On July 17, 2020, the federal government announced that it would extend the Canada Emergency Wage Subsidy program (“CEWS”) until December of 2020, and proposed several significant changes that will, among other things, allow more employers to access subsidies.
On July 20, 2020, the federal government introduced Bill C-20, An Act respecting further COVID-19 measures, to extend and adapt the CEWS program. On July 21, 2020, Bill C-20 received its third reading, and is expected to receive royal assent very soon. If passed, Bill C-20 will retroactively impact the CEWS program, generally commencing with the fifth qualifying period which commenced on July 5, 2020 (subject to a “safe harbour” discussed below).
We have previously published articles on CEWS here and here. To recap, CEWS helps employers continue and maintain their business during the pandemic by subsidizing certain remunerations paid to eligible employees. To-date, eligible employers must have experienced a sufficient decline in revenue (generally 30%) for defined four-week periods (“qualifying periods”) that commenced on March 15, 2020.
Bill C-20 proposes the following key changes to the CEWS program (among others):
- Eliminate the 30% revenue decline eligibility criteria. CEWS would provide a base subsidy for all eligible employers that experience any decline in revenue, including eligible employers with a revenue decline of less than 30%.
- Calculate the subsidy in proportion to revenue decline. Under the current CEWS program, subsidies amount to approximately 75% of eligible remunerations paid to eligible employees (subject to certain caps). Under the proposed scheme, the percentage of the subsidy would vary in proportion to the amount of the employer’s revenue decline, and would decrease as the program winds down.
- Introduce an additional “top-up” subsidy. CEWS would provide an additional top-up subsidy to employers that have been most affected by the pandemic. Eligible employers would generally be those who experienced a three-month average revenue drop of more than 50%.
- Provide a “safe harbour” for July and August. Employers who have already made business decisions for the qualifying periods in July and August based on the “old rules” (e. the pre-Bill C-20 rules) may be entitled to calculate their subsidy under those rules (i.e. by reference to the higher CEWS rate), if they would be better off.
- Eliminate the “14 day rule”. The eligibility criteria would no longer exclude subsidies for employees that are without remuneration for 14 or more consecutive days within a qualifying period.
- Extend the CEWS to further qualifying periods. According to Bill C-20, the CEWS program would be extended at least until November 21, 2020, and a further extension into December 2020 could be implemented by regulation. The federal government has announced its intention to provide support until December 19, 2020.
- Extend the application deadline. The deadline to apply for a subsidy under the program would be extended from September 30, 2020 to January 31, 2021.
Bill C-20 also includes several other notable changes. Furthermore, the federal government has proposed to make additional changes for the seventh and subsequent qualifying periods to align CEWS with the Canada Emergency Response Benefit and Employment Insurance Benefits with respect to employees who are on a paid leave of absence. However the details and timing of these complimentary changes are currently unknown.
Interested readers can access a more detailed summary of the changes proposed under Bill C-20 in this client alert published by Stephanie Dewey of our Tax Group.