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The nuts and bolts of the federal wage subsidy for employers

Employers who have temporarily laid off - or terminated - workers can take advantage of CEWS, but the situation is bit more complicated than for firms that didn't cut staff


April 20, 2020
By Karen Terepoksy/Field Law

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The House of Commons in the Parliament building in Ottawa. Photo: Steven Kriemadis/Getty Images

As the Canada Emergency Wage Subsidy (CEWS) was made official on April 14, 2020, employers potentially eligible for this subsidy should now be considering what proactive steps they can take to support the intent of the new legislation, specifically — getting employees back on payroll or keeping them there.

By keeping employees connected during this crisis, the return to employers’ normal operations should be more smoothly facilitated as the economy recovers.

For eligible employers who have not yet instituted temporary layoffs or terminations, the CEWS will be easy to implement. However, for those employers who have temporarily laid off or terminated the employment of employees but now want to bring those employees back with the help of CEWS, the situation is a bit more complicated. Options available to employers are discussed below.

What if employees have been laid off without pay for more than 14 days from March 15 to April 11?

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As we outlined in our prior summaries of CEWS, eligible employees are those employees of an eligible employer who have not gone without pay for more than 14 days during the claiming period in question.

This means that employees temporarily laid off without pay during this time period are ineligible for CEWS.

However, temporarily laid off employees can potentially be retroactively recalled from lay off in order to qualify for the CEWS in relation to the first claiming period.

To comply with section 64 of Alberta’s Employment Standards Code, a written recall notice must be issued. The recall notice can include language that brings the employee back to work retroactively to the beginning of the layoff period. Retroactive pay may be issued for the first claiming period, and the CEWS applied for in relation to these amounts. Although this process is not specifically mentioned in the legislation or commentary, it conforms to the purpose and spirit of the CEWS.

What if I am not able to retroactively recall employees?

If for whatever reason, a retroactive recall is not feasible, employees currently on layoff may be recalled immediately and placed back on payroll going forward in order to qualify for the next claiming period from April 12 to May 9, so long as they will not be without earnings for more than 14 days in the next eligibility period.

What if employment was terminated and as a result the employee did not have earnings for more than 14 days in the eligibility period?

Where employment was terminated, the employee can be rehired with the effective date of rehire specified as the day after termination, or March 15, which is the first day of the first eligible period for CEWS. The employee can then be paid retroactively back to this start date. This will ensure they were not without earnings for more than 14 days in the first eligibility period.

Alternatively, the employee could be rehired in a subsequent eligibility period and paid on a go forward basis. As long as they worked in Canada and are not without earnings for a period of more than 14 days in that eligibility period, they should be eligible for the CEWS.

Employers may want to consider whether or not the employee’s prior service will be recognized on a go-forward basis.

Under the Employment Standards Code, it will likely have to be recognized for minimum vacation entitlement purposes. However, it may not have to be recognized for the purpose of severance, should the employee’s employment be terminated again in the future. Employers should consider speaking with their legal counsel if proceeding with the rehire of terminated employees in order to assess their options.

What if my employees applied for or received the CERB or EI while on a temporary layoff or after their employment was terminated?

CERB and CEWS, and EI and CEWS are not intended to work together and the Government has been explicit in saying that any employee who receives CERB and subsequently receives employer subsidized wages under CEWS will be liable for repayment of the CERB amounts. Based on the commentary on CEWS, any double payment will be the employee’s responsibility; however, it would be prudent for employers to address this issue by documenting the employee’s agreement to repay any overpayment as a result of having received CERB or EI.

What if I don’t have work for my employees but want to take advantage of the CEWS?

Where no work is available at all, employees can still be made eligible for CEWS if they are placed on a paid leave of absence until work is available.

Where limited work is available, or to reduce the employee’s salary while on paid leave, employers may also consider recalling employees under modified terms, reducing hours worked and salary paid, especially in cases where 75 per cent of the employee’s earnings exceed the maximum benefit amount of $847 per week.

Where placing employees on paid leave or reducing hours or salary are being considered, it would be prudent to document the return to work relationship and, if possible, have it agreed to by the employee, in order to mitigate risk of any future claims by the employee, such as a claim for constructive dismissal.

What if I still don’t have work for the employees when the CEWS ends?

Employees recalled on the appropriate terms can be eligible for the CEWS until the end of the last claiming period on June 6. Employers should be aware that, depending on how recovery has progressed at that time, and if the CEWS has not been extended, they can then consider using the temporary layoff provisions in the Employment Standards Code.

Karen Tereposky is a Calgary-based lawyer in Field Law’s Calgary office serving clients throughout Alberta and Saskatchewan. Clients come to Karen with a range of issues in the fields of labour and employment law, as well as seeking counsel for bankruptcy, insolvency, and general litigation. She can be reached at ktereposky@fieldlaw.com. For more information, visit www.fieldlaw.com/Services/Labour-Employment.