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Bill Morneau

Ottawa elaborates on wage subsidies, subsidy abuse penalties for businesses, charities, non-profits

Thursday, April 02, 2020 @ 9:43 AM | By Cristin Schmitz

Last Updated: Thursday, April 02, 2020 @ 1:23 PM


The federal government has revealed new information about its much-anticipated 75 per cent emergency wage subsidy for employers — including some details of the “stiff and severe penalties” Prime Minister Justin Trudeau has warned will face businesses, non-profits and charities who abuse the COVID-19 wage subsidy program by using it other than to pay employees.

On April 1, Finance Minister Bill Morneau said the Canada Emergency Wage Subsidy announced March 27 — which offers employers a subsidy of 75 per cent of the first $58,700 normally earned by an employee (capped at $847 per week per employee) will be in place for 12 weeks — until June 6, 2020, retroactive to March 15.

Finance Minister Bill Morneau

“As an employer, you’ll need to attest that you’re doing everything you can to pay the remaining 25 per cent of your worker’s income,” Morneau told a Toronto news conference April 1.

Further important details about the program, including specifics on eligibility requirements, the eligibility periods, and the amount of subsidy, were later provided in a government backgrounder.

It states that in order to maintain the integrity of the program and to ensure that it helps Canadians keep their jobs, the employer would be required to repay amounts paid under the Canada Emergency Wage Subsidy if they do not meet the eligibility requirements and pay their employees accordingly.

“Penalties may apply in cases of fraudulent claims,” the government says. “In addition, anti‑abuse rules will be proposed to ensure that the subsidy is not inappropriately obtained and to ensure that employees are paid the amounts they are owed.”

The government said it is “considering proposing to create new offences that will apply to individuals, employers or business administrators who provide false or misleading information to obtain access to this benefit or who misuse any funds obtained under the program. The penalties may include fines or even imprisonment.”

Morneau explained that to be eligible for the 75 per cent wage subsidy program, big and small businesses — individuals, partnerships and non-publicly funded corporations — must suffer a drop in “gross revenues” of at least 30 per cent in March, April or May, when compared to the same month in 2019.

He said businesses will have to reapply each month. The wage subsidy is also available to charities and non-profits who see “a similar decline in revenues,” according to the Finance minister.

The government’s backgrounder states that “an employer’s revenue for this purpose would be its revenue from its business carried on in Canada earned from arm’s-length sources. Revenue would be calculated using the employer’s normal accounting method, and would exclude revenues from extraordinary items and amounts on account of capital.”

Morneau told reporters that the government is still working on details, including whether and how the wage subsidy would be available for startup enterprises who did not have any, or much revenue, during the relevant months last year.

The government said in a press release an eligible employer’s entitlement to the 75 per cent wage subsidy will be based entirely on the salary or wages actually paid to employees.

Prime Minister Justin Trudeau

Both Morneau and Trudeau emphasized that employers are encouraged — and are expected to at least make best efforts — to top up salaries to 100 per cent of the maximum wages covered. “We know that this may not always be possible,” Morneau acknowledged. “The system will be flexible because what’s most important is that Canadians can come back to work. My message to Canada’s employers is this: ‘Get ready to rehire people.’ ”

Morneau said he hopes to see many employers rehire workers they have laid off in recent weeks, as well as to retain those currently on their payroll.

Eligible employers would be able to access the Canada Emergency Wage Subsidy by applying through a Canada Revenue Agency online portal “that will launch soon,” Morneau said. “Funds will be available in approximately six weeks.”

Notably, the government also clarified that organizations that do not qualify for the 75 per cent wage subsidy program “may continue to qualify” for a different wage subsidy program that continues to exist and was announced March 18.

That earlier-announced three-month wage subsidy for small businesses, non-profits and charities, which has different eligibility criteria, applies to 10 per cent of remuneration paid from March 18 to before June 20, up to a maximum subsidy of $1,375 per employee and $25,000 per employer.

For the 75 per cent subsidy program eligible employers include employers of all sizes and across all sectors of the economy, with the exception of public-sector entities, the government said.

With respect to the eligibility requirement of a 30 per cent decline in gross revenue, the government said it will continue to work with the non-profit and registered charities sectors to ensure that the definition of “revenue” applied to them is “appropriate to their circumstances.”

“The government is also considering additional support for non-profits and charities, particularly those involved in the front-line response to COVID-19,” the government said in a press release. “Further details will be announced in the near term.”

Morneau said eligible employers will be able to access the Canada Emergency Wage Subsidy by applying through a yet-to-be unveiled Canada Revenue Agency online portal. “More details regarding how to apply for the program will follow,” the government specified.

Morneau said he is hoping the Canada Emergency Wage Subsidy will be up and running “as soon as possible” — but he is not absolutely certain when. “At this point we think it will take between three and six weeks for businesses,” he explained in French. “That means that we hope that the system will be up and running in three weeks, but we can’t exactly sure about that.”

He suggested employers should consider rehiring laid off employees now, “and afterwards we will pay the businesses back. I think that could work for many,” he observed. “We do think that with our current approach businesses will be able to hire back their employees in the next few days.”

Asked whether the government is open to extending the wage subsidy program beyond 12 weeks, Morneau replied that the government will continue with its approach of being there for Canadians.

Asked the total cost of the government’s announced COVID-19 emergency financial measures thus far to support Canadian businesses and people, Morneau estimated that the total proposed expenditure so far is “in the order of magnitude of five per cent or more” of Canada’s GDP — “so very significant.”

He did not provide the overall projected cost, but projected $105 billion in “direct support” to people and businesses

The government’s backgrounder indicates a total projected cost of more than $570 billion, an estimate that also includes various “credit and liquidity” supports.

If you have any information, story ideas or news tips for The Lawyer’s Daily please contact Cristin Schmitz at Cristin.Schmitz@lexisnexis.ca or at 613-820-2794.