Introduction

Employers who are considering layoffs and reductions in their workforce as a result of the current economic downturn should be aware of Service Canada’s Work-Sharing Program (the “Program”).

The Program is designed to assist employers and their employees by alleviating the need for layoffs due to temporary reductions in the company’s business activity, which are beyond the control of the employer. Upon successful application, Service Canada will provide income support to employees who agree to a temporary reduction in work hours while the business returns to its normal business activity.

The Program can provide substantial benefits to employers including the opportunity to retain skilled and experienced employees while reducing the likelihood of constructive dismissal claims.

To apply, the employer and participating employees (and the union, if applicable) must submit a joint application to Service Canada at least 30 days prior to the requested start date of the Program.

This blog is intended to provide highlights of the Program.  It is not intended to include all of the requirements or aspects of the Program nor is it intended to provide legal advice.

Eligibility

To be eligible for the Program, an employer must:

  1. conduct year-round business in Canada for at least two years;
  2. operate a private business, a publicly-held company, or a not-for-profit organization;
  3. demonstrate a recent decrease of business activity (a minimum of 10% decrease in sales or production levels within the last six months);[1]
  4. demonstrate that the shortage of work is temporary, non-cyclical, and beyond its control; and
  5. submit and implement a recovery plan with a reasonable expectation that business activity will return to normal upon completion of the Program.

To be eligible for the Program, an employee must:

  1. be a “core employee”, i.e., an employee with year-round full or part time duties that are necessary to carry on the everyday functions of normal business activity;
  2. be eligible to receive Employment Insurance benefits; and
  3. agree to a reduction in work hours while the business recovers.

Employees, such as management and sales persons, who are integral to the recovery of business activity are not eligible for the Program.

Work-Sharing Agreements

Successful applicants will enter into a Work-Sharing Agreement (the “Agreement”) with Service Canada. Each Agreement will contain at least one Work-Sharing Unit (the “Unit”) that is comprised of the core employees who agree to participate in the Program and reduce their normal working hours. The members of a Unit will be entitled to income support during the term of the Agreement.

A Unit is generally comprised of all employees who fall within a single job description or who perform similar duties. Each Unit must have a minimum of two employees.

Employees within a Unit are obligated to share the available work in an equal manner. If the availability of work increases or decreases during the course of the Program, each employee within the Unit must adjust their working hours accordingly.

Members of the workforce who do not qualify or choose to not participate in the Program cannot continue to work normal working hours. These employees are required to reduce their working hours in accordance with the Agreement.

Work Reduction

The reduction in work hours should correspond to the need for layoffs. For example, if the reduction in business activity would otherwise require an employer to lay-off 30% of the employees within a Unit, employee work schedules should be reduced by 30%.

The reduction in work schedules should be within the range of 10% (one half day) to 60% (three days) in any given week. Work schedules may vary week-to-week but the average work reduction over the course of the Program must remain between these limits.

Recovery Plan

A recovery plan must be submitted to Service Canada to demonstrate the employer’s plan to alleviate work shortages and return to normal business activity. The recovery plan should consider the particular circumstances of the business and the industry, including the cause of the work shortage. The recovery plan should have a reasonable likelihood of success by the completion of the Program.

Duration and Extensions

The Agreement (and implementation of the recovery plan) must have an initial term of 6 to 26 weeks. Participants may apply for an extension of up to 12 additional weeks if they submit a supplemental application to Service Canada that:

  1. outlines why recovery was not achieved during the course of the Program;
  2. demonstrates a continued reduction in business activity that would result in the lay-off of one or more employees; and
  3. provides an updated recovery plan with a reasonable likelihood of success.

Employer Obligations

During the Program, employers have an obligation to update Service Canada to ensure that all requirements and conditions are being met. In addition to this reporting requirement, employers must also (non-exhaustive list):

  1. maintain all existing employee benefits and notify employees that benefits may be reduced if they are calculated based on earnings or hours of work;
  2. issue a Record of Employment to each participating employee;
  3. provide to each participating employee the Employee Annex (a Service Canada document to assist and instruct employees);
  4. once the agreement is submitted, seek the approval of Service Canada in an amendment form of any proposed changes to the Unit that was submitted with the application and allow at least 30 days for processing; and
  5. once the agreement is approved, notify Service Canada within 3 days of any leaves from the Unit, such as resignations, dismissals, illness, maternity or other leaves of absence.

Review Process

A Service Canada Program Officer (the “Officer”) will review each application to ensure that all eligibility criteria are satisfied. The Officer will review and validate documents provided by the employer.

The recovery plan will be assessed by taking into account the context of the business, the needs of the community in which the business operates, and the conditions within the industry at the time of the application. A cost analysis will be conducted to compare the costs and social/community impact of potential layoffs and the costs of the proposed Agreement.

The Officer must be satisfied that the Program is an appropriate vehicle to address the work reduction and that there is a reasonable expectation that all employees within the Unit will resume normal working hours by the end of the Agreement.

There are risks of allegations or penalties for including knowingly false or misleading statements in the application even where there was no intent to defraud Service Canada. Ensuring accuracy in the application process is critical as is a commitment to compliance with the Program and the law.