Work in Progress: Government Relaxes the Criteria for the 75% Canada Emergency Wage Subsidy

Auteurs : Mark Firman et Guy-Étienne Richard

Traduction en cours.

Last week, we provided an update on the federal government’s Canada Emergency Wage Subsidy (CEWS), which will cover up to 75% of wages for qualifying employers. The CEWS is retroactive to March 15, 2020, and slated to continue to June 6, 2020.

On April 8, 2020, the federal government announced modifications to the CEWS that may make it easier for some employers to qualify for the subsidy, as well as incremental additional relief.

Expanded Eligibility


Previously, to qualify for the CEWS, employers were required to show a 30% decline in gross revenues on a monthly basis (March, April and May 2020) compared with the corresponding months in 2019. Some employers, notably startups, had raised this requirement as a barrier, since not all employers have revenue histories extending back to early 2019.

As part of the new announcements, the government has indicated the following:

  • For March 2020, employers will need to demonstrate only a 15% drop in revenues (recognizing that some employers may not have begun experiencing a slowdown until mid-March).
  • For April and May 2020, employers will still need to demonstrate a 30% drop in gross revenues.
  • Employers will be able to use the average revenue earned in January and February 2020 as a reference period for purposes of determining the 15% or 30% drop in revenues, or the corresponding months of March, April and May 2019.


The eligibility criteria for employees have also been changed. The government has announced that the CEWS will be available with respect to employees in Canada who have not been without remuneration for more than 14 consecutive days in each month of the eligibility period (i.e., from March 15 to April 11, from April 12 to May 9, and from May 10 to June 6).

The amount of the CEWS has not changed and will continue at a rate of 75% for the first $58,700 normally earned by employees, representing a benefit of up to $847 per week. Employers eligible for the CEWS will continue to be required to make their best efforts to top up employees’ salaries to bring them to pre-crisis earnings levels.

Measuring Revenues

Some employers had expressed uncertainty with the government’s previous CEWS announcement, noting that it was unclear how the 30% drop in revenues was to be measured. The government has now clarified that, to determine revenue loss, employers can measure revenues on the basis of either accrual accounting (as they are earned) or cash accounting (as they are received). Calculations may continue to exclude extraordinary items and amounts on account of capital. Special rules will apply for corporate groups, non-arm’s length entities and joint ventures.

Registered charities and non-profit organizations will also be able to choose to include or exclude government funding in their revenues for the purpose of applying the revenue reduction test.

In the case of both businesses and charities and non-profits, the revenue determination methods chosen will need to be consistent for the duration of the CEWS program.

Additional Refunds to Employers

The government also proposes to expand the CEWS by introducing a new 100% refund for certain employer-paid contributions to Employment Insurance, the Canada Pension Plan, the Québec Pension Plan, and the Québec Parental Insurance Plan.

The government will refund the full amount of employer-paid contributions for each eligible employee, for each week during which the employee is on leave with pay and for which the employer is eligible to claim the CEWS for the employee. Employers will be required to apply for this refund at the same time as applying for the CEWS.

This refund will not be available for eligible employees who are on leave with pay for only a portion of a week.

There will be no overall limit on the refund amount that an eligible employer may claim.

Compliance and Penalties

The government has hinted at penalties, including fines and imprisonment, for fraudulent use of the CEWS program. In addition, anti-abuse rules will be put in place to ensure that the CEWS is not inappropriately obtained. In each case, employers would also be required to repay any CEWS amounts paid to them under the program.

Artificial transactions to reduce revenue for the purpose of claiming the CEWS will be subject to a penalty equal to 25% of the value of the subsidy claimed (in addition to the repayment of the CEWS amount received in full).

Looking Ahead

We are closely following the government measures being announced to address the adverse economic impact of the COVID-19 pandemic on Canadian businesses. If you have any questions about these latest announcements or if you require assistance with employment issues during these difficult times, please do not hesitate to contact your regular Davies lawyer.



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