New CEWS Developments – October 2020 Announcements

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On October 9, 2020, the Government of Canada announced its intention to extend the Canada Emergency Wage Subsidy (“CEWS”) until June 2021. According to the release, the CEWS will remain at “the current subsidy rate of up to a maximum of 65% of eligible wages until December 19, 2020.” The announcement extending the current maximum CEWS amount represented a change from the then existing legislation, which gradually reduces the maximum CEWS amount available in respect of “active employees” (i.e., employees not on leave with pay in respect of a week) to 45% in Period 9 (October 25, 2020 to November 21, 2020). Details regarding the maximum CEWS amounts for Period 10 were previously unavailable.

A few days later, on October 14, 2020, the Government released a backgrounder (“Backgrounder”) further detailing the extension and other changes to the CEWS. The Backgrounder confirmed the Government’s intention with respect to the following:

  • the maximum base subsidy rate for active employees for Periods 9 and 10 (October 25 to December 19, 2020) will be set at 40% and the maximum top-up subsidy rate will remain at 25%, such that the maximum CEWS rate in respect of these employees for Periods 9 and 10 will be 65%;

  • subject to a safe-harbour described below, the revenue-decline test for the base subsidy and the top-up subsidy will be harmonized for Period 8 (September 27, 2020 to October 24, 2020) and onward. This means that instead of the current three-month revenue-decline test for the top-up subsidy, both the base subsidy rate and top-up subsidy rate applicable in respect of active employees will be determined by the change in an eligible employer's monthly revenues, year-over-year (or, for employers that have chosen to use the alternative revenue-decline method, the change in monthly revenue as compared to the employer’s average of its January 2020 and February 2020 revenues), for either the current or previous calendar month;

  • the CEWS will include a “safe harbour” rule applicable for Periods 8, 9 and 10, so that eligible employers are entitled to a top-up subsidy rate that is no less than what the rate would have been under the three‑month revenue-decline test; and

  • as of October 25, 2020, the wage subsidy in respect of “furloughed employees” (i.e., employees on leave with pay in respect of a week) is to be aligned with the benefits provided through Employment Insurance to “ensure equitable support of Canadian workers”. Pursuant to the Backgrounder, “[t]his means the subsidy per week in respect of an arm’s length employee (or a non-arm’s length employee who received pre-crisis remuneration for the relevant period) would be: the amount of eligible remuneration paid in respect of the week; or, if the employee receives remuneration of $500 or more in respect of the week, the greater of $500 and 55 per cent of pre-crisis remuneration for the employee, up to a maximum subsidy amount of $573”.

The Backgrounder also states that:

  • the Government intends to issue a technical backgrounder on the extended wage subsidy, including details on eligibility, and to introduce legislation that would implement the extended CEWS; and

  • the Government’s revised cost estimate of the CEWS is estimated at $68.5 billion through to the end of Period 10 (i.e., December 19, 2020).

Detailed commentary from our Firm on the CEWS can be found here, here and here.

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