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May 22, 2020

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On May 15, 2020, the Government of Canada announced further updates to the Canada Emergency Wage Subsidy (CEWS). A highlight of the significant updates is provided below. A summary of all of the updates is provided here.

Unless otherwise noted, the updates below are proposed to be retroactive so that they each apply to the first qualifying period starting on March 15, 2020 and subsequent qualifying periods.

For additional information regarding applications and eligibility for the CEWS, click here.

Extension of Claim Periods

The CEWS included three claim periods beginning on March 15, 2020 and ending on June 6, 2020. It has been announced that the CEWS will be extended by an additional 12 weeks to August 29, 2020. More information in respect of this extension, including the specific claim periods, is expected to be released soon.

Updates to Eligibility

Revenue Decline Threshold

Under the previously released information, the subsidy would be available to eligible employers that experienced a decline in revenue of at least 15% for the month of March and 30% for the months of April and May in comparison to the same time (year-over-year) in the previous calendar year, or compared to the average revenue earned in January and February, 2020. The Government of Canada is consulting with business and labour representatives over the next month on potential adjustments to the program, including the 30% revenue decline threshold. No further information in respect of this potential adjustment has been released, including whether or not it will be retroactive.

Amalgamations

Under the current legislation, corporations that have undergone a reorganization, such as an amalgamation or a wind up, may not qualify for the CEWS as they may not have benchmark revenues to show the required decline in qualifying revenue, or their benchmark revenues may not show an accurate picture of pre-crisis revenues.

A proposed amendment to the CEWS has been announced to allow corporations formed on amalgamation of two or more predecessor corporations (or where one corporation is wound up into another), to calculate benchmark revenue using combined revenues, unless one of the main purposes of the amalgamation or the wind up was to qualify for the CEWS.

Partnerships

Under the current legislation, a partnership may be eligible to claim the CEWS only if all its members consist of eligible entities (generally, individuals, taxable corporations, non-profit organizations, or registered charities).

It has been announced that a partnership will be considered an eligible entity for the purpose of the CEWS as long as its non-eligible members, in aggregate, do not hold a majority of the interests in the partnership. Specifically, the total fair market value of interests in the partnership held by the non-eligible entities at all times in the qualifying period must be less than 50% of the fair market value of all interests in the partnership.

Updates to the Subsidy

Baseline Remuneration

Under the current legislation, the subsidy amount considers an eligible employee’s baseline remuneration, being the average weekly remuneration paid between January 1, 2020 and March 15, 2020 inclusively, excluding any seven-day periods in respect of which the employee did not receive remuneration.

To bridge the gap for those employees who were on unpaid leave between January 1 and March 15, 2020, and for seasonal workers, employers can now choose, on an employee-by-employee basis, one of the two following periods when calculating baseline remuneration:

  • Average weekly remuneration paid from January 1, 2020 – March 15, 2020; and
  • Average weekly remuneration paid from March 1, 2019 – May 31, 2019.

Each of the above alternatives still excludes any seven-day periods in respect of which the employee did not receive remuneration.

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