the face of egregious unfair labour practices to order a certification without a vote. The current language of the Code gives the LRB the power to order remedial certification if it were likely that the union would have obtained the majority support of the employees “but for” the egregious unfair labour practices. That “but for” restriction is removed by section 5 of Bill 30 and replaced with: “the [LRB] believes it is just and equitable in order to remedy the consequences of the prohibited act”. At this stage, no one knows exactly how the LRB will exercise its very broad discretion under this amendment.This is a major change in my view that, coupled with changes to employer free speech, might well see a significant increase of remedial certifications issued by the LRB. The Review Panel’s comment, at p. 10 of the Report, that “In our view, remedial certification is the most effective deterrent and remedy for unfair labour practices” suggests this result.The impact of this change will be felt in other areas of the Code, such as the imposition of a first time collective agreement under section 55 of the Code. Now the LRB will be able to take the conduct of the employer, before and after certification, into account in exercising its discretion.RAIDS SECTIONS 19 AND 27.1Under the current provisions of the Code, if an employer is certified to and has a collective agreement with Union A, Union B can apply to take over that certification and collective agreement and step into the shoes of Union A. Such applications must be made during the 7th and 8th months in each year of the collective agreement.Bill 30 makes two key changes.First, section 6 of Bill 30 replaces section 19 of the Code. Under that new section 19, the new “raiding rules” are:(a) if the collective agreement is for a term of 3 years or less, then the raid can only take place in the 7th and 8th month of the last year of the agreement;(b) If the collective agreement is for a term of more than 3 years, the raid can take place in the 7th or 8th months of the third year and thereafter in each subsequent year of the agreement; and(c) a raid can take place in both (a) and (b) above, in the 7th or 8th month of any subsequent year of the collective agreement and/or a continuation of the collective agreement.Special conditions apply where “a majority of employees [are] primarily engaged in construction work” in which case a raid may take place each July or August of each year of the collective agreement. “Construction” was defined by the Review Panel in the Report, but Bill 30 does not define “construction work”.Second, section 8 of Bill 30 adds a new section 27.1 to the Code. It provides that, if a union is successful in raiding a bargaining unit, it may apply to the LRB to have the collective agreement declared “expired”. If it is successful in its application to the LRB, the union is not bound by the collective agreement of the incumbent union and can require collective bargaining to begin. Bill 30 does not set out the criteria to be considered in making such decisions, but the LRB might well look to the Review Panel’s Report for guidance. The Review Panel recognized that reopening collective agreements could have serious consequences and suggested, at p. 18 of the Report, that the exercise of this discretion should only be used “in extra-ordinary circumstances having regard to [the successor union’s] Section 2 duties”. Many employers rely on the certainty of a collective agreement in organizing their long-term business objectives and, in many cases, long term agreements reflect the employees’ recognition it is in their interests to do so. However, the one example the Review Panel gives is scary. The Review Panel, at p. 18, suggested one example of where the collective agreement could be voided would be where the “terms of the collective agreement are clearly inferior to the norm in the sector.”TIME LIMITS ON APPLICATIONS FOR CERTIFICATION SECTION 24 AND DECERTIFICATION SECTION 33Under the current Code, when a union applies for certification, the LRB must order a vote of employees in the bargaining unit within “10 days”. During that time, the LRB will direct a special officer to review payroll records and prepare a report to decide, for example, if the union has the threshold 45% of employees signed up to proceed with its application and to identify any issues that might arise (e.g., inclusions/exclusions, appropriateness of the bargaining unit etc).The special officer will also schedule a tentative vote within the 10-day period. The LRB will schedule an immediate hearing to consider if the union has the threshold support, confirm the vote and timing and hear any objections that might arise.Consequently, there is very little time, even under the current system, for a non-union employer to seek legal or other advice on the process; obtain the data required; understand its rights and obligations; and implement a communication strategy that is both effective and in accordance with the restrictions of the Code. That communication statement must be in accordance with the changes and restrictions on employer free speech in the amended sections 6(1) and 8 of the Code (See: “EMPLOYER FREE SPEECH SECTIONS 6(1), 8 AND 123.1” above). That will require more risk management assessment.Section 9 of Bill 30 amends the timeframe to require a vote within “5 business days” (see new definition above) instead of the existing 10 days. It also provides for mail ballots in exceptional circumstances. Bill 30 also amends the time limits for a secret ballot vote in a decertification application to 5 business days.This time period between the application for certification and the secret ballot vote can be very critical. For example, a union may file its application just before 4 pm on a Monday and the employer may not become aware of it until sometime the following day. The vote would be held on the Friday at the latest. As well the union has control of the timing when the application will be made. That means it can file its application for example at a time when it knows senior management may be away and unable to respond to the application. As well, the Review Panel recommended that Regulation 3 of the Code be amended to expand the time union membership cards are valid for use in a certification application from 90 days to 6 months. This Regulation has not yet been amended, but likely will be once Bill 30 becomes law.This is why we recommend that nonunion employers learn more about the certification process and the issues well in advance of any organizing drive or application for certification. We hope that you never need to use this information, but your motto should be “BE PREPARED”. Let’s hope you never need to mobilize your strategy in a short time period but, having done your preparation, you will at least be in a better position to implement an effective strategy.Note also that the decertification provisions have extended the time another union can apply to certify a unit that was decertified from “10 months” to “12 months”.SECTION 35 SUCCESSORSHIP WHEN SERVICE CONTRACTS ARE RETENDERED SECTION 3Section 35 of the Code provides that if a business or part of a business is sold, leased, transferred or otherwise disposed of, the successor employer will assume the obligations of the vendor including a certification and collective agreement.However, it has long been recognized by the LRB, that the successorship provisions do not apply to contracting out or re-tendering of contracts. This approach is consistent with the fundamental premise of the Code that certifications do not attach to the work but to the business and the employees.Bill 30 makes very significant changes to successorship rights where there is contracting out or re-tendering of a service contract.Section 10 of Bill 30 amends section 35 of the Code by adding a new definition of the term “contract for services” as meaning any contract for:

• Building cleaning services
• Security services
• Bus transportation services
• Food services
• Non-clinical services provided in the health sector (including a lengthy definition of non-clinical services)
• And any other services the NDP prescribes

It is noteworthy that these definitions go well beyond the suggested definitions in the Review Panel’s Report that limited food services to those in the health sector (see p. 12 of the Report). And without any restrictions on what other services might be caught down the road employers cannot have the certainty such legislation requires.The new section 35 of the Code goes on to provide that if contracts for services are “retendered and substantially similar services continue to be performed, in whole or in part, under the direction of another contractor”, the contractor is bound by all proceedings under the Code prior to the date of the contract and the collective agreement continues to bind the successor contractor. The problem with this amendment is that, in the ordinary successorship, there is a business relationship between the vendor and purchaser—under these amended provisions there will likely be no contact with the contractor who lost the contract. As a result, the successor employer will be bound by the predecessor’s collective agreement and other proceedings under the Code, but will not have access to the normal business documents and records regarding the employees and the union.In order to avoid any opportunity for an owner of a business or a contractor to address these situations, this amendment is made retroactive and is effective the date of the First Reading.This will likely be one of the most problematic amendments of Bill 30. The definition of services is unclear and there is no way of knowing what other services will be included by Regulation. Will landscaping be added? What if the successor contractor has a collective agreement that covers employees in a number of locations? What if a business has contracted for certain services and it is found the contract is totally unsustainable? The new contractor must negotiate a contract with the owner of the business but is bound by a collective agreement that may be too rich and not reflect the business realities.Why should a small group of unionized employees be able to get a lifetime job security attached to the work whereas the vast majority of employees do not enjoy that type of job security? To raise the questions is to answer them—these amendments have not been well thought out and the cost implications could be huge.Ironically unionized service contractors will now find it much hard to get contracts for fear of the successorship provisions.The problem with the amendments to section 35 of the Code is that they ignore today’s business reality. Many employers, large and small, make a solid business decision to contract out non-core parts of their business. This promotes efficiency and supports the success of the business for the owners as well as the employees of the main business. Why should that fundamentally sound business model be interfered with in this way?STATUTORY FREEZE AND REQUIREMENT OF PROPER CAUSE SECTION 45Under the current section 45 of the Code, if a union is certified, there is a statutory freeze on wages and other terms and conditions of employment for 4 months. In section 11 of Bill 30, that time period has been increased to 12 months. Under the current section 45(4) of the Code, an employer can only terminate an employee for “proper cause” during this extended period.Further, if an application to impose a first collective agreement is made during the 12-month “freeze”, and that process has not concluded, the freeze will continue until the conclusion of the process related to the imposition of the first collective agreement.FILING A COLLECTIVE AGREEMENT WITHIN 30 DAYS AFTER EXECUTION SECTION 51This provision has historically been honoured more in the breach than in compliance. In order to encourage the parties to file the agreements, section 12 of Bill 30 adds a new subsection to section 51 that provides that if the collective agreement is not filed the [LRB] may decline to consider the collective agreement in any proceeding before the [LRB].”Not sure how effective this “hammer” will be.JOINT CONSULTATION COMMITTEES SECTION 53(5)In an effort to improve the collective bargaining relationship, section 53(5) of the current Code provides that the LRB “must on the joint request of the parties appoint a facilitator to assist in developing a more cooperative relationship between the parties.” Bill 30 provides that such a request can now be made by either party.ADJUSTMENT PLANS SECTION 54 (2.1) – (2.5)Section 54 of the current Code provides that if the employer plans on introducing major changes affecting the employment of a significant number of employees, it must give at least 60 days’ notice and must meet with the union, in good faith and endeavour to develop an adjustment plan. Section 14 of Bill 30 amends section 54 to provide that, if the parties haven’t agreed to an adjustment plan, either party may apply for mediation. While the mediator may make recommendations, he/she cannot impose an agreement.FIRST TIME COLLECTIVE AGREEMENTS SECTION 55As noted above (see: “REMEDIAL CERTIFICATION WITHOUT A VOTE SECTION 14 (4.1)), under Section 55, the associate chair can, following mediation, set a process for concluding a collective agreement that may include arbitration or allowing the parties to strike or lockout. Before that application can be made, however, the current provision requires that the employees have voted to go on strike. This requirement has been removed (see section 16 of Bill 30). Without a strike vote, unions can now try to obtain an arbitrated first collective agreement without having confirmed the employees support the union’s position.Under these amendments, if the certification is a remedial certification following an unfair labour practice, the mediator, in making recommendations, and the associate chair, in deciding whether to impose arbitration, can each look at the conduct of the parties both before and after certification.My sense is this will end up with more arbitrated first-time collective agreements where the employees do not have the desire to strike.ESSENTIAL SERVICES SECTION 72Education will no longer be an essential service. What is interesting is that the Review Panel noted at p. 28 of the Report that “Education services that may be truly essential (such as grade 12 examinations) would continue to be captured by the Board’s interpretation of the term “welfare”. See section 16 of Bill 30.INDUSTRY COUNCILS SECTION 80These amendments will allow the Minister to establish Industry Councils with specific mandates. See section 17 of Bill 30.SETTLEMENT OFFICERS SECTION 87(1)Currently, a settlement officer can only be appointed after 45 days of the completion of the grievance procedure. That time limitation has been removed. See section 18 of Bill 30.CASE MANAGEMENT CONFERENCES SECTION 88.1In order to move arbitrations forward, this amendment provides that, within 30 days of the appointment of an arbitration board, the arbitration board must conduct a case management conference to exchange information and documents, schedule hearing dates and encourage settlement of the dispute. See section 19 of Bill 30.APPEAL TO THE COURT OF APPEAL SECTION 100Over the years there have been a number of cases where one party wants to appeal an arbitration award. Generally, that application would be made to the LRB under section 99 of the Code. But the Code provided, in section 100, that certain reviews had to go directly to the Court of Appeal. The line of demarcation was not clear. Section 20 of Bill 30 attempts to limit the jurisdiction of the Court of Appeal to matters of “general law” that are not included in section 99 and are “unrelated to a collective agreement, labour relations or related determinations of fact”. While helpful in narrowing the court’s jurisdiction, there will certainly be a period of litigation as the court sorts out what specific jurisdiction it retains.EXPEDITED ARBITRATION SECTION 104Section 21 of Bill 30 attempts to streamline the process for expedited arbitration by, among other things, eliminating and replacing existing time limits and providing for oral decisions followed by a written decision not exceeding 7 pages within 30 days. This brings to mind the difficulty arbitrators may have in sticking to the limited number of pages: “I was going to write you a short letter but I did not have time…”LIST OF EMPLOYEES SECTION 140Section 23 of Bill 30 amends section 40 of the Code to allow the LRB to order an employer to provide a list of employees in the proposed bargaining unit within the time specified by the LRB. It is not clear what the LRB will do with the list. The Review Panel did not propose the production of employee lists to a union prior to an application for certification but this amendment is not specifically clear enough to describe how such a list will be used.FINES SECTION 158In order to enhance enforcement of LRB orders, the fines for individuals will go from $1,000 to $5,000 and for corporations or trade unions from $10,000 to $50,000. See section 25 of Bill 30.SUMMARYBill 30 is a major piece of labour reform brought about by the NDP’s commitment to expand union bargaining rights. It is consistent with other initiatives of the NDP such as the all Building Trades Project Agreements for major construction in B.C. (e.g., the Pattullo Bridge). There may be a debate in how far the pendulum has swung but there is no doubt we are once again in a pendulum mode of creating labour legislation in B.C.We strongly encourage employers to consider their options at this time in order to prepare for any union organizing drive that might come your way or the impact of the other provisions of Bill 30 on your business.If you have any questions regarding the above please do not hesitate to give me a call or drop me an email at [email protected]The content in the Michael Weiler Employment + Labour newsletters and blog is for your general information and should not be taken as legal advice. Further, this review is simply a summary of some of the key items of Bill 30 as it stands at First Reading. There will very likely be changes before Bill 30 becomes law. If you have a specific problem, please contact Michael Weiler to discuss your situation.

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 Our Labour Law specialist, Mike Weiler shares his expertise in the New Car Dealers Association of BC magazine Signals, on how recent changes to the Labour Relations Code make it easier to unionize. 

Read Mike’s article on page 23 in the magazine's digital version here: https://issuu.com/blvdmag2/docs/2020_04_signals_aprmayjun_hr

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Mike Weiler wrote this article for the Spring Issue (April - June 2020) of the Signals Magazine, publication for members and friends of the New Car Dealers Association of BC - read the issue here.

LABOUR RELATIONS CODE CHANGES—WHY ARE B C FED OFFICIALS SMILING?

When the NDP formed government in 2018, they substantially altered employment laws in support of unions.  This reflected the pendulum swing of labour reform in BC upon change of government. Significant changes were made to Employment Standards, Human Rights, and the Workers Compensation Act where the NDP plans to implement the findings of 4 Reports, most of which will make employers’ lives more complicated and expensive.

The NDP also struck a 3-person Panel to review the Labour Relations Code (“Code”) as they had done in 1992. On May 30th 2019 Bill 30, the Labour Relations Code Amendment Act, was passed into law.

Space does not permit a thorough review of all the changes to the Code. This article focuses on those which make it easier for a union to certify a non-union car dealership or expand its certification in a partially-unionized one. While these changes have not received much fanfare, it is our view that the worsening economic conditions in BC will create greater opportunity for unions to utilize these rules to increase membership, which will result in costly and burdensome collective agreements that are counterproductive to the workplace.

UNFAIR LABOUR PRACTICES, EMPLOYER FREE SPEECH AND REMEDIAL CERTIFICATION

These changes were to be expected. Changes were made to the Code to enhance union organizing rights.  BC Federation of Labour president Laird Cronk summed it up nicely:

           “British Columbia remains a low-wage province, and precarious work is on the rise.  The best antidote to economic inequality is greater union density.”

Three key changes make it harder for employers to fend off a union organizing drive.  This increased risk of unionization applies to both non-union operations and the non-union departments of a unionized car dealer where the union seeks to organize the remaining employees.

First, the new Code restricts employer free speech.  In 2002 the Liberals expanded employer free speech in section 8 of the Code to allow the employer to discuss almost any topic, including unions, without running afoul of section 6 (which prohibits an employer from interfering with a union). Under Bill 30, section 8 protection now only applies to “facts or opinions reasonably held with respect to the employer’s business”.   If it feels like “déjà vu all over again” it’s because this was the language of the Code under the NDP from 1992 to 2002.

Secondly, the time period for the certification vote has been reduced from 10 days to 5 business days from the time of the application.  This is a huge advantage to the unions especially because they control the timing of filing (perhaps filing at 3:59pm on a Friday so the employer won’t find out until Monday).  Employers who don’t anticipate the application have little time to prepare their strategy and avoid unfair labour practices (“UFLP”).  This past Christmas our client faced a certification application filed Friday December 20th with the vote scheduled December 27th.  You can imagine how difficult it was for the employer to properly respond.

Thirdly, the power of the Labour Relations Board to order automatic certification without a vote to remedy an UFLP has been broadened to allow such a Draconian remedy whenever the LRB “believes it is just and equitable in order to remedy the consequences of the prohibited act”.  We don’t yet have any decisions on this provision, which leaves much uncertainty for employers who might cross the line and commit an UFLP.

For those who think these changes will not be significant or that there won’t be further changes I refer to the following passage from the Review Panel’s Report:

           “The Panel is acutely aware the secret ballot vote can only be an effective mechanism for employee choice if the Code deters and prevents employers from engaging in unfair labour practices and provides meaningful consequences for such practices.

           The exercise of employee choice through certification votes must be protected by shortening the time-frame for votes, ensuring the expeditious and efficient process for certification applications and unfair labour practice complaints, together with expansion of the Board’s remedial authority. If these enhanced measures are not effective, then there will be a compelling argument for a card check system.”

SUMMARY

These changes are huge for dealers faced with a certification application. Therefore employers are wise to consider the very real possibility their operations may be organized and take steps now to prepare.

*After this article was prepared the LRB issues its first decision interpreting the new remedial certification provisions. The Board ordered remedial certification where wo union organizers were terminated just as the union organizing drive started. The LRB gave a very broad interpretation to these new provisions: see Salade ETCETERA Inc., 2020 BCLRB 34. A more detailed summary will be posted in a new blog article soon.

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On May 5, 2020, we had the pleasure of hosting a webinar for the New Car Dealers Association of BC and its members, with CEO Blair Qualey. We heard from car dealerships from across the province and answered their questions about CEWS, CERB and more. We thought the information covered should be shared with our communities as well, and this is how this post came about.

**Please be advised that this Q&A is only applicable to the first four reporting periods of the CEWS (March 15 to July 4). For reporting periods after July 5, 2020, please stay tuned as the federal government is in the process of introducing amendments to the CEWS program that would result in new formulas for calculating the subsidy amounts. We expect to have further updates as more information becomes available.***  

On March 27th 2020 the Prime Minister announced a wage subsidy of 75% for qualifying businesses, and on May 8, 2020 he announced the program will be extended past June. The legislation allows for extension by regulation up to September 30, 2020 but further details will be released soon.  

This program is the most important and fundamental initiative in the Federal Government’s COVID 19 strategy.  Over the last few weeks we have covered the program, and other support programs extensively in our other blog posts, which we invite you to browse for more information - read our previous articles here.

Kane Shannon Weiler LLP wants to be there for our communities during these unprecedented times, and support businesses and individuals by sharing as much knowledge as we can.

Please remember that this information is general information and should not be taken as specific legal advice to your particular issues. Each case is analyzed to its particular facts. Also, the government makes changes on daily basis. Finally, please note that the notes below are only a condensed outline of the full questions and answers provided during the webinar. If you are dealing with any of these particular questions, we recommend that you contact Mike or Chris for legal advice.

Overview of CEWS (Canada Emergency Wage Subsidy):

The CEWS application has 4 parts:

1. Are you an eligible employer? Do you meet the revenue decline test? this a calculation you do prior to the application, several ways of doing this calculation. Once you choose a method you have to use the same one for the next periods. If you qualify for one period, you automatically qualify for the next period.

2. Who are your eligible employees? 1) Employed by a business in Canada, 2) and not without pay for a period of 14 days consecutive during the claim period. If that employee did not receive pay for 14 consecutive days in the claiming period, then that employee is not eligible – this way their won’t be doubling up for employees to use the CERB and CEWS.

3. Calculate the subsidy - Use the excel calculator spreadsheet provided on the government website. It allows you to put the date for each eligible employees you have for the claim period. You enter the pre-crisis weekly earnings, whether the employee is non-arms length, and the amount paid to the employee during the claiming period. The calculator will then provide the basic subsidy amount.

4. Apply for the CEWS online. You do this through your CRA MyBusiness Account. You can use the data from the spreadsheet calculator for the eligible remuneration and subsidy lines. There are lines to enter CPP/EI contributions for employees on payroll but not working (called furlough), which are refundable. There are also lines for the 10% subsidy, which is deducted, along with wages paid to employees on work-sharing. Finally, there is an attestation required to certify the application is true and accurate. There are significant penalties and even criminal liability for making fraudulent or other misrepresentations to CRA so use caution. If you have direct deposit set up, you should have the funds in your account in approximately 10 days.

CEWS, CERB and other programs — QUESTIONS and ANSWERS from webinar

1. Would like some clarification around how the employee is impacted if they received CERB and we call them back? Is it better to not claim CEWS for them during that CERB cycle so that they are not impacted by having to pay it back

Employee can earn up to $1,000 a month and still be eligible to CERB. If you are want to bring an employee back and still have them getting the CERB try to not pay them over $1000 a month so they will continue being eligible. If you pay them over $1000 a month they will no longer be eligible and they will have to pay the CERB back what they received. Consider if there is any risk associated with reducing their hours/wages or bring them back part time instead of full time which could lead to constructive dismissal and severance pay.

2. Are employees able to repay a week at a time back for the CERB if we rehire? The CRA Excel form automatically shows zero if you select the employee is not arm's length. If the employee's wages do qualify, do you select no? We laid employees off in March and then closed for 2 weeks. Do we not qualify for the subsidy for the 1 week they worked?

If you re-hire during the CERB cycle and pay more than $1,000 in the claiming period, the employee will be disentitled to the CERB for the rest of the claiming period and will have to repay any CERB amounts received. For non-arm’s length employees, you can only claim the subsidy based on pre-crisis earnings. As long as they were already on payroll before March 15, 2020, you should be able to calculate the subsidy using the spreadsheet. Regarding the employees that were laid off in March, you must review the definition of eligible employees to determine if they were without remuneration for 14 consecutive days in the claiming period. If they were then they are not eligible employees and you cannot claim the CEWs on the wages paid to them during the claiming period.

3. We pay our employees semi-monthly. To calculate average weekly for those paid commission or flat rate should we divide their earnings from Jan 1 to March 15 by number days worked plus vacation days plus stat days and multiply by 5 (for full time)? So basically divide by 10.6 weeks? Just want to do the same calculation that CRA would be doing. "

The definition of baseline remuneration is as follows: “the average weekly eligible remuneration paid to the eligible employee by the eligible entity during the period that begins on January 1, 2020 and ends on March 15, 2020, excluding any period of seven or more consecutive days for which the employee was not remunerated.” So this person is exactly right – you want to take the total eligible remuneration actually paid to the employee and divide by the total number of weeks over which it was paid. The Excel calculator only provides for weekly and bi-weekly pay periods –so for those with semi-monthly pay periods you just have to normalize the calculations by figuring out the weekly average. We’ve learned that CPA Canada has asked the CRA to include semi-monthly as an option so hopefully that’s coming in the next version of the calculator.

4. What are our rights when an employee who has been called to come back to work and they want to stay on lay-off?

First thing, when you make the decision to call someone back, check the amendments to the Employment Standards Act, if you are an eligible employee you are entitled to an unpaid leave. Type of leaves that are there:

• If they have been diagnosed positively.
• Quarantined during self isolation not just voluntary but in accordance to some regulation or order.
• The employer due to the employers concerns about the employer exposure to other has directed the employee to not work.
• If they take care of people who are diagnosed.

Have ongoing communication with your employees that are on leave so that you will not be blindsided and they will not be as well. If they refuse to come back to work, try to understand why.

5. If the company paid employees on 3/31/2020 for the pay period is 3/9/2020-3/24/2020, we should use the pay date to calculate the subsidy or the pay period?

Subsidy is based on the amount actually paid during the relevant pay period March 15 – April 11th. Exclude March 9-14th, and start counting on March 15 and include anything paid up to April 11. This employer next pay period would be March 25 to April 8. All earning to that pay period. And then 3rd pay period April 9/10/11 and combine those three to total the amount paid to the employee during the first claiming period. You can claim wages that were paid for the specific period - “It is not when they were earned (wages) but it is when they were paid”.

6. If we laid off the employee on 3/28 and paid him on 3/31 and rehire him on 4/10/2020, but paid him on 4/30/2020 for the period from 4/10-4/24, which claim period we can include his wage?

“It is not when they were earned (wages) but it is when they were paid”. This employer would claim the wages paid for the period between March 15 and March 28 PLUS the wages paid for April 10 and 11 – which is just the first two days of the second pay period. The rest of that pay period would go on the second claiming period: April 12 to May 9.

7. How does the 10% wage subsidy impact the 75% wage subsidy calculation?

Any amounts that you have already claimed under the 10% claim will be deducted from the 75% for the specific period. So you will be receiving 65%.

8. What is the impact of withholding federal tax and not withholding federal tax for the 10% subsidy?

You have to withhold to get this subsidy as there is no other way to get it.

9. Is the criteria for qualifying for the 10% subsidy different than the 75% subsidy? What are the differences?

For the 10% you do not have to show any drop in revenue, you will automatically qualify if your taxable capital is less than $15 million in the previous tax year. Main difference is that 10% is limited to $25,000 total per employer and up to $1375 per employee for the 3 month period it applies – focus more on small business. Rather than the 75% that has no overall limit on what a business can claim.

10. What is the proper way of claiming the wage subsidy for commission sales people? Average from last year? Actual sales from the period claimed?

Focus is on the wages actually attributed to the employee’s payroll in the claiming period, not amounts that might have been “earned” but will be added to a later payroll period, because the subsidy is based on what you have actually paid the employees. The payment could be for commission earned for pervious months or years but it is shown on payroll in the claiming period, so it qualifies.

11. I read that once you are eligible for one period of subsidy, you automatically qualify for the next period, even if you are not below the 30%. Can you confirm that this is true?

This is true.

12. Sales commissions and monthly bonuses paid for reaching targets at month end. For CEWS are we able to take commissions paid and average them over 4 weeks in the month or are they treated as earned when paid. Also, can bonuses paid in May that are for targets reached in April considered as April earnings or do they have to be calculated as May?

Only look at amounts attributed to the employee’s payroll during the claiming period and not at amounts earned. Bonuses paid on May payroll for targets reached in April will go on the May claiming period when they are actually attributed to the employee’s payroll and paid by the employer.

13. If a company has more than one pay period type with different pay periods that fall within each of the CEWS periods do we wait until the last pay period's pay date occurs before a claim can be made or can multiple claims per period be made?

You can only make one claim per claiming period, if you have multiple pay periods within that claiming period best practice to wait until you paid all the amounts you are going to be paying eligible employees before you are making the application. You have to pay the money before you get the subsidy. If you have to wait to May 10th, wait. Pay the money and then make the application.

14. Are automobile benefits included in the total remuneration paid to an employee?

Yes, if it’s the taxable portion of the benefit.

15. As part of the conditions of receiving the CEWS, is an employer supposed to be topping up current wages to the pre-crisis baseline amount?  In an Apr. 11 update it stated  %22These employers are expected where possible to maintain existing employees' pre-crisis employment earnings.%22  But I haven't seen anything on this topic in more recent updates." open="on" _builder_version="3.19.18"]

Nothing in the legislation itself that requires you to do that, if you do bring someone back at a reduced wage, you are not required to top them up to receive the CEWS.  Nothing in the attestation either that requires the employers to certify that they are doing everything they can to top up the employee pre-crisis wages. The government has backed away from this position a bit in the sense that there do not appear to be any legal consequences for not topping up to pre-crisis earnings.  

16. When bringing laid off staff back, do you have to bring them back in order of seniority?

Generally, no, unless they you have a collective agreement and you have to deal with the union on who gets called back. Secondly, the Employment Standards Act -  check on updates if they are entitled to the COVID-19 leave.

17. If an employee is asked to quarantine by health officials, and then there is no work to come back to, do you amend the role from sickness to lack of work?

Yes – in this case you likely would have issued the first ROE with code “D” for sickness. If the reason for the interruption in earnings has changed, you want to issue a new ROE coded as “A” for shortage of work.

18. Regarding the BC Emergency Benefit for Workers, the one time $1,000 payment from the BC government according to the website, it says that in order to be eligible you must “have been approved for the CERB”. What if some of the employees that we temporary laid off was approved for EI instead of the CERB, can they still apply for the $1,000 BC emergency benefit even though they didn’t apply for the CERB because they were approved for EI instead?

In order to be eligible for the BC Emergency Benefit for Workers (BCEBW), individuals must:

• be a resident of B.C. on March 15, 2020;
• meet the eligibility requirements for the CERB, i.e.:
• Received at least $5,000 of income in 2019 or in the 12 months before the application;
• Ceased working for at least 14 consecutive days for reasons related to COVID-19 (e.g. sickness, quarantine, caregiving of family member due to COVID-19)
• Not received more than $1,000 in income during the benefits period;
• have been approved for the CERB, even if a federal benefit payment has not yet been received;
• be at least 15 years old on the date of application;
• have filed, or agree to file, a 2019 B.C. income tax return; and
• not be receiving provincial income assistance or disability assistance.

We note that for anyone who became eligible for EI regular or sickness benefits on March 15, 2020 or later, their Employment Insurance claim will be automatically processed through the Canada Emergency Response Benefit (CERB). As such, any employees laid off after March 15, 2020 should have their claim processed under CERB and not under the pre-existing EI rules and should therefore be eligible for the BCEBW.

19. Is it correct that you cannot claim the CEWS on wages paid to an employee that is collecting CERB? I thought this is what was said in one of the Dealer Pilot webinars.

The definition of “eligible employee” in the CEWS legislation requires that the employee was not without remuneration for 14 consecutive days or more during the claiming period. This was originally how the CERB eligibility was defined. Thus, if the employee is receiving CERB, it is possible they are not an eligible employee. To determine if the employee is eligible for CEWS, check your payroll records for the claiming period. If the employee was without pay for 14 or more consecutive days, then you cannot claim the CEWS on any wages paid during the claiming period.

20. Have there been any updates on the special code that is supposed to be used to report wage subsidy amounts on T4’s?

That question is not within our expertise as employment lawyers. I would suggest checking with your accounting or tax professional.

21. Don’t you have to deduct the TWSE from your CEWS claim regardless of whether you have claimed the TWSE or not?

No. You don’t have to deduct the 10% temporary wage subsidy from the CEWS unless you have actually claimed it. If you have not claimed it, you enter “$0” in Line F of the online application.

22. I have had different advice on the calculation of wages for the purposes of the CEWS claiming periods in that you must calculate those wages that were earned and paid with respect to each week. As such, the calculation is on an earned basis, not on a paid basis meaning that where the dealership’s pay periods does not line up with the claim period of March 15-April11 (which is likely the case). You will need to calculate what the employees earned for each week.

There is a key difference between “earned” and “paid” during the claiming period. For example, something can be earned during the claiming period but actually paid out for on a different claiming period. For the CEWS, our interpretation is that you look at the paid wages attributed to the employee during each week of the claiming period. What does their paycheque say they earned for that period and has it actually been paid? The wages may not have actually been paid during the claiming period (if the pay date falls after the pay period) as long as the wages have been paid before you make your application, they can be claimed. In essence, you look at the wages paid to the employee for each week in the claiming period.

Note to our Readers: Information regarding COVID-19 is rapidly evolving. We are working to bring you up-to-date articles as the legal issues unfold. This is not legal advice. If you are looking for legal advice or are dealing with an issue in relation to COVID-19, please contact our Employment & Labour Group: Chris Drinovz at [email protected], Mike Weiler [email protected], Jesse Dunning at [email protected], Melanie Booth at [email protected], or or our Tax Group: Kevin Scott at [email protected]

Kane Shannon Weiler LLP is here to support you during these uncertain and challenging times. Our Employment & Labour Group and our Tax Group hosted a Let’s Talk webinar answering all of your questions surrounding COVID-19 and your workplace. We want to help you, your business and your employees by sharing our knowledge and information.

Chris Drinovz, Mike Weiler and Kevin Scott had a candid discussion on topics covered in your questions, including the new Canada Emergency Wage Subsidy legislation (CEWS), layoffs, reducing hours, work-sharing, EI sub plan, work refusals, Canada Emergency Response Benefit, and more.

We posted most of the questions that were covered below accompanied by their answers for your information. For a copy of the full webinar recording, please email  Chris Drinovz at [email protected].

**Please be advised that this Q&A is only applicable to the first four reporting periods of the CEWS (March 15 to July 4). For reporting periods after July 5, 2020, please stay tuned as the federal government is in the process of introducing amendments to the CEWS program that would result in new formulas for calculating the subsidy amounts. We expect to have further updates as more information becomes available.***  

Here are some highlights from our webinar:

Intro and Overview of Support Programs Available

https://youtu.be/kkZouQtg7io

Overview of CEWS Program by Kevin Scott, Partner, Tax Group

https://youtu.be/ojMrSa69EvE

Do owner/managers, non-arms length employees qualify for the Canada Emergency Wage Subsidy (75% - CEWS)?

https://youtu.be/nNBTGIMNubw

Do you need to provide a notice letter for reducing hours or layoffs? Had to lay off some staff, do we still qualify for Canada Emergency Wage Subsidy (75% - CEWS)? Do we need to bring back all employees to qualify?

[embed]https://youtu.be/xHN-Z9F6NMY

How does the Canada Emergency Wage Subsidy work for sales people with some income based on commission?

https://youtu.be/gFfbtfWtjD4

Can an employer lay off an employee who has just transitioned from EI to long term disability?

https://youtu.be/SPGd6wNPKAA

Are layoffs appropriate for employees who are at high risk due to pre-existing health conditions and COVID-19?

https://youtu.be/BcpEidsflzQ

Is the 10% subsidy program the same as the 75%? What are the requirements to qualify for 10% program? Do you still need to suffer same loss?

]https://youtu.be/LlFCr95WwlE

Do you have to pay back Canada Emergency Wage Subsidy? How do you show proof of revenue decline to meet the minimum standard? Will this be subject to a CRA audit at the year end?

[embed]https://youtu.be/W5xZ10Tx0eQ

What does an employees obligation to mitigate financial loss look like during a pandemic? (for example, agreeing to workshare, agreeing to temporary layoff, reduced hours etc.) How will the reasonable notice period be affected for wrongfully dismissed employees?

https://youtu.be/7dOY36y-5kE

How does the CEWS, CERB or EI benefits affect someone moving into or coming out of maternity leave? Are they eligible for EI or CERB?

https://youtu.be/tD4skcPisF8

Does the CEWS and CERB apply to employees and corporations including employees who own the voting shares?

https://youtu.be/9HfQ1egqrPY

Does vacation pay get included in eligible renumeration/wages when checking for CEWS eligibility?

https://youtu.be/hWCSjUQ5bE8

Can the CEWS (75% wage subsidy program) still be used if we get paid director/management fees instead of as employees?

https://youtu.be/JGgQ_rZLspU

What's the best process for employees who refuse to work because they feel unsafe due to COVID-19?  We have some employees we need to bring back as work is picking up but they prefer to stay on CERB and don't want to return to work.

https://youtu.be/YyYrfPjyQoE

Here are some of the additional questions that came in during and after the webinar, and our answers for your reference:

There was something about the EI by the employer that would be not payable. Is it a deferred payment or grant sort of thing? And how do I access this info?

I believe you are referring to my comment that in certain cases, an eligible employer for the CEWS can receive a refund for EI and CPP premiums paid on eligible remuneration claimed for eligible employees during the qualifying period. The legislation provides that if you qualify for CEWS, put employees back on payroll and claim the subsidy on wages paid to them but they are not actually working i.e. on leave with pay, you will receive not only the 75% subsidy on the wages you pay but also a refund on the CPP and EI premiums you remit on those wages.

If we cannot get the subsidy for some day labourers because of their %22employment status%22 with our company, can we change them to put them on payroll, and would that qualify now? And furthermore, would it be cost effective with all the tax payments and EI etc that the employer has to pay on an employee's behalf?

This is a particular situation in which you should discuss details with a lawyer and seek legal advice. If the remuneration paid to the day labourers was not paid as employment income during the qualifying period(s) (i.e. they were paid as independent contractors), then you would not be entitled to claim the CEWS for those payments. It is possible that if you put them on payroll now, you could claim the CEWS on wages paid going forward HOWEVER there are some risks there, both within the CEWS legislation and generally, as you would be assuming all of the liabilities of an employer by treating them as employees (additional taxes, employment standards, severance pay).

You mentioned you could take advantage of the 10% subsidy by not sending in money. Could you elaborate on that please?

Yes, the 10% subsidy is gained simply by calculating the 10% amount you are entitled to and then withholding that amount from your next employee income tax remittance. You are entitled to a subsidy of 10% of your payroll for the period March 18 to June 19, 2020 – up to a maximum of $1,325 per employee and $25,000 per eligible employer. In order to be eligible you must have taxable capital of less than $15M in the preceding tax year. You don’t have to officially apply, you just do the calculation and withhold the amounts. Note that you only withhold the income tax amounts, you must still remit CPP and EI. The 10% subsidy is taxable income and can still be claimed after June, 2020.  You can find further details on how to calculate and report the subsidy here:

https://www.canada.ca/en/revenue-agency/campaigns/covid-19-update/frequently-asked-questions-wage-subsidy-small-businesses.html

For the 10% wage subsidy is the criteria the same for employees arm’s length/non arm’s length?

Yes, for the 10% temporary wage subsidy, it makes no difference if the employee is arm’s length or not. You can find further details on how to calculate and report the 10% TWS here:

https://www.canada.ca/en/revenue-agency/campaigns/covid-19-update/frequently-asked-questions-wage-subsidy-small-businesses.html

I missed the answer to whether vacation pay or sick pay qualifies as wages for CEWS

Yes, taxable remuneration paid to an eligible employee as vacation pay would qualify as eligible remuneration for the purposes of the CEWS. For sick pay, assuming that we are talking about taxable wages paid to the employee pursuant to sick leave entitlement (instead of money paid by short or long term disability insurance), then these payments would qualify as eligible remuneration as well.

Will CWS apply to new employees hired after the crisis began?

Yes. If you qualify as an eligible employer, you can claim the CEWS on wages paid to new employees hired after March 15, 2020, so long as they are arm’s length employees (i.e. not a family member, etc). You are eligible to receive 75% of the eligible remuneration actually paid to the new employees during the qualifying periods, up to a maximum of $847/week, per employee.

Can you wait until the end of the year to claim the wage subsidy?

For the 10% Temporary Wage Subsidy, the answer is “yes”. If you are an eligible employer, but choose not to reduce your payroll remittances during the year, you can still calculate the 10% Temporary Wage Subsidy on remuneration paid from March 18, 2020 to June 19, 2020. At the end of the year, the CRA will pay the amount to you or transfer it to your next year’s remittance. You can find further details on how to calculate and report the 10% TWS here:

https://www.canada.ca/en/revenue-agency/campaigns/covid-19-update/frequently-asked-questions-wage-subsidy-small-businesses.html

For the 75% CEWS, eligible employers must apply for the subsidy before October 2020.  

employers may be eligible for a subsidy of up to 100% of the first 75% of pre-crisis wages or salaries of existing employees. What does this  mean?

I think you are quoting from the government website, which states: “In effect, employers may be eligible for a subsidy of up to 100% of the first 75% of pre-crisis wages or salaries of existing employees.”

This simply means that the maximum amount of the subsidy for eligible employers will be 75% of the pre-crisis wages paid to eligible employees. If you have continued to pay employees 100% of pre-crisis wages, then only the “first” 75% is subsidized and the remaining 25% continues to be paid by the employer. Note also that the subsidy is only available on the first $57,825 paid to the employee, which results in a maximum possible amount of $847 per employee per week. Any amounts paid to the employee above the $57,825 threshold are not subsidized.

What is the consequence if you are not able to pay the 25% corporately?

The government’s original language around the employer having to pay the “25% difference” has caused some confusion. In our view, since the 75% subsidy for eligible employers is based on amounts actually paid to the eligible employee, if the employee receives the subsidy based on 75% of amounts paid, then they will have already paid 100% or at least 25% more than the subsidy amount.

There are some exceptions to this. For example, if the employer has reduced the employee’s salary by more than 25% during the qualifying period, then the subsidy amount is actually the entire amount paid to that employee. For example, if Sally made $40,000 per year before March 15 and has been reduced by 50% to $20,000 per year, then the employer can claim 100% of the wages paid to Sally under the CEWS.

All of that said, the more recent language from the government is that employers receiving the subsidy must make best efforts to pay employees their pre-COVID-19 wages. Therefore, if you are claiming the subsidy based on a wage that is less than the employee’s pre-crisis wage, you must make best efforts to top-up the employee to their pre-crisis wage. While this does not appear to be a legal requirement, the legislation requires the person who has principal responsibility for the financial activities of the eligible entity to certify the completeness and correctness of the application submitted. It is possible that the application will require that person to provide details of the best efforts made to top-up employees to pre-crisis wages.

What documentation is needed for CEWS?

The CEWS application form is not yet available so we can’t say for certain. However, we don’t believe that you will need to submit any documents with the online application itself. However, you should retain all of the documentation used to calculate the qualifying revenues and revenue deduction, along with all documentation showing eligible remuneration paid to the employee for which you are claiming the subsidy. If you are not able to top-up employees to pre-crisis wages, you should retain all documentation that would justify this decision, as the application may require an attestation that you have made best efforts to do so.

When can we start applying for CEWS?

We expect the application will be available via the CRA My Business Account portal in the next several weeks. I would check back for regular updates on this. April 21, 2020 Update: it has been announced that applications can be submitted starting on Monday, April 27, 2020 and will be processed by May 5, 2020.

Can you claim both the TWS and the CEWS?

Yes. You can claim the 10% temporary wage subsidy and then apply for the 75% CEWS, however any amounts claimed under the 10% will be deducted from the 75% refund received under CEWS for the same period.  Note the subsidy is gained simply by withholding income tax in the amount you qualify for whereas the CEWS is an actual payment from the CRA to your account. As the CEWS money is at least several weeks away, we recommend taking advantage of the 10% TWS now. You can find further details on how to calculate and report the 10% TWS here:

https://www.canada.ca/en/revenue-agency/campaigns/covid-19-update/frequently-asked-questions-wage-subsidy-small-businesses.html

Is the weekly $847 based on gross or net salary?

The CEWS formula looks at gross eligible remuneration paid to the employee during the qualifying period when calculating the amount of the subsidy an eligible entity will qualify for. You are entitled to 75% of the first $57,825 (gross) paid to the employee, which results in a maximum possible amount of $847 per employee per week. You can find a summary of additional government benefits available for businesses here:  https://innovation.ised-isde.canada.ca/s/list-liste?language=en&token=a0B0b00000OGBoqEAH

Is there coverage for job sharing for on the days employees are not working?

If referring to Employment Insurance Work-Sharing program, the CEWS legislation says that if you claim for wages paid to an employee on Work-Sharing, the subsidy will be reduced by the total amount of EI benefits received by that employee during the qualifying period.

Is there coverage for loss of wages/income if employees are down to part time? ex. down from 5 to 3 or 2 days a week, Loss of mileage etc.

The short answer is “yes”. For eligible employers, the CEWS is available on wages paid even if the employees have been reduced to part-time. Note that if the wages claimed for represent a deduction of 25% or more of the employee’s pre-crisis wage, then the amount of the subsidy will be 100% of the wages paid to the employee during each qualifying period. In cases of reduced hours, the employer must be mindful of the risk of constructive dismissal claims. You should therefore consider whether you can use the CEWS to bring those employees back to full-time or as close to full time as possible; as you will recall, the employee is not required to be working in order for you to receive the subsidy on wages paid to them. Perhaps we can have a discussion about this, feel free to give me a call this week if you want to review options.

If we have temporary laid off our employees and they have received their CERB payment from March 15 - April 11th are we able to rehire them within this period or do we need to rehire them effective April 13th? Would this affect their CERB payment they received and make them pay this money back to the government?

If in fact you have rehired employees on or prior to April 11th 2020 and paid them in order to collect the CEWS then under the current CEWS rules the employees (not the employer) must repay their total $2000 CERB regardless of what they were paid in that first qualifying  period (i.e. March 15th to April 11th).  If they were rehired and paid after April 11th 2020 they can keep the 1st $2000 paid for the March 15th to April 11th qualifying period but would be ineligible to collect the $2000 for the second qualifying period  i.e. April 12th to May 9th assuming they are  back on payroll.

 As noted this is under the current CERB rules.  However we understand that the CERB will be amended to allow applicants to earn up to $1000 in each period and still collect the $2000 CERB.  If that occurs then we believe that employees earning less than $1000 each qualifying period could get the CERB and the employer could then apply for the CEWS payment of the less than $1000 wages.

Are we required to pay the payroll taxes for the 75% that the government is covering?  Does the government only give you back 75% of what you have paid - in other words, what we pay to the employee is 100% and the government only gives us back 75% of the money we have paid out?

If you are paying the employee’s salary then you must make employer remittances for premiums and contributions for EI and CPP.  The 75% CEWS would only be for the wages.  However if you have put employees back on payroll who were laid off (i.e. furloughed) and are paying them salary while not requiring them to work, then the amount of the CEWS will be increased by the total of all amounts payable by you as employer premiums and contributions.

If we have crew members taking this time due to compromised immune systems ether themselves or a family member and are on EI are we supposed to be paying them any wage?

The simple answer is no.  If you wanted to pay them more and top up their EI you might be eligible for the EI SUB plan that allows employers in certain circumstances to top up EI without penalty to the employee.  If you are interested in that SUB program please contact Chris [email protected] as he has familiarity with that program.

If for some reason you wanted to put them on payroll and pay them but not have them come back to work you can do that as we discussed yesterday.  In some cases you would get 75% back on what you pay them as a CEWS subsidy or in some cases you might get 100% back on what they are paid to maximum $847.  As we mentioned in all cases of bringing back furloughed employees you need to discuss with them the options.

Finally please note that this employee would likely have the job security protection of the COVID 19 related leave provisions recently added to the BC Employment Standards Act.

The 40K loan was mentioned by the govt, but no mention on how to apply. The banks do not have answers yet either...

The requirements for the $40k loan are much easier to meet then the 75% wage subsidy.  There is no requirement to show any revenue loss.  All you need to show is:

1. That the company had active 2019 payroll between $20,000 and $1.5M in salaries, as declared on its T4 summary; and
2. Someone with the company must attest that the loan proceeds will be used for certain eligible expenses (including payroll, rent utilities, etc.)

Clarification on whether CEWS can be claimed on management fees where those fees paid under separate GST number than directors fees.

Currently, the computation for the wage subsidy only includes “eligible remuneration” paid to an “eligible employee”.   It does not include individuals receiving dividends or contractors receiving management fees, subject to GST.

In regards to the 40k loan, if the company account has a healthy balance account is the company still eligible for the loan?

The requirements for the $40k loan are much easier to meet then the wage subsidy.  There is no requirement to show any revenue loss.

I don’t think that CEWS provides support for non-revenue generating businesses (e.g. privately funded research and development companies) whose staffing levels have been temporarily reduced due to COVID.  What options exist, if any, for companies in this situation?

The CEWS does provide support for certain tax exempt entities.   Eligible revenue for these entities includes membership fees and other amounts received in the course of its ordinary activities.  Such entities may elect to exclude or include government funding sources in the determination of its qualifying income.

Specifically, the definition of “eligible entity” in Bill C-14 includes tax exempt entities under paragraphs 149(1)(e), (j), (k), and (l) of the Income Tax Act (Canada).  Paragraph (j) refers to non-profit corporations that were constituted exclusively for the purpose of carrying on or promoting scientific research and experimental development.

Similar question for the $40,000 relief loan, if the only people on payroll are the owner-managers and immediate family does this qualify for the loan?  If so are there any additional rules to follow?

This benefit has the same test for arm’s length and non-arm’s length employees.

The requirements for the $40k loan are much easier to meet then the 75% wage subsidy.  There is no requirement to show any revenue loss.  All you need to show is:

1. that the company had active 2019 payroll between $20,000 and $1.5M in salaries, as declared on its T4 summary; and
2. someone with the company must attest that the loan proceeds will be used for certain eligible expenses (including payroll, rent utilities, etc.)

CEWS - What's New and Employment Law Considerations - KSW Article - Download PDF

On March 27th 2020 the Prime Minister announced a wage subsidy of 75% for qualifying businesses.  This program is the most important and fundamental initiative in the Federal Government’s COVID 19 strategy.  The purpose of the program was to have employers avoid layoffs where possible, or return employees to payroll and begin paying them directly and to allow employers to get ready to be able to start up business again after the COVID 19 pandemic subsides and businesses (hopefully)  start a return to normal.  The CEWS will ensure that a meaningful connection between employers and employees would remain as we work through this crisis.

Since the Prime Minister’s announcement the government and its ministers have been tweaking the program.  Finally on Saturday April 11th 2020, with the consent and cooperation of the Opposition, the Government passed into law Bill C-14 A second Act respecting certain measures in response to COVID 19 (“Bill C-14”).  Bill C-14 received Royal Assent that same day.

The KSW Employment and Labour Group has been reporting on various employee plans such as EI, the $2000 CERB, amendments to the Employment Standards Act to provide job security in certain circumstances, related employment issues and most particularly the development of the CEWS as the CEWS relates primarily to wages and employees. Read our previous articles here: https://www.ksw.bc.ca/employment-labour-blog/

Nevertheless the final version of Bill C-14 involves substantial amendments to the Income Tax Act as well as the Financial Administration Act and the Canada Deposit Insurance Corporation Act.   Further the actual application form has not been finalized and that will be important to consider whether your business qualifies. As a result before a business decides to start putting employees on payroll, paying wages and then applying for CEWS, it will be wise to consult its accounting and tax professional advisors to ensure they and their employees are eligible and that they properly file for the subsidy.

There will also be a number of employment issues including practical issues such as whether the CEWS should be accessed in the first place and how are employees to be put back on payroll.  Our Group can help you develop your strategies for your particular business.

In this article we will identify the 10 key changes and critical aspects of Bill C-14 and then offer some answers to the most common questions we have heard from you.

**Please be advised that this Q&A is only applicable to the first four reporting periods of the CEWS (March 15 to July 4). For reporting periods after July 5, 2020, please stay tuned as the federal government is in the process of introducing amendments to the CEWS program that would result in new formulas for calculating the subsidy amounts. We expect to have further updates as more information becomes available.***  

TOP 10 CHANGES TO THE CEWS FOUND IN BILL C-14
Given the nature of Bill C-14 and the myriad of questions that can arise it is not possible in this article to outline all the details of the legislation or the questions that potentially arise in your specific business.  Further each case will be decided on its own facts.  However we have identified what we see as the top 10 key changes found in Bill C-14 since the program was originally announced on April 1.  This list is not exhaustive and we invite you to send us your specific questions which we will try to answer on an individual bases.

1. To qualify for the CEWS for March 2020, revenues must have decreased by 15% (instead of the previous 30%). This change was made to reflect the fact that many businesses did not start suffering losses until the middle of March. The required revenue decline for April and May continues to be 30%. It is important to note that nothing the legislation requires the revenue reduction be caused by COVID-19.

2. Employers may choose to calculate their decline in revenue for March, April and May 2020 against either an average of revenues for January and February 2020, or revenues from March, April and May 2019. Whatever option is used must be used as the benchmark for all qualifying periods. Where an employer did not carry on activities for all of January and February 2020, the revenues for the period that the employer did carry on activities will be averaged and applied to both months. The January/February 2020 reference is the only option for any employer not carrying on business on March 1, 2019. Note that the above-noted calendar month periods for qualifying revenue do not coincide with the four-week periods for which the subsidy can be claimed.

3. For calculating revenue decline, employers may calculate their revenues under the accrual method or the cash method (as per existing tax rules) but not a combination of both. Whichever method is chosen must be used for all relevant qualifying periods. Qualifying revenue means the inflow of cash, receivables or other consideration arising from the ordinary activities of the entity in Canada. This includes revenue from the sale of goods, the rendering of services and the use of resources by others. The definition excludes extraordinary items and amounts derived from non-arm’s length sources, subject to certain exceptions. We expect there are a number of interpretive issues around the definition of qualifying revenue, which must be explored with your tax and accounting professionals.

4. An eligible employer that qualifies for the CEWS for one qualifying period will automatically be deemed to qualify for the next qualifying period. For example, if you qualify for the first period, March 15 to April 11, you will automatically qualify for the next period: April 12 to May 9; however you will still have to re-qualify for the third period: May 10 to June 6. If you do not qualify for the March period but qualify for April, then you will automatically qualify for May. This change eliminates some of the uncertainty surrounding eligibility.

5. There is now more flexibility for related corporate groups. For example, a group of affiliated eligible entities may now elect to determine their qualifying revenues together on a consolidated basis. As a result, each individual member of the group could take advantage of the total consolidated revenue decline and qualify for the CEWS when they otherwise would not. Affiliated persons under the Income Tax Act include common law partners, spouses and various others. Similarly, a group of eligible entities that normally prepares consolidated financial statements may jointly decide for each member of the group to determine its qualifying revenue individually. These are highly technical issues and we strongly recommend seeking tax and accounting advice if these issue affect you. To the disappointment of many, a single corporate entity with multiple divisions cannot separate the individual divisions for the purpose of calculating revenue decline. We understand that this issue is currently under discussion between industry and the government.

6. The legislation has added greater flexibility for employers and joint ventures that earn non-arm’s length revenues. For example, if all or substantially all of the revenues of an eligible entity are from non-arm’s length persons or partnerships, that entity may jointly elect with all those persons or partnerships to calculate the revenue reduction based on a weighted average formula. Again, this is an extremely technical tax matter that goes beyond the scope of this article and requires specialized advice.

7. Eligible employers who receive the CEWS on wages paid to workers who are simply on leave with pay but not actually working (referred to by the government as furlough) are now entitled to receive a 100% refund for the employer-paid contributions to Employment Insurance and the Canada Pension Plan on those wages. For example, if the employer pays Worker A his regular salary of $50,000 during the March 2020 qualifying period and remits CPP and EI contributions on that money, but Worker A does not perform any work, the employer will be entitled to claim not only the 75% subsidy on the $50,000, but the total of the CPP and EI contributions remitted as well.

8. The legislation contains an anti-avoidance provision which disqualifies an employer from eligibility for the CEWS where the employer carries out a transaction or action that has the effect of reducing qualifying revenues and it is reasonable to conclude that one of the main purposes of the transaction or action was to cause the employer to qualify for the subsidy. It should also be noted that employers will be required to repay amounts paid under the CEWS if it is later determined they fail to meet the eligibility requirements. Further, employers will be liable for penalties of up to 50% of the wage subsidies received where the employer knowingly or is grossly negligent in submitting an application under CEWS containing false or misleading information.

9. The new provisions allow the government to extend the date of the CEWS program by regulation up to September 30, 2020. This would add up to 4 more months of eligibility if the Government deemed they were warranted. If additional qualifying periods are added, the prior reference period to be used will also be determined by regulation.

10. The legislation gives the Minister of National Revenue the authority to publicize the name of any person or partnership that has claimed the CEWS. While no information regarding the use of this policy has been made available, we believe it may be used to identify employers that have committed violations. We therefore recommend that you do your due diligence and proceed cautiously when determining if you qualify.

CEWS—10 FREQUENTLY ASKED QUESTIONS

1. Is the CEWS right for my business and my employees?

The first thing employers must do is to find out if they are an eligible employer under the CEWS and whether their employees are eligible.  As noted Bill C-14 has a great deal of criteria and conditions that must be met before an employer is entitled to be reimbursed by the Government for 75% of the wages paid.  There are also a number of penalties that might apply if an application is not properly made so caution at this first step is very important.  

Each employer will have different questions in considering whether it and its employees are eligible and for what period.  Do I use the period March 2019 to compare to March 2020 or do I use the average of January/February 2020 to compare?  Can I use the lost revenues in each division or must I take into account the entire entity? Should I calculate revenues under the accrual method or the cash method?  Are my employees working in Canada?  Do I take into account revenue I earn in the USA from sales of products produced here in BC?  

If you are satisfied that you and your employees are eligible you can then look at some of the practical business questions that arise in considering if the CEWS is right for you and your employees.  Must I apply each month?  Can I afford the cash flow as reimbursement may take some time?  Who will I bring back from layoff? Given the clear direction from the Government that the CEWS must be used in good faith, employers must be cautious if they decide to only bring some employees back to work and not others. Be sure that there is a clear rationale for doing so.

2. Who is an Eligible Employee?

An employer cannot receive reimbursement for wages paid under the CEWS unless it pays “eligible remuneration” to an “eligible employee”.  An “eligible employee” must be employed in Canada (although she not need be a Canadian citizen) by an “eligible employer” during what is defined as the “qualifying period”.  An employee will not be eligible if she did not receive remuneration for 14 or more days during the qualifying period. An employer is not obligated to bring all of its employees back onto payroll in order to claim the CEWS. On the other hand, there is no cap on the number of eligible employees or the total amount of subsidy an eligible can claim for eligible employees. For example, Air Canada has announced it intends to re-hire 16,500 workers! It is also important to note that you can claim the subsidy for new employees hired after March 15, 2020.

3. Must the “eligible employee” actually be working?

The answer is no.  The criteria remains that the employer must put the employee “on payroll” and must in fact pay them.  The employee does not have to attend at and do work.  This is consistent with the Government’s strategy to reconnect employees to their employer so that when the crisis passes and businesses can start up again, the employer is ready to go as the workforce is already in place. As noted above, the employer can claim back EI and CPP contributions for these furloughed workers.

4. Mike is my manager earning $80,000 per year and has been working continually since January 1st 2020.  Assuming I am an eligible employer and Mike is an eligible employee can I be reimbursed for Mike’s salary up to $847 per week from March 15th 2020?

The answer is yes. Assuming both employer and employee are “eligible” as defined in Bill C-14 then the criteria for reimbursement have been met, namely Mike is on payroll and Mike has been paid. In fact, the Government will be happy that you kept Mike at his pre-crisis wage.

5. Mike’s fellow employee Chris was laid off March 15th 2020 and has been receiving EI since then—Can I pay Chris retroactively to March 15th 2020 and then be reimbursed under the CEWS?

No—retroactivity only applies to employees actually being paid during that qualifying period.  You can recall Chris, put him back on payroll and pay him going forward and then apply for your CEWS, whether you bring him back to work or not.

6. In the lead up to Bill C-14 the Prime Minister and government officials were commenting that the eligible employer did not have to pay the 25% difference although they were encouraged to do so and it appeared an employer would have to have reasonable grounds for not paying the 25% difference.  Is this still the law under Bill C-14?

It appears that there was some confusion in the statements made regarding the “25% difference”. In our view, in most cases the employer will already have to pay the employee 25% more than the subsidy amount claimed in order to receive the 75% subsidy on the wages paid. For example, if Sally makes $40,000 per year (or $769 per week), then the employer will have to pay her $769 per week in order to claim the subsidy of $576 per week.

There are two exceptions to this.

If the employer has reduced the employee’s salary by more than 25% during the qualifying period, then the subsidy amount is actually the entire amount paid to that employee. For example, if Sally has been reduced by 50% to $20,000 per year (or $384 per week), then the employer can claim 100% of the wages paid to Sally under the CEWS.

Finally, if the employer has reduced the salary by less than 25% during the qualifying period, then the subsidy amount is paid on Sally’s pre-crisis salary. For example, if Sally had been reduced by 10% to $36,000 ($692 per week) then the amount of the subsidy will be based on $40,000 and not $36,000. Therefore the subsidy amount would be $576 per week.

In all cases the maximum amount of the subsidy is $847 per week per employee.

All of that said, the more recent language from the government is that employers receiving the subsidy must make best efforts to pay employees their pre-COVID-19 wages. So if your employee was laid off and prior to that was paid $80,000 the government was trying to encourage employers to bring her back at full wages.  But in order to get the full 75% subsidy the employer only needs to pay $58,725 salary to receive the maximum subsidy of $847 per week.  

While there does not appear to be a legal requirement to “top up” employees to pre-crisis wages, the government has stated that the eligible employer must make best efforts to do so. The legislation requires the application for the CEWS to include an attestation from the person who has principal responsibility for the financial activities of the eligible entity as to the completeness and correctness of the application submitted. It is possible that the application will require the employer to provide details of the best efforts made.  

Now employers have to be cautious in making changes to employees’ wages as such changes unilaterally imposed might be considered a constructive dismissal. The best solution would be to discuss a return to work (or payroll) with each employee and ensure you have their agreement as to the wages.  One scenario might be to bring the employee back to work (or at least on payroll) at the $58,700 salary but agree with the employee that when business is back to 100% their salary will revert to the pre COVID 19 level.

7. Is an eligible employer entitled to the CEWS for eligible employees paid on commission and if so how is that calculated?

The answer is yes as the commission salesperson has the normal deductions from payroll such as income tax, CPP, EI etc.  

Assuming an arm’s length employment relationship we believe the CEWS would be the lesser of the average weekly earnings from January 1st 2020 to March 15th 2020 excluding periods of 7 or more consecutive days for which the employee was not remunerated or the actual commissions earned in the qualifying period.

8. How do I apply for CEWS?

The application must be filed with CRA.  Eligible employers are only those that had on March 15th 2020 a business number registered with the CRA for remittances for income tax source deductions. As yet we do not have the actual application form from CRA.  And as noted the CEWS is only available for employees of the eligible employer who on payroll and who have actually been paid.  So there is a bit of a leap of faith here as employers risk putting employees on payroll and paying them but then finding their application for the CEWS is rejected.

9. My employees laid off have applied for CERB—can I still get CEWS?

No.  If employees are receiving the $2000 CERB the employer cannot start to pay them and then collect the CEWS.  It is an “either or proposition”.  That is why it is important to talk to each employee who has been laid off and who might have applied for CERB (or in fact been paid same) to consider if she wants to come back on payroll and be paid by you.  Also do the calculation and consider whether that employee may be better off just claiming the CERB. The government has stated that if an employee receives the CERB while being paid wages for which the CEWS is claimed, the employee will be responsible for repaying the CERB amounts. If you in fact have work for them and want them back they will need to forgo the $2000 CERB.  And it may be that some employees refuse to return to work in which case they will have in our view quit their employment and a new ROE should be issued.

10. What about employees who qualified for the leave of absence under the recent amendments to the Employment Standards Act and are now ready to return to work—can I reduce their income or not have them show up for work?

It is a bit unclear how the Employment Standards Act mandatory COVID-19 leave provisions (similar to maternity leave) will apply to employers trying to access the CEWS.  The Act requires employers to put the employee back in the same or comparable position as they held at the time of the leave.  It is not clear how the two Acts work together but in those circumstances it is our view the employer must take the employee back at their regular wage or lay them off.

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Table of Contents

• What's New - 10 Key Changes
• Employment Law Considerations - FAQs

Note to our Readers: Information regarding COVID-19 is rapidly evolving. We are working to bring you up-to-date articles as the legal issues unfold. This is not legal advice. If you are looking for legal advice or are dealing with an issue in relation to COVID-19, please contact our Employment & Labour Group: Chris Drinovz at [email protected], Mike Weiler [email protected], Melanie Booth at [email protected], or Jesse Dunning at [email protected] or our Tax Group: Kevin Scott at [email protected]

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April 19, 2020 Update - Our Group hosted a Q&A webinar to answer some of your questions! Review the Webinar recordings and Q&A in our blog post Let’s Talk: Questions about Covid-19, The Workplace and Your Business

April 14, 2020 Update: For further details, please read our recent detailed post on Canada Emergency Wage Subsidy Is Now Law! What’s New & Employment Law Considerations

Canada Emergency Wage Subsidy - KSW Article - Download PDF

On Friday March 27th 2020, the Prime Minister announced a wage subsidy of 75% for qualifying businesses. After much discussion and lobbying the government made changes to its proposal and on Wednesday April 1st 2020 the Department of Finance announced the new Canada Emergency Wage Subsidy (“CEWS”). The details were contained in a Press Release entitled “Government Announces Details of the Canada Emergency Wage Subsidy to Help Businesses Keep Canadian in their jobs”. As well the government provided details on its web site here. Most importantly Minister Morneau held a press conference April 1st 2020 where he provided important details and answered questions.

Normally when reporting to you about significant government policy we would wait for the actual legislation, regulations and would follow the debates on same in Hansard. While the Press Release, Government web site posting and Minister Morneau’s comments are very useful in understanding where the government wants to go with this program and while they provide some more important details, the fact is there is no draft legislation nor regulations and the House will have to sit at some point to pass the enabling legislation. Unfortunately there are many “interesting questions” that cannot be answered with certainty at this point. At the same time you want a summary of what we know today and where there may be issues to consider. Many businesses will decide to wait until they see the legislation before they take action; others will want to rely on what we know to date and begin the process of bringing employees back to work or discussing with their employees currently working how this subsidy will impact their jobs.

With that in mind and in order to bring you up to date on matters as they stand now, we offer the following analysis.

The overall policy objective of the CEWS is to help businesses keep and return workers to their payroll through the challenges posed by COVID-19. As such, the wage subsidy aims to prevent further job losses, encourage employers to re-hire workers previously laid off, and help better position Canadian businesses to more easily resume normal operations following the crisis. As a result of information released over the course of the week, we now have a partial idea of how the CEWS will operate to achieve these objectives:

• Eligible employers include individuals, taxable corporations and partnerships, and non-profit organizations and registered charities; it does not include public employers, including schools and municipalities;  
• In order to qualify for the subsidy, an eligible employer must have suffered a decline in gross revenue of at least 30 percent during the eligible period being applied for; there are currently 3 eligible 4-week periods:

• Period 1: March 15 to April 11, 2020;
• Period 2: April 12 to May 9, 2020;
• Period 3: May 10 to June 6, 2020;

• Eligibility is generally determined by the change in monthly revenues, year-over-year, for the calendar month in which the period began. For example, if revenues in all of March 2020 were down 50 per cent compared to March 2019, the employer would be allowed to claim the CEWS on remuneration paid between March 15 and April 11, 2020 (Period 1 above). Similarly, a comparison between the month of April 2020 over April 2019 would be used for Period 2 and May 2020 over May 2019 for Period 3. Importantly, the amount of wage subsidy provided under the CEWS in any given month would be ignored for the purpose of measuring the decline;
• For businesses established after February 2019, eligibility will likely be determined by comparing monthly revenues to a reasonable benchmark, such as the previous month(s);  
• A for-profit employer’s “revenue” will be its revenue earned from business carried on in Canada from arm’s-length sources; the employer’s normal accounting method would be used to calculate revenue and extraordinary items and amounts on account of capital will be excluded from revenue. Employer will be required to attest to the decline in revenue in making the application;  
• The definition of revenue for non-profits and charities will be determined on a case by case basis following consultation with each sector;
• The wage subsidy will cover up to 75% of an employee’s wages on the first $58,700 of annual salary (a maximum of $847 per week). For example: a floral shop in BC has four full‑time employees, each earning $800 per week, and 6 part-time employees, each earning $400 per week, for a total weekly payroll of $5,600. The shop is closed during the pandemic and only fulfilling online orders. They are keeping all of their employees on the payroll at 100% wages, despite revenues being down by 30 percent. This business would be eligible for a weekly wage subsidy of $4,200 ($600 for each of their full-time employees and $300 for each of their part-time employees);
• A special rule will apply to employees that do not deal at arm’s length with the employer.  The subsidy amount for these employees will be limited to the eligible remuneration paid in any pay period between March 15 and June 6, 2020, up to a maximum benefit of $847 per week, or 75% of the employee’s pre-crisis weekly remuneration; we expect there to be further clarification on this exception;  
• Eligible remuneration appears to include salary and wages and other remuneration subject to tax withholding, and likely commission and bonuses, but does not include severance pay, or items such as stock options or personal use of a corporate vehicle;
• Importantly, entitlement to the CEWS will be based on the salary or wages actually paid to employees. Therefore the employer must pay the employees first and receive the subsidy on remuneration actually paid and shown as such;
• There is no cap on the number or category of employees who can be subsidized nor on the overall amount an employer can claim;
• Employers will be expected to make “best efforts” to top-up employees’ salaries to 100% of the maximum wages covered and will be required to attest to this in the application;  
• The amounts received under the CEWS would be included in the employer’s taxable income but presumably this would be offset by the additional salaries paid;  
• Applications will be made through the CRA’s My Business Account portal as well as a web-based application; an employer must re-apply for the subsidy each additional month it is claimed for;
• It is expected that the portal will be opened for applications in three to six weeks;
• There will be anti-abuse rules and penalties proposed to ensure the subsidy is not inappropriately obtained and that employees are paid the amounts they are owed. The government may create new offences for individuals or businesses who provide false or misleading information to obtain access to the benefit or who misuse funds obtained under the program; the penalties may include fines or even imprisonment;
• Employers not eligible for the CEWS may still apply for the previously announced 10% wage subsidy from March 18 to June 20, which is limited to up to $1,375 per employee and $25,000 per employer. For employers eligible for both subsidies, any benefit from the 10% wage subsidy for remuneration paid in a specific period would generally reduce the amount available to be claimed under the CEWS in that same period;
• An employer will not be eligible for the CEWS in a week that falls within a 4-week period for which the employee is eligible for the $2000 Canadian Emergency Response Benefit.

There are many questions that remain unanswered which we hope will become clearer in the days and weeks to follow. These include:

• When will the CRA portal be open, how long will the application process take, and what materials will be required? It is likely that in order to streamline the delivery of funds, the government will only require an attestation now and require back-up later. The government has noted that if it approves an application but later determines an employer does not qualify, the employer will have to repay the subsidy. Employers are wise to keep good records of their calculations.
• How long until funds are actually released to employers? We expect that after the portal is opened in three to six weeks and applications are received, there will be some additional delay until the actual delivery of funds.
• How does the retroactive portion of the subsidy work? It would appear that making the subsidy retroactive to March 15, 2020 is intended to cover employers who have kept some or all of their employees on payroll since that date. We query whether or not wages paid to employees that have been recalled from layoff and then paid retroactively could also be subject to the subsidy. If the employees have already been paid EI benefits, this may complicate things.
• Must employees actually perform work in order for the employer to claim the wage subsidy or can they simply be kept on payroll? Based on the current information provided, it appears that performing work is not a requirement to receive the subsidy. What is required is that employees be on payroll and be paid.
• If employees are simply put back on payroll and work is not available, must the employer still make best efforts to top-up wages? The government has stated that it expects businesses to do everything in their power to top-up employee’s wages to their full amount. That said, Minister Morneau appears to have recognized that this will not be possible in every situation.
• What exceptions will be made for startups or small firms with highly variable income and how flexible will the test be to establish the decline in revenue? Given the stated policy objectives, we expect the revenue comparison test to be reasonably flexible. As a result, businesses who might not qualify under the conventional test should think creatively about how they might show declining revenues.
• Does the 30% decline in revenue have to be related to COVID-19? At this time, there does not appear to be a requirement of a direct or indirect connection to COVID-19. We expect this will be a case-by-case determination.
• Will the CEWS program be extended beyond 12 weeks? Given that some provincial government officials have announced social distancing measures will likely continue into the summer months, it is possible that the government will consider extending the CEWS beyond 12 weeks. We will continue to monitor the situation carefully.

• It appears that employers who wish to access the subsidy will have to incur payroll costs now and hope to receive the subsidy at a later date. Employers who want to retain their workforce in the face of significant revenue declines should carefully review the published criteria before making decisions about the workforce.
• The government has stated that: “employers would have to keep records demonstrating their reduction in arm’s-length revenues and remuneration paid to employees”. As such, start reviewing and analyzing your financials now with a view to establishing the appropriate paper trail and due diligence for showing revenue decline and monies paid to employees for which you will seek the subsidy. This may include creating a Memo to File or consulting with your accountant or other professional.
• Analyze your current workforce and the work you have available. Communicate with any employees you have laid-off to determine who might be available to return to work and in what capacity. Find out how many employees have applied for the CERB and make note of this. Consider how you can provide meaningful work to employees for which you intend to claim the subsidy.
• We have noted in our previous articles that layoffs, even temporary layoffs may be considered a constructive dismissal at common law or a termination under the Employment Standards Act. Be mindful that if you bring employees back to work under the subsidy but fail to top-up their salary to 100%, this may also trigger a constructive dismissal claim and/or a claim for termination pay under the Employment Standards Act. The same considerations apply if you substantially change an employee’s position or duties. If the employee agrees to come back at a reduced wage or in a different position, carefully document this agreement.
• For employers that may qualify for both the 10% wage subsidy and the CEWS, it is worthwhile to take advantage of the 10% wage subsidy now as it will simply be deducted from any future CEWS payment for the same period. More details on this program here: https://www.canada.ca/en/revenue-agency/campaigns/covid-19-update/frequently-asked-questions-wage-subsidy-small-businesses.html
• Employers in need of additional financial relief pending approval of the CEWS may wish to consider availing themselves of the various new credit options being extended by the federal and provincial governments and other sources, including the new Canada Emergency Business Account. Various tax deferrals and other sources of credit have also been announced provincially and federally to give employers increased liquidity.
• As the economic downturn will likely continue past the timeline of the CEWS program, employers may wish to also consider the Federal Government’s existing Work-Share and Supplemental Unemployment Benefits (SUB) Programs. Please contact us for further details on these programs.

Note to our Readers: Information regarding COVID-19 is rapidly evolving. We are working to bring you up-to-date articles as the legal issues unfold. This is not legal advice. If you are looking for legal advice or are dealing with an issue in relation to COVID-19, please contact our Employment & Labour Group.

The use of handheld devices while driving is banned in British Columbia. In this blog post, I will focus specifically on the use of electronic devices while driving, not on other forms of distraction, such as eating or talking with other passengers.

Using an electronic device while driving can lead to a ticket of $368 and 4 penalty points, which amounts to $175, leading to a total fine of $543.

Part 3.1 – Use of Electronic Devices While Driving in the Motor Vehicle Act, RSBC 1996, c. 318 sets out the specific rules and prohibitions.

Even holding a phone in your hand without speaking or texting can lead to a distracted driving ticket, as noted in a 2018 BC Provincial Court case, R. v. Bainbridge, 2018 BCPC 101. Furthermore, charging a phone at a red light is also considered distracted driving (R. v. Jahani, 2017 BCSC 745).

You are not allowed to use hand-held cellphones and other electronic devices with transmitting functions while driving. Under section 214.1 of the Motor Vehicle Act, electronic devices are defined as:

(a) a hand-held cellular telephone or another hand-held electronic device that includes a telephone function,

(b) a hand-held electronic device that is capable of transmitting or receiving electronic mail or other text-based messages, or

(c) a prescribed class or type of electronic device

Use of electronic devices is defined as:

(a) holding the device in a position in which it may be used;

(b) operating one or more of the device’s functions;

(c) communicating orally by means of the device with another person or another device;

(d) taking another action that is set out in the regulations by means of, with or in relation to an electronic device.

You are allowed to use your device in hands-free mode, such as with a Bluetooth headset or with the integrated speaker function in a vehicle. However, if you have an L (Learner’s) or N (Novice) licence, then you are not allowed to use the device at all, even in hands-free mode. There are certain exceptions for emergency personnel.

According to the Canadian Automobile Association (CAA), distracted driving involving a cellphone can increase your chance of a crash by 8 times.

Using electronic devices while driving can not only lead to a violation ticket and penalty points, but also liability if you are involved in a car accident. It can also prevent you from successfully suing the other party.

In the case of Rollins v. Lovely, 2007 BCSC 1752, the defendant was looking down at his ringing cell phone, and liability was apportioned to him at 90%.

In the case of Shaver v. Lymbery, 2012 BCSC 978, the plaintiff sued for soft tissue injuries she suffered in an accident. However, she was unsuccessful in proving liability, as she was using her cellphone during the accident.

Contact Peter Unruh, Personal Injury Lawyer in BC

If you have been injured in a car accident, Peter Unruh will review your case to determine if you should be compensated beyond ICBC Part 7 benefits for your injuries. The extent of your injuries and fault for the collision needs to be assessed in order to arrive at whether you have a personal injury case for compensation. Call Peter Unruh today, personal injury lawyer in Abbotsford, at 604-746-4357.

By: Chris Drinovz & Japreet Lehal

Employers dismissing short service employees, be wary! A recent trend has been developing in British Columbia trial-level decisions towards higher common law reasonable notice awards for employees with shorter lengths of service. In our inaugural KSW Workplace Law blog post, we examine this trend in greater detail as presented in the following trio of cases decided less than a month apart.

In Greenlees v. Starline Windows Ltd., 2018 BCSC 1457 (August 29, 2018), a 43-year-old Mr. Greenlees quit his previous employment and accepted a sales job with the defendant window company after receiving a cold call promising the potential to earn $100,000 per year. Mr. Greenlees had a written employment agreement but it did not address severance. After only six months, Starline terminated employment without cause. Despite getting no reference letter, Mr. Greenlees engaged in significant mitigation efforts, applying to 3 recruitment firms and 42 companies. After 8 job interviews, he found another job 7 months post-termination.

Mr. Justice Gomery began his analysis with reference to Saalfeld v. Absolute Software Corp, 2009 BCCA 18 (“Saalfeld”) where the BC Court of Appeal suggested a benchmark for short service cases of two to three months’ notice for a nine-month employee, to be adjusted in other cases for age, length of service, and job responsibility. Most significant to the upward adjustment was the limited availability of alternative employment. The court found that it could draw an inference as to this fact due to the plaintiff’s lengthy but unsuccessful job search, made even more difficult by Starline’s failure to provide a reference letter. His Lordship also found (para 52) that Starline had induced the plaintiff to quit his old job (para. 54) though this factor was only given modest weight as the case was “close to the line”. For these reasons, Mr. Greenlees received six months’ notice.

Mr. Justice Gomery ruled again a few days later in Corey v. Kruger Products L.P., 2018 BCSC 1510 (September 4, 2018). Here, the plaintiff was hired as a maintenance supervisor at 55 years old. His written employment agreement provided for a starting salary of $100,000 but was silent on the issue of termination. His duties and responsibilities were middle management and included supervision of highly-paid specialized tradespersons at the defendant’s tissue paper manufacturing facility. Mr. Corey was terminated without cause after 2 years and 7 months. He was 57 years old at termination and 58 by the time of trial.

After a summary trial on the issue of damages, the same Mr. Justice Gomery awarded 8 months’ notice. The starting point of the analysis (para. 30) was again Saalfeld and an adjusted “benchmark” of four to five months’ reasonable notice for “middle management employees with supervisory responsibilities and two to three years of service” such as Mr. Corey. That was not the end of the analysis however as his Lordship then concluded (para. 50) that “Mr. Corey’s age and the lack of availability of suitable alternate employment justify a somewhat longer notice period than would otherwise be the case.” While Mr. Corey had made diligent search efforts (10 applications, 2 interviews) he had not found new employment. The court found that his age was a factor in this as well (para. 47) as it made Mr. Corey less competitive having “fewer years of service to offer to prospective employers." This case is interesting in that the trial was heard on August 17, 2018, only five months after the date of dismissal. Kudos to counsel involved for efficiency!

Approximately three weeks later, the reasons for judgment for Chapple v. Big Bay Landing Ltd., 2018 BCSC 1666 were released. This case was also determined by a one-day summary trial on the basis of an agreed statement of facts. Mr. Chapelle was hired as the “Remote Resort Manager” for the defendant’s resort on Stuart Island with an annual salary of $84,000. After working for 26 months, Mr. Chapelle was terminated without cause at the age of 61 years old. He was then unemployed for 12 months before finding replacement work.

As Mr. Chapelle did not have a written employment contract, the length of reasonable notice was the main issue. Mr. Justice Steeves turned to Saalfeld here as well, noting the plaintiff was “entitled to notice longer than, for example, the rough rule of one month per year of service that is sometimes used”. The court found that Mr. Chapelle’s work was “somewhat specialized and the opportunities for work in the resort lodges in coastal British Columbia are limited”. As a result, he awarded 9 months’ notice.

Takeaways

Employers and employees alike would be wise to consider the following takeaways arising from this trio of cases:

• The starting point for short-service employees is the two to three-month benchmark established for a nine-month employee in Saalfeld to be adjusted in each case with reference to age, length of service, and job responsibility.
• The above “benchmark” may be increased to four or five months’ notice for a middle-management employee with two to three years’ service.
• Factors such as age, inducement, specialized industry, and the unavailability of similar alternate employment in the face of strong mitigation efforts may increase the notice period upward from the benchmark into the range of six to nine months. 
• None of these employers had a written termination provision! These significant liabilities for short service employees can be reduced through the use of carefully drafted termination of employment clauses.

If you are an employer or an employee seeking advice regarding your employment relationship, the Workplace Law Practice Group at Kane Shannon Weiler LLP would be pleased to speak with you. Please contact us at [email protected] or 604-746-4357.