COVID-19: Employment Insurance (EI), CERB, and Layoffs in Alberta

| April 1, 2020

We have had a number of inquiries from employers who wish to explore the idea of reducing staff hours and pay rather than proceeding with full layoffs or terminations. Employers are wondering if there is a way to have an employee’s hours and pay reduced, but also to allow that employee the entitlement to apply for EI benefits. This document discusses some of the potential ways to achieve that, along with some brief analysis of the pros, cons and risks of each.

As this is not client-specific, this document is merely information and not legal advice.  Before implementing any steps, we urge you to seek legal advice to confirm that those steps are appropriate at the current time and in light of your specific circumstances.  Our main office contacts for Employment Law are at the bottom of this document.

We should note that EI entitlement and policy has always been a somewhat self-contained and complex area, and it is now changing by the hour which makes summarizing it challenging. As well, we are providing advice to employers, and we cannot provide guarantees on each of your individual employees’ entitlement to EI. This document is meant to serve as a guideline to provide you options for exploration.

Option 1 – An Agreed Upon Reduction in Hours, Effective Immediately

If an employee’s hours or pay are reduced unilaterally by an employer in a substantial way (i.e. more than 10-20%), this would likely fit the test for “constructive dismissal” and allow the employee the right to treat him or herself as terminated and entitled to pay in lieu of notice. That risk can be managed by making changes with the employee’s agreement. Given the economic circumstances currently, employees may be willing to agree to accept reduced hours to allow an employer to continue to operate without laying off or terminating anyone. If there was agreement, then this would essentially be an agreed upon amendment to the employment agreement, and there would be no issue from the employer’s standpoint. Some risks are created if language is used such as, “Agree to these new terms or you are fired,” and so we suggest advising employees that an employer is struggling, needs to reduce overhead, and is exploring options, this hour/pay reduction being one of those options.

The major downside with this option is that a reduction in hours would not generally entitle an employee to apply for EI. The Canadian Government has indicated that they will be introducing an “Emergency Support Benefit” delivered through the CRA to provide up to 5 billion in support to workers who are not eligible for EI and who are facing unemployment. There is little information on this benefit at this point, but it is conceivable that it would assist employees who had their hours/pay reduced.

Option 2 – A Temporary Layoff to a Reduced Position

This document is meant to supplement our more general COVID Employment Law Issues article, which has information on layoffs generally, and so the general details of temporary layoffs will not be covered again here.

The idea behind this option would be that a layoff notice would not say that the employee was fully laid off, but would rather indicate that the employee was being laid off from his or her usual position and being moved to a position with reduced hours.

At this point, the uncertainty around this is whether this would be categorized as a full “layoff” under both the Employment Standards Code, and for the purposes of applying for EI. EI eligibility is based on being without work and without pay for at least 7 consecutive days in the last 52 weeks.

In our opinion, it is unlikely that this would entitle someone to EI, and is not a practically viable option, but we outline it here so that you are aware we considered it.

Option 3 – Issue a Temporary Layoff, Then Have the Employee Work on a Casual Basis

Under this option, the employer would issue a layoff notice. In order for the employee to be without work and without pay for the 7 days required by EI, you would issue your layoff notice and then the employee would have a week before being entitled to EI. After a week, the employee would be contacted and asked to come in for a day or two of employment per week on a casual basis.

This should not be done as a recall. There are risks to issuing this as a recall notice:

  1. Since the employee would be recalled to something less than their usual position, the employee could indicate that they were being constructively dismissed at that point in time and seek termination pay.
  2. A recall would involve notice through the ROE system that the employee had been recalled, which may then disentitle them to any EI.

The employee would be obligated to report his or her earnings, and his or her EI benefits would be reduced by fifty cents for every dollar earned up to 90% of pre-layoff insurable earnings, at which point it would switch to dollar for dollar. However, the employee would earn more this way than through EI alone.

Note: At this point, we are trying to confirm whether an employee’s return to work with the same employer would completely disentitle them to EI. Our assumption is that, absent a recall, the EI entitlement will continue. We have not seen anything in the legislation or on the Government of Canada website that would indicate otherwise.

As indicated in the general article, a temporary layoff can be extended where an employer provides some form of benefit and an employee agrees to the extension. In this scenario, the benefit part of that concept would presumably be provided through the pay for part-time work. 6. Therefore, if the employee is being provided with wages for casual work, you could approach him or her about extending the layoff arrangement.  This should be done as early as possible once you know an extension could be necessary, and no later than 53 days into the layoff. With agreement, the 60 day timeframe could be extended indefinitely. If the employee did not agree, the employer would have to choose whether to do an actual recall to put the employee in their normal position or to allow the employee to be deemed terminated at the expiry of the 60 days.

One matter we were asked to consider would be whether any part-time days worked would be excepted from the counting of the 60-day deadline on a temporary layoff. In the scenario outlined above, since this would not be a full recall, our assumption is those days would count as part of the 60 day limit. The employee would be working but would still be laid off for those days. That analysis would change if the employee was actually recalled to employment and then laid off again.

Option 4 – A Work Share Agreement

In brief, Work Sharing is a wage adjustment program designed to help employers and employees avoid lay-offs if there is a temporary reduction in the normal level of business activity beyond the control of the employer. Theoretically, this program should enable employees to work a temporarily reduced work week while the business recovers. This does not permit you to lay off then recall employees for short periods of time without having to go through the normal recall process – this is completely separate from temporary laying off employees. Because of that, you will still want to run the assessment as to whether it is beneficial for you to temporarily reduce for a number of employees, or to temporary lay off a number of employees.

Work Sharing is a three party agreement, the employers, the employees, and Service Canada. There is a moderate process that has to be followed before Service Canada will approve a Work Sharing agreement and program.  This could make it practically challenging for most employers. The affected employees also must agree to a reduced scheduled work and to share the available work over a specified period of time. With employees agreeing to adhere to a Work Sharing program, your risk of constructive dismissal is greatly reduced – this is a higher risk if you just reduce hours without consent and without submitting a Work Sharing program.

For further information on Work Sharing, we have a separate article covering only that topic here.

Option 5 – SUBP

Employers may be able to use a Supplemental Unemployment Benefit Plan (SUBP) to increase their employees’ weekly earnings when they are unemployed due to a temporary stoppage of work, training, illness, injury or quarantine.

Payments from SUBP’s that are registered with Service Canada are not considered as earnings and are not deducted from EI benefits (pursuant to subsection 37(1) of the EI Regulations).  This is an application-based process and we cannot guarantee that Service Canada will approve your application.  Information on SUBP and the requirements to implement can be found here.  If you are interested in SUBP, we have prepared a more extensive article on that topic in particular that you can find here.


The federal government has been changing these rules at a rapid pace.  This is our analysis for now but it could change as we try to keep up with the EI demand in coming months.  The government has recently announced the Canada Emergency Response Benefit (“CERB”) – more information is here.  This lump sum benefit is intended to cover employees who are not entitled to EI (such as those who don’t have enough insurable earnings to qualify or who are self-employed) and to reduce the burden on EI.  Canada has just updated its application process for the CERB here.

It will ultimately be up to your employees to apply for any EI and other supplemental benefits and we urge you to not give them any information that could be perceived as a guarantee or promise of EI or other government payments.  For more information on these topics or any other matters please contact one of the below lawyers from Bryan & Company LLP or access our Employment Law group here and it would be our pleasure to assist.


This article was prepared with the assistance of: