Update for Ontario Employers Regarding Recent COVID-19 Developments
As the COVID-19 virus continues to spread across Ontario and Canada, the provincial and federal governments have made several announcements to help businesses and workers which employers need to be aware of.
This blog is intended to supplement and update our blog issued on March 11, 2020 and updated on March 23, 2020.
Order Mandating Closure of Non-Essential Businesses in Ontario
On March 23, 2020, the Ontario government issued O. Reg. 82/20: Order under subsection 7.0.2 (4) under the Emergency Management and Civil Protection Act (“EMPCPA”) to mandate the closure of non-essential workplaces to protect the health and safety of employees and the general public (“Order”). All non-essential workplaces were required to close by midnight on Tuesday, March 24, 2020. This Order will be in effect for 14 days but may be extended beyond 14 days if necessary.
The Order permits non-essential businesses to have temporary access to the closed place of business for the purposes of:
(a) performing work at the place of business in order to comply with any applicable law;
(b) allowing for inspections, maintenance and repairs to be carried out at the place of business;
(c) allowing for security services to be provided at the place of business; and
(d) attending at the place of business temporarily;
(i) to deal with other critical matters relating to the closure of the place of business, if the critical matters cannot be attended to remotely; or
(ii) to access materials, goods or supplies that may be necessary for the business to be operated remotely.
The Order does not prevent non-essential businesses from providing services online, by telephone or by mail/delivery, nor does it prevent teleworking and online commerce. Non-essential businesses can continue their operations with their employees working remotely from home.
Section 50.1 of the Employment Standards Act, 2000 permits employees to take a leave of absence without pay where the employee is unable to perform his or her duties as a result of the Order.
Shortly after this blog was posted on April 3, 2020, the Ontario government made another announcement at 2:15 pm that it was ordering more workplaces to close by reducing the list of essential businesses previously ordered. All businesses that are not deemed essential by the updated Emergency Order must close at 11:59 pm on Saturday, April 4, 2020. This closure will also be in effect for 14 days, with the possibility of it being extended.
The updated list will direct additional businesses to close and will place restrictions on stores that sell hardware products, vehicle parts and supplies, pet and animal supplies, office supplies and computer products and repairs and safety supplies to provide services by alternate methods such as curb side pickup and delivery, except in exceptional circumstances.
The government also announced that only critical construction projects will be permitted to continue, including industrial projects such as refineries and petrochemical plants and infrastructure projects such as new hospitals, roads and bridges. Any new starts in residential projects will have to stop, whereas residential construction that is near completion will be permitted to continue.
The Ontario government has set up a toll free line 1-888-444-3659 to provide support to businesses that have questions about the Order.
Failure to Comply with the Province’s Emergency Order
Employers are encouraged to adhere strictly to any emergency Order issued by the Province as they can be exposed to significant liability, in addition to reputational harm and public shaming given the current state of affairs. Pursuant to subsection 7.0.11 of the EMCPA, an employer, its directors, officers and employees who fail to comply with an emergency Order may be found guilty of an offence and may be subjected to significant fines and terms of imprisonment.
An employee may be fined up to $100,000 daily and imprisoned up to one year. A director or officer may be fined up to $500,000 daily and imprisoned up to one year. An employer that is a corporation may be fined up to $10 million daily. The legislation also provides that a court may increase these fines to an amount equal to the financial benefit that was acquired as a result of the offence. While a first offence may result in a lower fine, it is difficult to predict during these uncertain times how the provincial authorities will react to businesses that refuse to abide by their emergency Orders.
Canada Emergency Wage Subsidy
On March 30, 2020, the federal government announced that it would provide qualifying businesses with a 75% wage subsidy for up to 3 months retroactive to March 15, 2020 so that more workers could keep their jobs. The government is encouraging employers to re-hire workers that were previously laid off and to keep them on payroll with the hope that they will be one day eligible to receive the Canada Emergency Wage Subsidy. There is no limit on the subsidy amount that an employer can claim. On April 1, 2020, Finance Minister Bill Morneau announced that businesses will have to wait approximately six weeks to receive the subsidy.
The subsidy will be available to individuals and businesses of all sizes including taxable corporations, partnerships, non-for-profit organizations and charities that have experienced a 30% decrease in revenue due to the COVID-19 pandemic regardless of the number of employees they have. Public bodies such as municipalities, universities, colleges, schools and hospitals are not eligible for this subsidy.
Applications can be made by eligible employers to the Canada Revenue Agency (“CRA”) My Business Account portal. Businesses must reapply each month for the subsidy. The subsidy will be paid by the CRA by way of direct deposit into the bank account of the business, if possible. Prime Minister Trudeau announced that there would be serious consequences for anyone who tries to abuse the system.
In the application, employers must attest to the decline in revenue. When calculating the 30% decrease in revenue, an employer should base its calculations on its revenue from its business carried on in Canada earned from arm’s length sources. This would exclude revenue from extraordinary items and amounts on account of capital.
The program will be in place for a 12-week period, from March 15, 2020 to June 6, 2020. During that time, the amount of the wage subsidy will be calculated based on the remuneration paid to an employee, as the greater of:
- 75% of the amount of remuneration paid (e.g. for the first $58,700) up to a maximum benefit of $847 per week; and
- the amount of remuneration paid up to a maximum benefit of $847 per week or 75% of the employee’s pre-crisis weekly remuneration, whichever is less.
A special rule will apply for employees that do not deal at arms’ length with their employer. Further information will be provided by the government on how to define “pre-crisis” weekly remuneration.
In order to prove that a business has seen a 30% drop in revenue in March, April or May 2020, businesses will be asked to submit year-over-year earnings comparisons with their application showing the revenue earned for the same month in 2019, and for those businesses operating less than a year, they could provide a month-to-month comparison instead.
Businesses should continue to monitor government websites for additional information regarding this program in the coming weeks.
Canada Emergency Response Benefit
The federal government recently implemented the Canada Emergency Response Benefit (“CERB”) to support workers in Canada during the COVID-19 pandemic. This is a taxable benefit which provides $2,000.00 per month for up to four months from March 15, 2020 through to October 3, 2020. Eligible Canadians are those who have lost their jobs, are sick, quarantined, or taking care of someone who is sick with COVID-19. In addition, working parents who must stay home for childcare will be eligible. CERB is available to employees, contract workers and self-employed individuals who would not otherwise be eligible for EI. If a worker is currently receiving or has applied for EI, they should not also apply for CERB. This benefit will be available to those who are still employed but are not receiving income due to lack of work as a result of COVID-19. Canadians entitled to CERB payments will receive payments within 10 days of filing an application as there is no waiting period. According to Bill C-13, which implements the CERB payments, a worker who is eligible for these payments, must be at least 15 years of age, be a resident in Canada and earned at least $5,000.00 for 2019 or in the 12-month period before they apply for the CERB benefit from employment, self-employment, benefits under the EI Act or benefits from provincial plans due to pregnancy or to care for a new-born child or a child placed with them for adoption. The portal to apply for these benefits will be available on April 6, 2020.
What Other Options are Available for Employers?
Employers may wish to consider a Supplementary Unemployment Benefit Plan (“SUB Plan”) where they can top up their employees’ EI benefits during a period of unemployment due to a temporary layoff, illness or quarantine. The basic EI benefit rate is 55% of the employee’s weekly insurable earnings to a maximum of $573 per week. However, the Government of Canada permits employers to use a SUB Plan to increase their employees’ weekly earnings when they are unemployed and in receipt of EI benefits, up to a maximum of 95% of compensation, without reducing the employee EI benefits.
If the SUB plan provides top-up for EI benefits while employee earnings are interrupted due to temporary stoppage of work, illness or quarantine, the employer must register the SUB Plan with Service Canada. While employers are not required to follow a specific format or template for a SUB Plan, the plan must include specific information. The Government of Canada has posted a sample plan on its website for employers to use:
Employers are encouraged to review Government of Canada websites, as the above information is subject to change due to the evolving nature of the COVID-19 pandemic.
In order to avoid lay-offs, employers could consider instituting a work-share program. In such a program, employment insurance benefits are provided as income support for a group of employees who work a temporarily reduced work week throughout a business downturn. Affected employees must agree to work a reduced schedule and share available work over a specific period of time. Work-Sharing agreements must include a reduction in work activity of the employees’ regular work schedule between a minimum of 10% (one half day) and a maximum of 60% (three days). In any given week, the work reduction can vary depending on available work, as long as the work reduction on average over the life of the agreement is between 10% and 60%. The program must be in place for a minimum of 6 weeks. The maximum duration has recently been extended to up to 76 weeks for businesses experiencing a downturn in business due to the COVID-19 pandemic. Employers must demonstrate a recent decrease in business activity of approximately 10% in revenues within the last six months to be eligible to participate in Work-Sharing. Employers must also submit a recovery plan with their Work-Share application. Normally, an application for a Work-Sharing agreement must be submitted a minimum of 30 days prior to the requested start date, but the federal government has recently agreed to waive the mandatory waiting period so that employers with a recently expired agreement can immediately apply for a new agreement, without waiting between applications.
For more information on work-sharing, see the federal government website.
Can Employers Temporarily Reduce Employee Hours of Work or Pay?
Employers who may not immediately qualify for the 75% federal wage subsidy may be faced with difficult staffing decisions. Is it in the best interest of their company to keep their employees employed pursuant to their existing arrangements, temporarily lay them off, or temporarily reduce their hours of work or salary? While reducing an employee’s hours or salary can be beneficial as it allows employees to continue working and potentially earn more than the government CERB or EI benefits, there are some risks to the employer.
Employees might claim that the reduction in hours or wages without their consent amounts to a fundamental change to their employment agreement. This could lead to a claim for constructive dismissal, where an employer could be held liable for termination pay, severance pay and common law damages. Employers may be prepared to accept that risk, believing that employees will be unwilling to end their employment relationship and claim damages, where their termination entitlements may not be significant and given that they will be forced to look for another job in a very challenging job market. In addition, employee claims for common law damages will be quite limited if employers offer to recall employees back to work under their former terms and conditions of employment, and the employee refuses such an offer.
Employer Health Tax
On March 25, 2020, the government of Ontario announced that it would provide tax relief for businesses by increasing the Employer Health Tax (“EHT”) exemption for 2020 from $490,000 to $1 million due to the COVID-19 pandemic. The EHT exemption will return to $490,000 on January 1, 2021.
The EHT is a deductible payroll tax in Ontario that provides funding to support the Ontario Health Insurance Plan. The EHT does not apply to self-employed individuals. It only applies in employment relationships where an employer pays an employee. Employers with a payroll of less than $5 million are entitled to an EHT exemption on the first $1 million of total payroll in Ontario for 2020 retroactive to January 1, 2020. Employers only need to start making instalment payments after their payroll exceeds the new $1 million exemption level. Commencing April 1, 2020, penalties and interest will not apply to businesses that miss their EHT remittance deadline.
Workplace Safety and Insurance Board
On March 25, 2020, the provincial government also announced that it would provide relief to all businesses covered by the Workplace Safety and Insurance Board (“WSIB”) workplace insurance. Those businesses are permitted to defer their reporting and payments to the WSIB for six months until August 31, 2020. No further action is needed to receive the financial relief. The government also announced that no penalties will be charged during the six month deferral period and that no interest will accrue on outstanding premium payments for Schedule 1 businesses.