On November 19, 2020, Bill C-9, An Act to Amend the Income Tax Act (Canada Emergency Rent Subsidy and Canada Emergency Wage Subsidy) (Bill C-9) received Royal Assent.  Bill C-9’s purpose is to implement targeted support to help businesses get through the second wave of the COVID-19 pandemic.  Among other things, Bill C-9 makes changes to the Canada Emergency Wage Subsidy (CEWS), first implemented on April 11, 2020, when the federal government introduced and passed Bill C-14, A second Act respecting certain measures in response to COVID-19. 

The CEWS program has undergone changes since it was first announced.  Bill C-9 makes additional modifications to the program including, among other things, extending the CEWS; narrowing its eligibility criteria; eliminating the substantial reduction of the “base subsidy” that was scheduled to occur beginning at Period 9 (October 25, 2020 – November 21, 2020); adjusting the CEWS top-up subsidy; introducing an elective alternative method for eligible employers to determine baseline remuneration for claim periods 5 to 10; and establishing a new deadline for wage subsidy applications.  We provide further detail below. 

Extension of the CEWS Program

Bill C-9 extends the CEWS to June 2021. 

Narrowing of the “Eligible Employee” Definition

Employers are entitled to the CEWS for eligible employees.  Bill C-9 narrows the definition of “eligible employees” to mean employees who are employed by the eligible entity primarily in Canada throughout a qualifying period or a portion of that period. 

Elimination of “Base Subsidy” Reduction Scheduled to Occur at Period 9

Employers that experience a revenue reduction because of the pandemic are entitled to the CEWS “base subsidy.”  The base subsidy was scheduled to be substantially reduced beginning at Period 9.  Bill C-9 eliminates this scheduled reduction, so that the maximum base subsidy applicable to claim period 8 will also apply for both claim period 9 and claim period 10.  Accordingly, the maximum subsidy rate for claim periods 8 to 10 will remain at 65% (40% base rate + 25% top-up).

Change to the Method of Calculating the CEWS “Top-up” Subsidy

In addition to the base subsidy, a CEWS “top-up” subsidy is available for employers that experience a revenue drop of 50% or more.  Bill C-9 changes the method for calculating the top-up: retroactive to September 27, 2020, the top-up subsidy will be calculated based on the change in monthly revenues, year over year, for the current or previous calendar month (subject to a safe harbor rule introduced to calculate the top-up wage subsidy for claim periods 8 to 10, i.e., until December 19, 2020).  Prior to Bill C-9, the top-up was calculated using the revenue drop over the preceding three months, compared to the same three-month period the year before. 

Introduction of Elective Alternative Method for Eligible Employers to Determine Baseline Remuneration for Claim Periods 5 to 10

For claim periods 5 to 10, if an eligible employee was on a leave throughout the period beginning July 1, 2019 and ending on March 15, 2020 (e.g., maternity, paternity, parental, or adoption leave, or due to illness, injury, quarantine to provide compassionate care or support for family members, or to provide care or support for critically ill children or adult family members), and they received benefits pursuant to the Employment Insurance Act or Quebec’s Act respecting parental insurance, the eligible employer can elect that the baseline remuneration period is a period that is 90 days immediately before the date on which they commenced their leave.

Application Deadline

Bill C-9 extends the deadline to apply for CEWS.  An application for a qualifying period must now be made by January 31, 2021, or 180 days after the end of the claim period, whichever is later. 

For detailed information about the CEWS, including information about the modifications to the program made in November 2020 pursuant to Bill C-9, see the Government of Canada’s Frequently asked questions - Canada emergency wage subsidy (CEWS).