Demystifying the Canada Emergency Response Benefit (CERB)

27 April 2020

On March 25, 2020, the Government of Canada announced that it was taking "strong, immediate and effective action" to protect Canadians and the economy from the impacts of the global COVID-19 pandemic. Along with many other relief programs, the government established the Canada Emergency Response Benefit (CERB) program, which provides temporary income support to employed and self-employed Canadians who have stopped working due to COVID-19.

There has been some confusion about how the CERB interacts with the employment insurance (EI) regime and whether there is a difference between the two programs. In fact, before the CERB application portal went live on April 6, 2020, many Canadians applied for EI benefits despite being eligible for CERB and not for EI.

To be clear, the CERB is not EI. Individuals eligible to receive the CERB may do so without affecting their EI entitlements should they need to rely on EI in the future. Employers must exercise caution to avoid inadvertently disqualifying employees from CERB payments.

Employment Insurance

An individual who receives EI payments can work and earn income without foregoing EI benefits entirely. Generally speaking, an EI claimant is able to keep fifty cents of EI benefits for every dollar earned, up to 90% of the weekly insurable earnings used to calculate their EI benefit amount. If they earn more than this threshold, it is deducted dollar for dollar from their EI entitlement. Therefore, when an individual receives EI, they are still permitted (and even incentivized) to seek out other income-earning opportunities. This arrangement permits employers to recall laid off employees on a gradual or part-time basis without completely removing their EI eligibility.

Employers may also register a Supplemental Unemployment Benefit (SUB) plan with Service Canada, which increases employees' weekly earnings when they are not working because of a temporary work stoppage. Payments from approved SUB plans are not deducted from EI benefits. This program allows employers to top-up EI benefits without having any claw back of EI benefits, provided SUB plan payments and EI benefits do not exceed 95% of an employee's normal weekly earnings.

As an alternative to layoffs, employers can submit a work-sharing agreement to Service Canada, which provides income support to employees who agree to a reduced workweek and agree to share available work with their colleagues. Employees eligible for EI will receive EI benefits to supplement wage losses. The reduction in work must be between 10% and 60% over the duration of the agreement. In response to COVID-19, the government introduced special temporary measures under this program and has reduced processing time for applications.

Canada Emergency Response Benefit

The CERB program provides individuals with $500 per week for up to 16 weeks, and can be applied retroactively to March 15, 2020. As a result of this new program, individuals who would have applied for EI benefits due to a layoff arising after March 15, 2020 are now being directed to apply for the CERB.

The specific 4-week claiming periods for the CERB are as follows:

Four-week period cycle Period dates

1

March 15, 2020 to April 11, 2020

2

April 12, 2020 to May 9, 2020

3

May 10, 2020 to June 6, 2020

4

June 7, 2020 to July 4, 2020

5

July 5, 2020 to August 1, 2020

6

August 2, 2020 to August 29, 2020

7

August 30, 2020 to September 26, 2020

When an applicant submits a claim for the first time, he or she must have earned no more than $1,000 in income for 14 or more consecutive days within the 4-week period cycle of the claim. For subsequent claims, the applicant must have earned no more than $1,000 in income for the entire 4-week period cycle of the claim. If an employee is laid off but obtains alternate work or works reduced hours, and still makes more than $1,000 in a 4-week cycle, they will not qualify. Similarly, employers who want to help their employees by topping up CERB payments cannot do so unless the top-up is no more than $1,000 in any 4-week cycle.

Another crucial difference between EI and CERB relates to SUB plans. Given the simplified design of the CERB, the provisions that exist under the EI system for employers to make additional payments to workers through SUB plans do not apply to employees who are receiving the CERB. Amounts received by individuals from any employer in excess of the $1,000 threshold would create an obligation for the individuals to repay CERB amounts they received for the same benefit period. Employers that wish to do so may still submit a SUB plan to Service Canada. By registering a plan, employers can make payments to employees who are currently receiving EI regular or sickness benefits, and will also be prepared should employees need EI benefits at a future time.

Case Scenarios

The following scenarios illustrate two common problems with receiving compensation and CERB eligibility:

Accrued Vacation Time: Andrew is laid off on April 24, which is within the second 4-week CERB claiming period (refer to chart above). As this is Andrew's first claim, in order to qualify for the CERB, he must earn no more than $1,000 in income for 14 consecutive days. Andrew expects to earn no income for at least 14 days, but accepts his employer's offer to be paid for five days of accrued vacation time before the layoff takes effect. If Andrew's paid out vacation time leads to Andrew earning more than $1,000 in income during the relevant 14-day period, he is no longer entitled to receive the CERB in respect of that cycle.

Unexpected Recalls: Elizabeth was laid off on March 17. She submitted her first claim for CERB, and received the benefit during the first 4-week cycle. Elizabeth does not expect to be recalled to work for several months but is unexpectedly recalled to work, effective May 4, 2020. In her week back at work during the second CERB claim period, Elizabeth earns over $1,000 in income, thus disqualifying her from receiving the CERB for that period. Elizabeth will likely have to refund her CERB payment for that period.

Takeaway

Until April 16, 2020, applicants would be disentitled to receive CERB if they received any income during a 4-week claiming period. The benefit was quickly modified to provide much needed support to workers who continue to earn modest wages but have experienced a significant reduction in hours and earnings. However, employers must still remain cognizant of how compensation paid to employees during the CERB periods (whether through a top-up, vacation pay, etc.) could inadvertently eliminate their CERB entitlements.

Government benefits relating to COVID-19 are being introduced and adjusted rapidly. While this note provides general guidance on the CERB program, legal advice should be obtained before your workplace decides to provide any form of income to employees, which may interact with this entitlement.


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