covid-19: practical strategies to mitigate risk and access ......employer deemed to have overpaid...

COVID-19: Practical Strategies to Mitigate Risk

and Access the CEWS

Kyle B. Lamothe Phone: 416-855-6539 [email protected]

Ian Humphries Phone: 604-602-4215 [email protected]

Shana French Phone: 416-458-1289

[email protected]

Erin R. Kuzz Phone: 416-603-6242

[email protected]

https://www.sherrardkuzz.com/staff/shana-french/

https://www.sherrardkuzz.com/staff/erin-r-kuzz/

Revised Canada Emergency Wage Subsidy (“CEWS 2.0”)

Canada Emergency Wage Subsidy (CEWS)

• Most significant economic relief measure enacted in response to COVID-19

• Intended to encourage employers to re-hire workers previously laid off as a result of COVID-19, avoid future job losses, and allow fast resumption after crisis

• Amounts received are a “refundable tax credit”

• Employer deemed to have overpaid its income tax, is granted a refund

• Credit is taxable to the employer, but remuneration paid to employees should offset for no new taxable income

• Is “government assistance” that counts against scientific research and experimental development (SR&ED) claims

Overview of July 27, 2020 Legislative Changes

• Wholesale reform of the existing framework affecting all employers who have suffered a decline in qualifying revenues

• Three broad categories:

• Previously-announced measures (aka legislative fixes);

• Substantive changes; and

• Administrative and consequential changes

• Result:

• CRA: “it’s quick and easy!”

• Taxpayers: “…???”

Previously-Announced MeasuresPayroll Service Providers

• Pre-Existing Regime

• Applicant needed to have a registered payroll account with the CRA as of March 15, 2020

• Problematic in situations where payroll services provided by a third party

• CEWS 2.0 - Applicant can qualify if:

• on March 15, 2020:

• it had at least one employee;

• the payroll for its employees was administered by another person or partnership; and

• the “payroll service provider” had a registered payroll remittance account at that time; and

• the payroll service provider used its payroll remittance account to make remittances in respect of the employer’s employees.

Previously-Announced MeasuresAmalgamated Corporations


• No rule to adjust revenue decline calculations when the employer was formed as the result of

an amalgamation in either 2019 or 2020.

• Could cause otherwise eligible employers to not qualify since no ability to compare a year-

over-year revenue decline.

• CEWS 2.0.

• New provision deems amalgamated entity to be the same entity as its predecessor entities

for the purposes of the CEWS.

• Subject to anti-avoidance rules if amalgamation undertaken to take advantage of CEWS.

Previously-Announced MeasuresBaseline Remuneration


• Employer could calculate their subsidy on the basis of average weekly remuneration paid to

employee between January 1st, 2020 and March 15th, 2020.

• Intention was to not penalize employers who had temporarily decreased their remuneration

paid to arm’s length employees as a result of pandemic.

• CEWS 2.0.

• New provision permits employer to elect for different baseline remuneration periods for

each employee.

• Intended to remedy unintended results in the case of seasonal employees or employees on

parental or disability leave.

Previously-Announced MeasuresBaseline Remuneration (continued)

• Suggests employers should carefully review each individual employee’s

circumstances as part of their application

Qualifying Period Regular Baseline Remuneration Period Elected Baseline Remuneration Period

March 15 – April 11, 2020April 12 – May 9, 2020May 10 – June 6, 2020

January 1, 2020 - March 15, 2020 March 1, 2019 - May 31, 2019

June 7, 2020 - July 4, 2020 January 1, 2020 - March 15, 2020March 1, 2019 - May 31, 2019

ORMarch 1, 2019 - June 30, 2019

July 5, 2020 - August 1, 2020August 2, 2020 - August 29, 2020

August 30, 2020 - September 26, 2020September 27, 2020 - October 24, 2020October 25, 2020 - November 21, 2020

January 1, 2020 - March 15, 2020 July 1, 2019 – December 31, 2019

Substantive ChangesNew Qualifying Periods

Qualifying PeriodCurrent

Reference PeriodPrior Reference

PeriodNew / Old Formula

Specified Percentage

Maximum Base %

#1 March 15 – April 11, 2020 March 2020 March 2019 Old85%

(15% decline)N/A

#2 April 12 – May 9, 2020 April 2020 April 2019 Old70%

(30% decline)N/A

#3 May 10 – June 6, 2020 May 2020 May 2019 Old70%

(30% decline)N/A

#4 June 7 – July 4, 2020 June 2020 June 2019 Old70%

(30% decline)N/A

#5 July 5 – August 1, 2020 July 2020 July 2019 Both (30% decline) 60%

#6 August 2 – August 29, 2020 August 2020 August 2019 Both (30% decline) 60%

#7August 30 – September 26,

2020September 2020 September 2019 New N/A 50%

#8September 27 – October 24,

2020October 2020 October 2019 New N/A 40%

#9October 25 – November 21,

2020November 2020 November 2019 New N/A 20%

#10Prescribed Period ending no

later than December 31, 2020

TBD TBD TBD TBD TBD

CEWS 1.0

“Safe Harbour

Periods”

CEWS 2.0

Extension to

Summer 2021?

Substantive ChangesNew Formula – Application to Qualifying Periods

• Periods 1-4 (March 15 – July 4) = Old Formula

• Periods 5-6 (July 5 – August 29) = Greater of:

• Old Formula; and

• New Formula

• Periods 7-9 (August 30 – November 21) = New Formula

Substantive ChangesNew Formula – Overview

• Fundamental distinction is whereas an employer’s revenue decline previously affected that employer’s eligibility for the CEWS, that revenue decline now affects the amount of that employer’s wage subsidy claim.

• Two distinct components

• Base percentage subsidy intended for most employers with a revenue decline no matter how small.

• Top up subsidy intended for employers with the most significant revenue declines.

• Elements of the formula decline overtime reflecting an intention to “wean” employers off CEWS.

Substantive ChangesCalculation for Active Arm’s Length Employees

• High-Level Calculation (Per Employee) = (Base percentage + top-up percentage) * eligible remuneration (subject to cap)

• Employers who are not eligible for the top-up subsidy maximum weekly wage subsidy on a per-employee basis would range from $225 to $677

• In most cases, only employers who have suffered a 65%+ revenue decline (using a three-month average analysis) will be better off using the “New Formula” in the Safe Harbour Periods.

MAXIMUM WEEKLY SUBSIDY PER EMPLOYEEBase Percentage

20% 40% 50% 60%

To

p-u

p

Pe

rce

nta

ge

0% $225.80 $451.60 $564.50 $677.405% $282.25 $508.05 $620.95 $733.85

10% $338.70 $564.50 $677.40 $790.3015% $395.15 $620.95 $733.85 $846.7520% $451.60 $677.40 $790.30 $903.2025% $508.05 $733.85 $846.75 $959.65

Substantive ChangesCalculation for Other Employees

• Furloughed Employees – subsidy does not vary based on revenue decline

• Non-Arm’s Length Employees – based on employee’s baseline remuneration, rather than current remuneration

• Pay-Reduced Employees – No special rules in New Formula

d

Type of Employee Qualifying Period FormulaActive Safe Harbour Qualifying Periods Old Formula or New FormulaActive New Qualifying Periods New Formula

Furloughed Safe Harbour Qualifying PeriodsOld Formula, with no 30% revenue decline

needed

Furloughed New Qualifying PeriodsLesser of (i) eligible remuneration and (ii)

prescribed amount.

Non-Arm’s Length Safe Harbour Qualifying PeriodsOld Formula or New Formula

Limited by Baseline Remuneration

Non-Arm’s Length New Qualifying PeriodsNew Formula

Limited by Baseline RemunerationReduced Pay Safe Harbour Qualifying Periods Old Formula or New FormulaReduced Pay New Qualifying Periods New Formula

Substantive ChangesAsset Purchase Elections

• CEWS 1.0 = Problem in situations where employer had acquired a new business after prior year period, since revenue decline was artificially reduced (or eliminated).

• CEWS 2.0 = Election to include prior year-revenues of the business IF:

• acquired assets constituted all or substantially all (generally 90% or greater) of the fair market value of the property used by the seller in the course of carrying on business; and

• Both buyer and seller elect.

• Result = revenue from business “assigned” to buyer and excluded by seller for the purposes of CEWS and calculating revenue decline

• Key Takeaway = consider election protocols in any asset purchase agreements going forward

Administrative and Consequential Changes

• Binding Effect of Elections restricted to first five qualifying periods

• Filing Deadline moved from October 1, 2020 to February 1, 2021

• Broadening of category of eligible employees to include employees

without remuneration for a 14-day period

• Cash employers (farmers and fisherman) can elect to use accrual

method

• Continuity Rule for Revenue Declines

CEWS Administration Update

• Audit Activity Commencing

• “standard” audit letter can be 7-page request list, with 10-15 day

turnaround period

• Higher Burden than expected

• Significant potential for administrative errors in initial qualifying

periods

Key Takeaways for Employers Seeking to Maximize Claim

• Employers who were not eligible under old regime could be eligible

under new regime

• Employers need to run multiple scenarios with each employee and

each revenue computational rule to maximize claim

• Employers may be able to refile prior period applications and

obtain higher subsidy in certain circumstances (most changes are

retroactive)

• Wrong calculations for qualifying revenues can lead to more severe

consequences

Kyle B. Lamothe

Phone: 416-855-6539

[email protected]

Ian Humphries

Phone: 604-602-4215

[email protected]

Legal Disclaimer: We understand the Content presented in this webinar to be accurate as of the date of this presentation of October 8, 2020.

However, the Content may be inaccurate or incomplete, and particular facts unique to your situation may render the Content on this webinar

inapplicable or incorrect for your situation. To determine if this Content is applicable to your situation, you should always consult with a

lawyer for independent legal advice.

https://www.thor.ca/lawyers/kyle-lamothe/

https://www.thor.ca/lawyers/ian-humphries/

COVID-19: Practical Strategies to

Mitigate Employment Risk

Erin R. Kuzz and Shana French

October 8, 2020

250 Yonge Street Suite 3300

Toronto, Ontario M5B 2L7

Tel 416.603.0700

Fax 416.603.6035

24 Hour 416.420.0738

www.sherrardkuzz.com

Sherrard Kuzz LLP, Employment & Labour Lawyers

COVID-19: Practical Strategies to Mitigate Employment Risk - Current as of October 2020

Main 416.603.0700 / 24 Hour 416.420.0738 / www.sherrardkuzz.com

Agenda

◼ Statutory leaves

❑Ontario Infectious Disease Emergency Leave

◼Duty to Accommodate

❑Family Status and Child Care Preferences

❑COVID-19-Related Anxiety

◼ Safety Issues and Work Refusal

❑Reporting and Investigation

◼ Return to Work Considerations

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New Ontario ESA Emergency Leave

◼ Infectious Disease Emergency Leave (IDEL)

❑Job protected leave to an employee unable to work due to COVID-19

related issues

❑Retroactive to January 25, 2020

❑No time limit on how long an employee may take the leave, once eligible

❑Will remain in place until COVID-19 is no longer a designated infectious

disease under the ESA

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◼Available in a variety of circumstances, including:

❑Employee is in isolation in accordance with public health information or

direction

❑Employee needs to provide support or care to a person for a reason related

to COVID-19, such as a family member required to isolate by public health

❑Employer directs the employee not to work due to a concern that

COVID-19 could be spread in the workplace

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◼ Entitled to IDEL to provide care and support to child at home due to

school or daycare closure

❑Leave is also available to an employee who chooses to keep a child out of

school or daycare (e.g., for virtual learning) due to fear of COVID-19

◼ IDEL can be taken sporadically (days or weeks off), does not need to be

taken all at once

❑ e.g., time off as required to care for a child who must be held out of school if they

have COVID-19 symptoms

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◼ If employee requests IDEL:

❑Cannot request medical certificate to verify entitlement

❑Can request documentation from Public Health to support need to self-

isolate (if that is the basis for the decision to remain at home)

◼ Employee will need to provide some explanation of “care and support”

they provide

❑Can request non-medical supporting documentation

❑e.g., written confirmation of daycare closure

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Other Ontario Statutory Leaves

◼Other ESA unpaid leaves that may be triggered:

❑Sick Leave

❑Family Responsibility Leave

❑Family Medical Leave

❑Family Caregiver Leave

❑Critical Illness Leave

◼ Ensure you comply with other leave entitlements under employer policy

or collective agreement

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Duty to Accommodate

◼ Job-protected leave provisions do not entitle employee to a remote work

arrangement or other paid job modification

❑Unpaid, job-protected time off only

◼ Request for remote work or other job modification for COVID-19

related reasons (illness, childcare, etc.) should be treated as request for

accommodation under human rights legislation

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Family Status Accommodation

◼ Even if school or daycare is open, may have employees who want to

work remotely, in whole or part, and keep children home

◼Not likely entitled to work from home arrangement due to preference to

stay home if care is available

❑There may be extenuating circumstance, e.g., child with a medical condition

❑Can request medical information to substantiate need for the leave

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Family Status Accommodation

◼ Employer entitled to information to evaluate need for accommodation

❑What “other supports” are available? Family members, paid care, etc.

❑Is this a “want” or a “need”?

◼ Employee does not need to exhaust all options before asking employer

for accommodation

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COVID-19-Related Anxiety

◼ Employers experiencing increasing number of requests for

accommodation related to anxiety around return to work

◼ General feeling of worry or fear of contracting COVID-19 is not

sufficient to engage duty to accommodate

◼ Employee needs to establish existence of a disability and provide

detailed medical information about restrictions and limitations

◼ Only then must the employer look to accommodation

30




Accommodation

◼ If employee has established a need for accommodation, and no

accommodation possible in the workplace (or restrictions are such that

employee must be at home), may need to consider work-from-home

arrangement

◼ That an employee worked from home during shutdown may support the

feasibility of the arrangement as a potential form of accommodation

◼ But, remember, the employee is entitled to reasonable, not preferred,

accommodation!

31




Safety Issues and Work Refusal

◼ Employer is required to report a case of COVID-19 in the workplace to

the ministry of labour (in addition to the joint health and safety

committee or trade union) if advised the worker has an occupational

illness or that a claim in respect of an occupational illness has been filed

with the WSIB by or on behalf of the worker

◼Otherwise, no obligation just because a worker has COVID-19

32




Work Refusal Process

◼An employee may refuse to return to work due to a general fear of

contracting COVID-19 in the workplace

◼ Should treat as work refusal under Occupational Health and Safety Act

33





◼ Place employee in a safe area

◼ Investigate refusal with Joint H & S Committee worker representative

◼ If a risk exists, address risk

◼ If no risk exists, ask employee to return

◼ If employee continues to refuse, contact ministry of labour to investigate

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◼ Some suggestion that ministry of labour inspectors have been taking the

position a worker must be physically at the workplace before a work

refusal is triggered under the Occupational Health and Safety Act

◼ Employers should still comply with the work refusal process, but may

find inspector will not investigate on the basis it does not constitute a

work refusal

35





◼ Remember: Compliance with public health recommendations and

ministry of labour guidelines regarding COVID-19 workplace safety will

be the minimum threshold to establish a safe workplace

◼ If employer can establish compliance, far less likely employee can assert

the workplace poses a risk

36




Return to Work Plan

◼Develop a return to work (RTW) plan before employees are back at work

◼ Consider:

❑Employee screening (now required)

❑Practices to reduce transmission

❑Personal protective equipment (source and provide)

❑Protocols if an employee is ill, symptomatic, travels outside of Canada,

etc.

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Return to Work Plan

◼ Educate and train employees on the RTW plan

◼ Consider and plan how you will address a refusal to wear personal

protective equipment

◼ Follow public health guidelines and recommendations

❑Changing weekly

❑Even once RTW plan established, monitor public health guidance to ensure

protocols remain current

38

250 Yonge Street, Suite 3300

Toronto, Ontario, Canada M5B 2L7

416.603.0700 Phone

416.420.0738 24 Hour

416.603.6035 Fax

www.sherrardkuzz.com

39

http://www.sherrardkuzz.com/

40

◼ The information contained in this presentation/article is provided for general information purposes only and does not constitute legal or other professional advice, nor does accessing this information create a lawyer-client relationship. This presentation/article is current as of October 8, 2020 and applies only to Ontario, Canada, or such other laws of Canada as expressly indicated. Information about the law is checked for legal accuracy as at the date the presentation/article is prepared, but may become outdated as laws or policies change. For clarification or for legal or other professional assistance please contact Sherrard Kuzz LLP (or other counsel).

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