A Second Act Respecting Certain Measures in Response to COVID-19

A Second Act Respecting Certain Measures in Response to COVID-19

Andrea Risk
Posted April 14, 2020 Category: Businesses, Individuals/Families

On Saturday, April 11, 2020, just in time for Easter, the federal government passed legislation entitled A Second Act Respecting Certain Measures in Response to COVID-19, which amends the Income Tax Act to create the 75% Canada Emergency Wage Subsidy (“CEWS”).  Let’s unwrap this egg, shall we? 


Eligible employers include individuals, as well as taxable corporations, non-profit organizations and registered charities that are not publicly-funded (i.e., not municipalities, hospitals, school boards, etc.).  There are some exceptions that allow publicly-funded organizations to be eligible for CEWS, including boards of trade, chambers of commerce, and certain housing corporations.  All eligible employers must have had a business number on March 15 that was used for payroll remittances.


The amount of the CEWS that can be claimed for each employee is the greater of:

a) 75% of the eligible remuneration paid to the eligible employee, up to a maximum benefit of $847 per week;


b) The lesser of

i) 75% of the eligible employees’ baseline remuneration;
ii) the amount of eligible remuneration paid to the eligible employee; and
iii) $847 per week

It’s complicated.  Read it a few times.  You’ll also need to understand the following terms:

eligible remuneration” includes salary, wages and taxable benefits, but does not include severance pay, stock options or personal use of corporate vehicles.  It also excludes amounts paid that are above the usual amounts and are designed to assist in qualifying the employer for the CEWS.

eligible employee” is an individual who is employed in Canada and has not been without remuneration for 14 or more consecutive days in the qualifying period (i.e., does not qualify to receive the Canadian Emergency Response Benefit).

baseline remuneration” is the average weekly eligible remuneration paid between January 1 and March 15, 2020 inclusive, excluding any 7-day periods in which the employee did not receive any remuneration


Employers must experience a 15% decrease in revenue in March, and a 30% decrease in April and May.  The 15% decrease for March will be a relief to some of you, who are seeing or anticipating a delayed decrease in revenue.

The % decrease can be measured in one of two ways, either: (a) March 2020 to March 2019, April 2020 to April 2019 and May 2020 to May 2019; or (b) March, April and May 2020 to the average revenue earned in January and February 2020.  You must select one of these two methods when you apply, and will be required to use the same approach for the duration of the program.  Revenue from non-arm’s length entities cannot be included in the calculations.

We have received many inquiries from clients who are registered charities or non-profits about how to calculate revenue.  What we now know is that the calculation of revenue for these organizations can include most forms of revenue.  Registered charities can include revenue from related businesses (as defined in the Income Tax Act), gifts and other amounts received ordinarily.  Non-profits can include membership fees and other amounts received ordinarily.  These organizations can elect to exclude revenue from government sources in the calculation but if they do then they must continue that election throughout the program. 

The legislation allows organizations that normally prepare consolidated financial statements to determine qualifying revenue separately, provided that all members of the group do so.  It also allows affiliated organizations to calculate revenue on a consolidated basis.

There are 3 claiming periods:

March 15 – April 11
April 12 – May 9
May 10 – June 6

You qualify for each of them if you meet the required decrease in revenue by the method of measurement you have chosen.  Once an employer is found eligible for a specific claiming period, that employer will automatically qualify for the next period.  For example, if you qualify for period 1 then you automatically qualify for period 2.  Ditto for 2 to 3.

The current legislation allows for additional claiming periods, ending no later than September 30, 2020.


You can apply for the CEWS through the CRA’s My Business Account portal.  There will be a separate online application portal as well.  You must apply before October 2020.

You must keep records demonstrating the decline in revenue and remuneration paid to employees.

As part of the application, you will be required to attest that the application is complete and accurate in all material respects

If you do not qualify, then you will be required to repay the amounts you received. If you are found to have artificially reduced your revenue then you will need to repay plus 25%.  In the event of fraud, consequences include fines and possible imprisonment.


The amount of the wage subsidy for which you qualify is deemed to be an overpayment to the CRA.  The Minister is authorized to refund any or all of this overpayment to you at any time during the tax year.  The wage subsidy amounts may therefore be provided by way of a “refund” from the CRA, a credit against other amounts due to the CRA, or possibly a combination of the two.


The CEWS legislation included a surprise new refund of employer-paid contributions to EI, CPP, the Quebec Pension Plan and the Quebec Parental Insurance Plan.

For each full week that an eligible employee is on paid leave, if the employer is eligible to claim the CEWS, then 100% of the contribution is refunded.

The refund has no weekly maximum benefit per employee and no overall limit to the refund amount that an eligible employer can claim.

You deduct and remit both the employer and the employee contributions as usual.  You then apply for the refund of the employer portion at the same time as you apply for the CEWS.


If you are eligible for both the CEWS and the 10% TWSE for a period, any amount received for the 10% TWSE will reduce the amount available to be claimed under the CEWS program.

If you have a work-sharing program, EI benefits received by employees through that program will reduce the benefit you are entitled to receive under the CEWS program.

As always, this is not legal advice but, rather, a general update. 

Keep safe.

The Labour & Employment Team at Cunningham Swan

Andrea Risk
Posted April 14, 2020 Category: Businesses, Individuals/Families

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