CPA’s and Firms will play a critical role in helping businesses and individuals manage the financial upheaval being caused by the COVID-19 pandemic. While many Firms will be able to continue operating by serving clients online and enabling staff to work remotely, this may not be possible if the current situation significantly deteriorates. Therefore Firms must plan now for all potential contingencies and be ready to quickly adjust to a worst-case scenario situation (i.e. a government imposed lock-down or key staff becoming sick).
This article focusses on the legal options available to Firms, with respect to employees and contractors, in the event it becomes necessary to significantly reduce operations or temporarily suspend operating all together. Thankfully, the federal and provincial governments have already stepped up with new and increased support for businesses and individuals, and further support will likely come.
The Canada Work-Sharing program is designed to help employers and employees avoid layoffs when there is a reduction in the normal level of business activity beyond the employer’s control – the COVID-19 crisis constitutes such a situation. Eligible employees who have to work reduced hours may obtain income support through Employment Insurance benefits while their employer recovers. This arrangement can last for up to 38 weeks. Work-Sharing is a three-way agreement between the employer, employees and Service Canada; as such, Firms will need to obtain their employees’ consent to work a reduced schedule before they can implement the program.
Firms should review online guidance from the Government of Canada to see if they qualify and find out how to apply.
When business is slow, or an employer is forced to temporarily shut down, temporary layoffs could be implemented until business picks up again. This allows employers to avoid paying severance, while enabling employees to apply for E.I. benefits and have their jobs protected.
However, temporary lay-offs are only permitted where the employer is expressly allowed in an employment contract. Absent an existing contractual right, we recommend Firms obtain their employee’s prior consent now, in writing, through a temporary lay-off agreement.
For administrative and support staff, the BC Employment Standards Act (the “ESA”) allows for temporary layoffs. The ESA currently prohibits Firms from contracting for a layoff period longer than 13 weeks. If the layoff lasts longer than 13 weeks, the employment relationship is terminated and the Firm will need to provide termination pay. It should also be noted that under the ESA, and regardless of an employer’s intent, an employee is considered laid off as soon as they earn less than 50 percent of their weekly wages at the regular rate (averaged over the previous eight weeks).
Under Common Law, a CPA or CPA-trainee will be constructively dismissed if there is a substantial change to their hours, duties and/or pay. For contractors, a Firm would also likely be in breach of contract if it substantially reduced the contractor’s income, duties, or hours. If Firms do not have an effective temporary layoff agreement in place, an employee could be entitled to severance and a contractor could be entitled to damages for breach of contract.
Since Firms are not bound by the 13-week maximum ESA layoff period when it comes to CPA’s and CPA-trainees, it’s possible for them to contract for a longer layoff period with these staff members if necessary.
E.I. Benefits for Temporarily Laid Off Employees
Regular E.I. benefits, with a one-week waiting period (which may be waived if appropriate steps are taken), are available for employees who have been temporarily laid off. They must be available for work, able to work, and looking for work to qualify, even though they are on a temporary work stoppage.
Expanded Sickness E.I. and the Canada Emergency Response Benefit
In response to the COVID-19 crisis, Canada has introduced new benefits and expanded E.I. eligibility. For eligible employees on sick leave or in quarantine, they are entitled to up to 15 weeks of income replacement and can apply to waive the one-week waiting period without a medical certificate. (https://www.canada.ca/en/employment-social-development/corporate/notices/coronavirus.html)
On March 25th, Canada introduced the new Canada Emergency Response Benefit (the “CERB”), which will provide a taxable benefit of $2000 a month for up to 4 months.. This flat-payment benefit would be administered through the CRA and provide income support to:
- Workers who must stop working due to COVID-19 and do not have access to paid leave or other income support.
- Workers, including the self-employed, who are taking care of a family member who is sick with COVID-19, such as an elderly parent, but do not qualify for EI sickness benefits.
- Parents with children who require care or supervision due to school or daycare closures, and are unable to earn employment income, irrespective of whether they qualify for EI or not.
- Workers who still have their employment but are not being paid because there is currently not sufficient work and their employer has asked them not to come to work.
- Wage earners and self-employed individuals, including contract workers, who would not otherwise be eligible for Employment Insurance.
The CERB replaces previously announced Emergency Support Benefit and Emergency Care Benefit.
This is an unprecedented and challenging situation. It’s perhaps natural to want to avoid thinking about worst-case scenarios, but by planning for them and being aware of the legal options and government resources at our disposal, will be able to serve our people and clients well through this temporary crisis.
NOTE: The content of this article is intended to provide a general guide to the subject matter. If you have specific questions about your employment policies or practices you can contact Yeager Employment Law for a consultation.