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COVID-19: Work Sharing

COVID-19: Work Sharing

April 1, 2020

The Government of Canada has recently announced expansions to its work-sharing program. This program is being rolled out on a rapid basis so the following is based on our current understanding and we reiterate that the ultimate decisions for whether employers are covered with these programs rest with the Government. We urge you to obtain updated information from the following website.

In addition, general information on work sharing agreements is at the following website.

As this article 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.

Both sites above contain information on how to contact Service Canada and obtain further information on whether this program is right for you and your employees.  Most of the information below comes from those sites. The following is a very brief overview of the program for your initial assessment for whether it is a viable option for your business.

The Work Sharing program is a way in which to reduce work and wages for employees while not temporarily laying them off, and still permitting them access to Employment Insurance Benefits from the Government. The expansion of this program was announced on March 18, 2020, and has not yet been completely legislated by the Government, let alone interpreted and dissected by lawyers. This is not client specific and is intended to be for information only. Before you implement any programs, we urge you to seek legal advice, and to obtain information from the Government on whether this program can apply to your business.

Work Sharing Generally

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.

COVID-19 Changes

The change this week in light of COVID19 is that the Government of Canada has expanded the maximum duration of Work Sharing agreements from 38 weeks to 76 weeks across Canada for the businesses affected by the down turn of COVID19, as well as for the forestry, steel, and aluminium sector. According to the Government of Canada, “you are eligible to apply if you are experiencing a downturn of business activity related to the global outbreak of COVID19, and have:

  1. Work Sharing Agreements signed between March 15, 2020 and March 14, 2021;
  2. Work Sharing Agreements that began and ended between March 15, 2020 and March 14, 2021; and
  3. Work Sharing Agreements that ended between June 23, 2019 and March 14, 2020, and are in their mandatory cooling off period.”

Work Sharing Applications

The websites listed above contain extensive information on the application program, and if you do not have a current Work Sharing Agreement in place, you will be applying for a new Work Sharing Agreement. Note that the application process requires the preparation of a reasonably detailed package and recovery plan, which requires some disclosure that you may not be comfortable providing to the employees and Government on a continuing basis. If that is not an issue for you, you want to ensure that you are following the disclosure requirements very carefully so that your application is not dismissed.

The program requires you to identify a work unit with similar characteristics and apply equal treatment within that group (and, to be clear, the employees still need to agree since it is a change in employment). In other words, if you had fifteen employees performing similar functions that were prepared to reduce hours, the program requires you to reduce them all equally and, as work ramps back up, increase the hours equally as well.  That may work well for some businesses but not for others.

Another key condition is that you need to establish a term of the arrangement that is a minimum of 6 weeks long and up to 76 weeks (with extension possibilities – keep in mind that we have very little information in the extension to 76 weeks at this time). In the usual process of the Work Sharing program, you apply for it before implementation. The application is to be submitted a minimum of 30 days prior to the requested start date. That timeline may not be practical to respond to these circumstances.  The government has ensured that there will be a ‘streamlined process’ but we do not yet know what that will be. We are hopeful that it will allow you to apply after you have implemented reductions with employee agreement, because waiting may not be an option.  It is possible that the EI stimulus measures will be available for the 30-day waiting period but we are still waiting on detailed information on those measures. The employer also has to maintain all healthcare benefits currently in place (though pro rated reduction applicable to benefits is a likely exception, where the benefits plan is based on hours worked).

Assessment of Viability

Ultimately, you will have to assess if this program meets your needs, or if a temporary layoff is a better option (with or without offering options for work within that layoff).  You may not meet all conditions for the program, you may have reasons that make the conditions untenable or unfavourable, and the conditions may change on us in the next days as they are rolled out.  Because of those elements, there’s a calculated risk involved in deciding to move ahead now.

You also will want to be careful with employee messaging when discussing EI availability in general and Work Sharing in particular.  In other words, you should not promise the availability of the benefit to your employees if you offer work reduction, and you should consider the advantages and drawbacks of the financial implications of layoffs.  This assessment is particularly prudent given the lack of direction and information from Service Canada.  If you have to act now for cost reasons, then you will need to make a judgment call on whether to act as though this isn’t an option, or if you want to try to fit the criteria.

From an employer standpoint, there should be no implementation difference between a rate reduction without Work Sharing versus doing it pursuant to the program – you’ll just pay deductions and contributions based on revised earnings. The value is to you in being able to maintain your workforce rather than make selective layoffs. The additional value is that you reduce the likelihood of constructive dismissal claims, but you can reduce that likelihood if you can get consent to rollbacks regardless. For employees, there is benefit to the Work Sharing program because they can then access EI.

Earnings received in any week by an employee under the Work Sharing agreement shall not be deducted from the Work Sharing benefits.  Subject to eligibility, Service Canada indicates that the employee’s EI benefits will be based proportionately on the decrease in working hours as per the Work Sharing agreement, as demonstrated by this example:

An employee who has a weekly EI benefit rate of $500.00 and a normal work week of 40 hours is decreased to 30 hours under the Work-Sharing agreement. 

In this case, the employee has worked 30 out of a possible 40 hours. Therefore, 10 out of 40 hours were lost due to the Work-Sharing agreement, or 25%. This claimant will be entitled to 25% of their benefit rate, or $125.00, for the 10 hours missed because of the Work-Sharing agreement.

If a Work Sharing participant has earnings from sources other than the Work-Sharing employment (including, presumably, additional earnings from the Work Sharing employer), a percentage of these earnings will be deducted from any Work-Sharing benefits payable the week in which the earnings occurred. Earnings are deducted in the following way:

  1. If the earnings received are less than the Earning Threshold (i.e. 90% of the Weekly Insurable Earnings [WIE] used to calculate the Employment Insurance claim), 50% of the earnings will be deducted from any Work-Sharing benefits payable.
  2. If the earnings received are more than the Earning Threshold but less than the WIE, 50% of the earnings up to the Earning Threshold will be deducted as well as 100% of the earnings over the Earning Threshold.
  3. If the earnings received are equal to or greater than the WIE, no benefits will be payable.

If you are comfortable with the applicable process, this is one way to reduce your employees’ wages that allows them to access EI for the reduction and to still permit flexibility in casual additional employment.  If you feel like this is an option you want to pursue further, try to connect with the government first if you can to get some guidance on the expected rollout of the program. If you are still interested, please contact us and we can assist you with implementation with the goal of fitting within the framework of the program.  We would also recommend considering some disclaimer language to protect against employees not being able to obtain the benefits of the program, particularly if you choose to risk implementing it before Service Canada has agreed to your implementation.

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.

CARTER D. GRESCHNER
cdgreschner@bryanco.com
780-420-4712
CHAYLENE L. GALLAGHER
clgallagher@bryanco.com
780-420-4711

This article was prepared with the assistance of:

KELLEN C HALL
kchall@bryanco.com
780-420-4746
SAMANTHA N. HANSON
snhanson@bryanco.com
780-420-4721

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