COVID-19: A Guide to Work Sharing Agreements

In response to the COVID-19 pandemic, the Federal Government of Canada has announced several measures and programs to assist employers and employees during this unforeseen economic downturn.

Of particular interest to many employers may be the special measures taken by the Government to make the Work-Sharing program (the “WS Program”) more accessible.

Federal Work-Sharing Program

The WS Program is designed to help employers and employees avoid layoffs when there is a temporary reduction in the normal level of business activity that is outside of the control of the employer. The program is available to both federally and provincially regulated employers. The WS Program provides income support to employees eligible for Employment Insurance (“EI”) benefits who work a temporarily reduced work week while their employer recovers. The WS Program creates a three-party agreement with the employer, the employees, and Service Canada (the “WS Agreement”).

Eligible Employers

To be eligible for a WS Agreements, employers must:

• have been in business in Canada year-round for at least two years;
• be a private business, publicly-held company, or a not-for-profit organization;
• demonstrate that the shortage of work is temporary and beyond their control, not a cyclical/recurring slowdown;
• demonstrate a recent decrease in business activity of at least 10%; and
• submit and implement a recovery plan designed to return the Work-Sharing individuals to normal working hours by the end of the program.

Eligible Employees

In order for an employee to be eligible to participate in a WS Agreement, they must be:

• year-round permanent full-time or part-time employees who are required to carry out the everyday functions of normal business activities, ie. “core employees”;
• be eligible to receive EI benefits; and
• agree to a reduction of their normal working hours in order to share the available work.

Employees who are employed as seasonal or casual employees, students hired for summer or co-op terms, or shareholders of the business whose shares provide them with significant decision making power as to the direction of the company, are not eligible to participate in a WS Agreement.

The Work-Sharing Unit

The employees participating in a WS Agreement are a “Work-Sharing Unit”. The members of the Work-Sharing Unit are all core employees who have agreed to participate in the WS Agreement, to reduce their working hours, and to share equally the available work. The Work-Sharing Unit is typically made up of employees in a single job description or who do similar work. The Work-Sharing Unit may also be made up of employees who complete different work but whose jobs impact one another.

Applying for a WS Agreement

In order to be eligible to participate in the WS Program, the employer must apply at least 30 days prior to the commencement of the requested start date and demonstrate a decrease in business of 10% or more within the last six months. The employer must prove the decrease by providing a record of sales or production figures over the last 24 months up to and including the last month prior to submitting the application.

The WS Agreement must include a reduction in work activity of the employees’ regular work schedule of no less than 10% (one-half day) and no more than 60% (three days). In applying to the WS Program, the employer is required to provide a recovery plan which illustrates the actions it intends to take in order to alleviate the work shortage and return the Work-Sharing Unit to normal working hours by the end of the WS Agreement period.

COVID-19 and WS Agreements

Typically, a WS Agreement has a minimum duration of 6 weeks and a maximum initial duration of 26 weeks, with a possible extension of up to 12 weeks. However, the Government of Canada introduced temporary special measures as a result of the COVID-19 pandemic and its impact on the economy. The temporary measures include:

• Extending the duration of the WS Agreements from a maximum 38 weeks to a maximum of 76 weeks (upon application by the employer);
• Waiving the mandatory waiting period between WS Agreements (previously an employer was required to wait the equal number of weeks of its previous WS Agreement period prior to applying for a new WS Agreement); and
• Easing the recovery plan requirements.

The above temporary special measures will apply to employers who are applying to the program as a result of a decline in business activity directly or indirectly related to the impact of COVID-19.

We recognize there remains great uncertainty surrounding COVID-19 and its long-term impacts on businesses. If you have any further questions or intend to make a decision regarding Work-Sharing Agreements, we recommend seeking the advice of counsel.

Read more EKB Updates about COVID-19, the law, and the impact on business.