COVID-19 Update: Considering a Supplemental Unemployment Benefit (“SUB”) Plan? Things to Think About.

With the COVID-19 pandemic continuing to have material impacts on Canadian businesses, many employers are considering ways to support employees who may experience a loss of earnings as a result of a layoff or closure situation. For employers who are considering a top-up of Employment Insurance benefits, the following is a summary of things to think about in order to do so in a compliant way. 

Please note that the statutory regime around Employment Insurance has been subject to material change in the last few days as a result of COVID-19. Additional changes are possible, including with respect to SUB Plans. We are continuing to monitor all announcements and will provide any updates as they occur.

What is a SUB Plan?

A Supplementary Unemployment Benefits (“SUB”) plan is a plan, approved by Service Canada, that allows an employer to top up an employee’s EI benefits during periods of unemployment due to various factors including a temporary stoppage of work or illness, injury or quarantine.[1]

What are the Specific Requirements for SUB Plans?

In order to comply with the Employment Insurance Regulations, the following requirements must be met:

1. Employees must be in receipt of EI benefits related to a permitted type of unemployment. In the COVID-19 situation, the most applicable types are “temporary stoppage of work” and “illness, injury or quarantine”; 
2. The weekly payment under a SUB plan, when added to the applicable weekly EI benefit rate[2], cannot exceed 95% of the employee’s normal weekly earnings; and
3. SUB plans should be registered with Service Canada. If they are not, top-up payments will be considered insurable earnings and will be deducted from an employee’s EI benefits.

For more information on the specific requirements for SUB plans, check out our blog post here.

How do I set up a SUB Plan?

1. Create a plan.

While employers are not required to follow a specific format or template for a SUB plan, the plan must contain a complete description of the benefits and include the following information:

• The group(s) of employees covered by the plan
• The type(s) of unemployment covered by the plan
• A statement noting that employees must be in receipt of EI benefits
• The value of the Supplemental Unemployment Benefit and SUB payments
• Benefit duration (it must include the maximum number of weeks the SUB payments are payable, however there is no minimum or maximum threshold requirement)
• Plan details, including: (i) duration of the plan (must be at least one year and can last up to five years), (ii) written notice of any subsequent changes (which must be given within 30 days of the effective date of change), (iii) the method used to finance the plan, and (iv) a statement indicating that separate records will be kept of all SUB payments.
• A statement noting that payments received under the SUB plans will not be used to reduce or increase any other remuneration (e.g. guaranteed annual remuneration, deferred remuneration or severance pay).

The Government of Canada has posted a sample plan on its website which includes the information required in a SUB plan. 

1. Submit a copy of the SUB plan, SUB plan Registration Form and any additional documentation to Service Canada.

Additional documentation includes the following (if applicable):

• Current collective agreement(s), if the plan covers unionized employees;
• Relevant sections of the insurance policy used to administer the SUB plan;
• The Trust Agreement; and
• Any policies or guidelines setting out information about the plan and any declarations or documents that employees are required to sign to receive the SUB payment.

The documents must be submitted to:

Service Canada - Supplemental Unemployment Benefit (SUB) Program

120 Harbourview Boulevard

P.O. Box 11,000

Bathurst, New Brunswick

E2A 4T5

While the Service Canada directions indicate mailing as the manner by which the submission should be delivered, a fax number is also listed on the website: Fax: (506) 548-7473.

1. Obtain approval from Service Canada.

This approval must be received before the implementation date of the plan. If employers pay employees any top up amounts before a plan is registered, these amounts will be treated as earnings and may be deducted from the employee’s EI benefits.

This update is part of our continuing efforts to keep you informed about the COVID-19. Watch our COVID-19 hub and our McCarthy Tétrault Employer Advisor blog for further updates. If you need assistance, please reach out to any member of our National Labour & Employment Team whenever you need to.

[1]https://www.canada.ca/en/employment-social-development/programs/ei/ei-list/reports/supplemental-unemployment-benefit/introduction.html

[2] Currently, the basic EI benefit rate is 55% of the employee’s weekly insurable earnings to a maximum of $573 per week.