The Government of Canada has implemented temporary special measures to the federal Work-Sharing Program (“WSP” or the “Program”) in order to help Canadian employers avoid laying employees off in the face of financial challenges stemming from reciprocal tariffs with the United States. The special measures temporarily expand the Program’s eligibility criteria and introduce increased flexibility in terms of the duration of eligible Work-Sharing Agreements. These special measures are currently slated to be in effect for one year, from March 7, 2025 to March 6, 2025, unless the government chooses to extend them.
Although these temporary measures are not as impactful as some of the special measures introduced during the COVID-19 pandemic, such as the Canada Emergency Wage Subsidy and Canada Emergency Rent Subsidy, they can provide valuable support to employers experiencing business declines related to the tariffs.
Background
The Work-Sharing Program was introduced in 1977 with the goal of helping employers and their employees avoid layoffs in the face of business slowdowns. This is accomplished by permitting employees who agree to share the available work to also collect Employment Insurance (“EI”) benefits to supplement their otherwise reduced income, subject to the employer, the employees, and Service Canada agreeing to this arrangement.
Prior to the new special measures being implemented, for an employer to be eligible to participate in the WSP, their business or organization must:
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be a year-round business that has operated in Canada for at least two (2) years;
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be a private business, publicly held corporation, or not-for-profit organization, other than a municipality, government agency, or sole proprietorship;
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have experienced a decrease in “overall work activities” by at least ten percent (10%) in the last six (6) months caused by factors beyond the employer’s control (excluding decreases caused by labour disputes, cyclical/seasonal shortages of work, and business decisions);
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put in place recovery measures directed at returning employees back to normal staffing levels/working hours by the end of the Work-Sharing Agreement; and
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have at least two (2) eligible employees in the work-sharing unit, who must share the available work equally.
Notably, to establish the required decrease in “overall work activities”, the employer must demonstrate a decrease in the number of available hours of work for its employees in the work-sharing unit relative to the previous quarter or year. As a result, a reduction in sales or revenues alone is not sufficient to establish the required decrease.
The general eligibility requirements for employees to participate in the Program, absent the special measures, include:
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they must be a year-round, permanent employees (whether full time or part time);
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they must be eligible to receive EI benefits; and
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they must agree to reduce their normal working hours by the same percentage and share the available work equitably.
Ineligible employees for the Program generally include: seasonal employees; summer students; casual/on-call employees; temporary help agency workers; self-employed workers; those responsible for the direction of the company who hold 40% or more of the voting shares in the business and/or who are investors; and employees needed to “generate the work” (such as senior management).
Finally, absent the special measures, a Work-Sharing Agreement must have an initial duration of between six (6) weeks and twenty-six (26) weeks, which can be extended upon request up to a maximum of thirty-eight (38) weeks. Additionally, there is normally a mandatory “cooling-off period” equal to the length of time that the Work-Sharing Agreement was in effect, during which a new Work-Sharing Agreement is not permitted, ranging from six (6) to thirty-eight (38) weeks.
Temporary Special Measures
The temporary special measures expand the eligibility criteria for certain employers to participate in the WPS (i.e. businesses and organizations experiencing a decline in business activity attributed to the “threat or potential realization” of the tariffs).
In particular, the eligibility criteria for employers to participate have been expanded to include employers that have been operating in Canada for at least one (1) year (as opposed to at least 2 years), and to include not-for-profits and charities that have experienced a reduction in revenue levels as a direct or indirect result of the tariffs.
Additionally, the eligibility criteria for employees have been expanded to include seasonal/cyclical employees who do not work year-round, as well as employees assisting the employer’s recovery efforts.
Finally, the special measures have introduced increased flexibility for eligible employers by allowing for Work-Sharing Agreements to have a maximum duration of seventy-six (76) weeks (as opposed to 38 weeks), and by waiving the mandatory cooling-off period that would normally apply after a Work-Sharing Agreement has expired. In other words, even if an employer just completed a 38-week work-sharing agreement, they can be eligible to enter into a new Work-Sharing Agreement for up to seventy-six (76) weeks without any cooling-off period in between.
The Bottom Line
The special measures discussed above are the first step the federal government has taken to help impacted employers cope with the financial challenges arising from the tariffs between Canada and the United States, and it remains to be seen whether the government will introduce further relief measures similar to the COVID-19 pandemic if the tariffs remain in effect.
Regardless, employers experiencing a decrease in overall work activities of at least ten percent (10%) and contemplating temporary layoffs should consider proposing a Work-Sharing Agreement with their employees prior to implementing any layoffs. This is particularly the case for employers who did not reserve the right to place employees on temporary layoff in their employment agreements, as they will face substantial constructive dismissal risk if they unilaterally do so. Furthermore, Work-Sharing Program can also help affected employers avoid talent loss resulting from employees who resign for new jobs in the face of temporary layoffs, in addition to minimizing impacts on employee morale resulting from layoffs and/or dismissals.
If you require any advice on how to effectively navigate a business slowdown while avoiding employment law related liability, please do not hesitate to contact us for expert legal advice and guidance.
