Consultation on the Canada Emergency Wage Subsidy

Introduction

Unifor is Canada’s largest private sector union, with 315,000 members working in a diverse range of workplaces across the country. Our members work in every major sector of the Canadian economy, including retail, health and long-term care, passenger transit, food and beverage processing, and many other sectors that have been on the frontlines of the COVID-19 pandemic.

Unfortunately, the unprecedented economic impact of the recent pandemic has led to tens of thousands of our members being laid off and thousands more who have seen reduced hours and pay. While our members’ collective agreements provide for stronger layoff protections than non-unionized workers, without decisive intervention by the government, many of these layoffs would likely become permanent as the economic downturn drags on.

Unifor welcomed the announcement of the Canada Emergency Wage Subsidy (CEWS) in April as a vital measure to support workers’ incomes, prevent layoffs and maintain the employment relationship. The CEWS would make it easier for employers to reactivate employees once conditions improve, which would play a key role in accelerating Canada’s economic recovery.

Despite the program’s stated ambitions, however, employers’ response to the program has been lukewarm. By late May, only a tenth of the $76 billion CEWS budget had been spent, with the projected costs subsequently being revised downwards to $45 billion. The slow uptake by employers is consistent with Unifor’s experiences, which has seen employers large and small drag their feet in coming to a decision on whether or not to apply for the CEWS.

While the recently announced 12-week extension of the CEWS is a welcome one, the government will need to make more substantial changes to the program if it hopes to increase employers’ uptake. Applications for the CEWS only opened in late April, at a time when Canadian workers had already been laid off in the millions. By then, it was far too late to avoid the vast majority of layoffs that had been galvanized by plunging revenues, and the program understandably fought an uphill battle to convince employers to rehire already laid-off employees.

In what follows, we expand on some of the primary issues that need to be rectified if the CEWS program is to prove successful in encouraging employers to rehire workers and maintain the employment relationship.

 

Financial Disincentives Embedded in the CEWS

Across Unifor’s many locals, one of the largest stumbling blocks that our members have come across when encouraging employers to apply for the CEWS has been the unsubsidized costs of maintaining workers on paid leave.

Many of our collective agreements – which remain in force while an employer is receiving the CEWS – stipulate that employers must continue paying health insurance premiums and other non-taxable benefits to workers on paid leave, which are not currently designated as eligible remuneration under the terms of the CEWS program. Employers are also bound by provincial legal requirements to continue paying statutory provincial health taxes and workers’ compensation premiums. Taken together, these unsubsidized costs constitute a considerable financial disincentive for many employers, particularly those whose operations have been completely suspended over the past few months.

The structure of the CEWS application process also means that employers can only apply for a claim period once the period has ended. In effect, the wage subsidy is paid out as a reimbursement of wages that have already been advanced. This also poses a significant financial disincentive for employers to rehire laid off employees given the initial outlay of wage costs required.

For many of our largest employers in sectors such as hospitality and gaming which continue to see little or no cash inflows and which will take a long time to reopen, such costs make it prohibitive to apply for the CEWS. These sectors will not only require a cost-free method of accessing the program, but additional incentives that provide liquidity and financial support for costs associated with payroll.

 

Concerns Around Eligibility, Dues Deductions and Subsidy Calculation

Beyond the financial barriers to accessing the program, Unifor is concerned that the eligibility requirements of the CEWS are far too restrictive. The required revenue decline of 30% from claim period 2 and onwards disqualifies a number of employers who have nevertheless made significant layoffs. Given the low level of uptake, the government should consider lowering the threshold to 15% (as in claim period 1) across all claim periods.

Moreover, while the recently announced expansion of eligible entities to include Indigenous government-owned businesses, registered journalism organizations, and non-public educational and training institutions was a key improvement to the program, there are still too many entities that remain ineligible, including municipal transit authorities and public post-secondary institutions.

Many employees, of course, will continue to be ineligible to receive the wage subsidy since they are employed by entities who do not meet the eligibility requirements. For those employees who are laid off and receiving the Canada Emergency Response Benefit (CERB), it is vital that they be able to access their supplementary unemployment benefit (SUB) plans, which is currently not permissible under CERB rules. In a number of Canadian jurisdictions, SUB plan payments would suffice to maintain the employment relationship and prevent deemed termination, fulfilling part of the CEWS program’s function for those ineligible.

On the logistical end, Unifor has had to repeatedly inform CEWS recipients of the need to continue making statutory payroll deductions, including union and other dues, given the lack of clear direction from the government on this front.

Finally, Unifor has become aware of certain employers abusing the option of averaging weekly hours across biweekly pay periods to pay our members less than they would otherwise receive. In such cases, employers are opting to pay our members a flat weekly amount of $847 if their hours fall under a certain threshold, while paying regular wages if employees are above that threshold. By averaging the weekly hours across two weeks, however, they reduce the amount of regular wages paid as a top up on the CEWS maximum weekly amount.[1] While Bill C-14 only makes mention of remuneration calculated on a weekly basis, the CEWS online calculator provides employers with the option of biweekly averaging.

 

Unifor’s recommendations

Given the inherent financial disincentives and limitations of the CEWS program, as currently structured, Unifor recommends that the government make the following amendments to the program:

• Include health premiums, pension contributions and other non-taxable benefits in the definition of eligible remuneration.
• Extend eligibility to the broader public sector, including post-secondary institutions and municipal transit authorities.
• Reduce the required revenue decline threshold to 15% across all claim periods.
• Provide clearer guidance to CEWS applicants on the need to make statutory deductions, including union dues.
• ​Co-ordinate with provincial governments to alleviate or refund statutory employer health taxes and workers’ compensation premiums for employees on paid leave.
• Prevent employers from averaging pay on a biweekly basis and enforce weekly reporting of remuneration.
• Allow employers to use projected revenue shortfalls and apply for the CEWS claim period in advance.
• Develop a mechanism to provide supplementary payroll support to employers in sectors which have yet to reopen or which continue have a large proportion of workers on layoff.
• Ensure that all laid off employees are able to access their supplementary unemployment benefit (SUB) plans, whether or not they are receiving the CERB benefit.

Unifor believes that the CEWS is a vital program to maintain workers’ employment relationships and must play a central role in preparing the economy for a swift recovery from the COVID-19 pandemic. We are happy to discuss these matters further and to provide more detailed input on how the CEWS program can be amended to reach more workers.