Last updated: Friday April 23, 2020
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How do I apply for the Canada Emergency Wage Subsidy?
On April 21, 2020, Prime Minister Trudeau announced that the CRA would begin receiving applications from employers for the Canada Emergency Wage Subsidy on Monday, April 27, 2020. Applications are to be received through the CRA’s My Business Account portal or by separate application to be made available on April 27.
No details were released about when businesses can expect payments after making their applications.
What government resources are available to assist me during the pandemic?
The Governments of Canada and BC have announced a variety of measures and programs aimed at assisting businesses, including those operating in the technology industry, through the economic turbulence caused by COVID-19.
The various programs, subsidies and other assistance that are available to businesses are each described in the following article: COVID-19: Financial Assistance for Businesses. As the details about these programs are evolving almost daily, you and your employees can keep up-to-date about their status and eligibility criteria via official government websites such as www.canada.ca and www.bc.gc.ca.
Bank of Montreal, CIBC, National Bank of Canada, Royal Bank of Canada, Scotiabank and TD Bank have also all made a commitment to work with individuals and small business clients to ease the financial pressures they may be facing due to COVID-19. This includes offering flexible solutions such as up to a six-month payment deferral for mortgages or relief on other credit products. Situations will be handled on a case by case basis and individuals are encouraged to contact their banking institution directly.
What if my technology company doesn’t qualify for the Canada Emergency Response Benefit or the Canada Emergency Wage Subsidy?
On April 17, 2020, the federal government announced over $1 billion in new support for small businesses in Canada to help mitigate the effects of the COVID-19 pandemic, some of which has been dedicated to the technology sector. The funding includes $270 million for Futurpreneur and the Industrial Research Assistance Program (IRAP). This funding was provided in recognition that many startup and pre-revenue technology companies may not eligible for other federal assistance such as the Canada Emergency Response Benefit and the Canada Emergency Wage Subsidy. Futurpreneur is a non-profit organization that provides ﬁnancing, mentoring and support tools to aspiring business owners aged 18-39. IRAP is a program developed by the National Research Council of Canada to provide advice, connections, and funding to help Canadian small and medium-sized businesses increase their innovation capacity and take ideas to market.
More information: Funding Applications Open for $250 Million Innovation Assistance Program
How do I determine whether my business is deemed an essential service and therefore permitted to remain open?
B.C.’s list of essential services, which can be found here, includes a variety of service-oriented businesses, such as food services, transportation, health services and so on. Many construction and manufacturing activities are also permitted to stay open, as will banks, accounting firms, insurance providers and other financial services.
For non-essential businesses, British Columbia has so far ordered the closure of “personal service establishments” (e.g.: salons, spas, et). Businesses that have not been ordered closed, but are not considered essential, are permitted to stay open (at least for the time being), but only if they can adapt their services and workplace to the orders and recommendations of the Provincial Health Officer.
For businesses operating in the technology sector, the essential services list includes a section titled “Communications, information Sharing and information technology (IT)”. However, as that section mainly relates to IT businesses that maintain IT and communications infrastructure for other essential services, such as medical facilities, government facilities and employees working from home, it will not likely apply to all businesses in the technology sector if further closure orders are issued.
More information: Questions Answered – Is Your Business “Essential”?
Will my business interruption insurance apply if I am required to close my business during the pandemic?
Government mandated closures, when not coupled with the actual presence of COVID-19, are preventative measures intended to slow the spread of COVID-19 generally and encourage physical distancing. For such closures to constitute “physical loss” or “property damage”, which are the typical losses that a business must show to make a claim under business interruption insurance, the meaning of those phrases would likely need to be stretched beyond their reasonable legal meanings.
Of course, your exact policy wording and the particular facts of your business closure are the key factors in an insurance claim. It is possible that where the actual presence of COVID-19 causes a business to close, there may be coverage under commercial insurance policies. However, as always, coverage is subject to the operation of exclusions, which should be reviewed and carefully considered.
If I have been required to close my business due to COVID-19, am I required to continue to perform under existing contracts?
Most technology companies will be familiar with how contracts in the sector are structured, which may include service level agreements and processes for excusing a party from performing its obligations (such as earthquakes and fiber cuts). However, the impact on business caused by a pandemic or public health emergency may not have been front of mind when you signed those agreements.
The article below discusses excused performance contract provisions (often called force majeure clauses) and the common law doctrine of frustration, each of which could provide relief if your business is unable to perform under an existing contract. Regarding force majeure clauses, it is important that the specific language in any relevant contract be examined by a lawyer to determine if it applies in the context of the COVID-19 pandemic. Even if so, it should also be noted that the party claiming relief will likely be under a continued obligation to take commercially reasonable steps to mitigate any damages.
More information: COVID-19: Impact on Contractual Obligations
More information: Contracts in the Age of COVID-19
What if I am unable to make certain loan payments due to a COVID-19 related business closure?
In our view, open, early and frequent communication is key. Lenders and borrowers should be transparent and proactive at this time with a view to hopefully identifying workable arrangements and to avoid worsening circumstances.
More information: COVID 19 – Considerations for Lenders and Borrowers
Transparency Registry Deadline Extension
On October 24, 2019, the BC Government approved new regulations which would require private companies incorporated under the Business Corporations Act (British Columbia) to establish and maintain a transparency register of significant individuals who had significant ownership positions in or control of the company. The regulations were originally set to come into effect on May 1, 2020 however, in light of the COVID-19 pandemic, the BC Government announced that it was extending the coming into force date of these regulations to October 1, 2020.
See our detailed post explaining the transparency register here: New B.C. Transparency Register: Who Needs to Disclose?
Canadian Emergency Business Account Update
On April 16, 2020, the federal government announced an expansion of the Canada Emergency Business Account (CEBA), which provides interest-free loans of up to $40,000 to small businesses. CEBA will now be available to Canadian employers with $20,000 to $1.5 million in total payroll during 2019 (the minimum payroll was previously $50,000). If the loan is repaid by December 31, 2022, 25% of the loan (up to $10,000) will be forgiven. After December 31, 2022, the remaining balance will be converted to a three-year term loan at 5% interest.
Prime Minister Justin Trudeau announced that approximately $7.5 billion in loans have been approved under CEBA since the program was announced.
See our detailed post explaining CEBA and various other government resources available here: COVID-19: Financial Assistance for Businesses
Commercial Lease / Rent
Can a landlord under a commercial lease evict a business during the COVID-19 pandemic?
The moratorium announced on evictions by the British Columbia Government on March 25, 2020 only applies to residential leases.
Does my company need to pay rent during the pandemic?
Generally speaking, tenants will be required to pay rent under their lease in the normal course. Most commercial leases provide that rent must be paid without abatement or set-off. It is worth noting, however, that leases can vary widely in their terms and it is important for both landlords and tenants to review their particular contract to see whether a situation like the current pandemic is addressed. For example, a given lease may have a force majeure clause which might address the highly unusual situation now faced by most small business tenants.
A word of caution, however, the wording of these types of clauses will not usually assist a tenant facing COVID-19 like business interruptions. The specific wording of such a clause should be checked and, in all likelihood, run past a lawyer for his/her opinion.
More information: COVID-19: Response Options Under a Commercial Lease
Am I permitted to temporarily lay-off my employees?
The Employment Standards Act (British Columbia) (the “ESA”) allows employers to temporarily lay off employees for up to 13 weeks in a 20 week period. If employees are recalled before the expiration of the 13 week period, no notice or pay in lieu of notice is owing under the ESA. This includes group termination notice, if applicable.
While employees can waive the right of recall and demand to be paid out immediately (as well as contractual severance or common law pay in lieu of notice), given the uncertainty of the future job market, we anticipate most employees will accept the layoff.
More information: COVID-19 – Update for Employers
What must I consider from a health and safety perspective as it relates to my employees?
Both employers and employees have an obligation to ensure the health and safety of their workplace under the Workers Compensation Act (British Columbia) and the Occupational Health and Safety Regulation. These obligations include taking reasonable steps to protect employees from a contagion such as COVID-19.
Any employee who believes that a condition in the workplace is likely to endanger their health or safety, can refuse to work under applicable occupation health and safety legislation. If an employee refuses to work, employers should handle the situation on a case-by-case basis and consider the situation on its merits.
Employees may be entitled to paid sick leave, if provided for in their employment contract or in a workplace policy. Employees who have symptoms of COVID-19 should be treated the same as any other sick employee. If paid sick leave is not provided for in an employment contract or policy, the employer is not obligated to provide paid sick leave. The employee may, however, be eligible for employment insurance sick leave benefits while on their unpaid leave of absence.
More information: COVID-19: Employer and Employee Rights and Obligations
What subsidies and programs are available to my employees if I am required to close my business?
Wage Subsidy Program: This program, which is available for three months, provides a subsidy to certain employers so that wages can be paid to employees who are not working due to COVID-19. Businesses will have to apply monthly and in order to qualify, demonstrate that their revenues dropped at least 30% in the relevant month this year over the same month in 2019. For example, to be eligible for the subsidy for April wages, a business’s revenues in April 2020 must be at least 30% lower than they were in April 2019.
Canadian Emergency Response Benefit (CERB): The CERB is available to employees and self-employed individuals whose income has been lost as a result of COVID-19 and is available to individuals employed in all sectors, including those employed or operating in the technology sector, that meet the eligibility requirements. The CERB provides eligible applicants with $500 per week for a period of 16 weeks.
More information: COVID-19: Federal “Canada Emergency Response Benefit” Announced
Supplemental Unemployment Benefit (SUB) Program: The SUB program, delivered by Service Canada, allows for an increase in employees’ weekly benefits when they are unemployed due to a temporary stoppage of work, illness, injury or quarantine. Registered SUB plans can benefit both employees and employers during time of economic uncertainty: it enables employers to continue supporting their employees, while the burden of the majority of the employees’ income is carried by employment insurance.
More information: The Supplemental Unemployment Benefit (SUB) Program
BC COVID-19 Action Plan: BC workers who are eligible for employment insurance benefits (as a result of lay-off; sickness; or eligibility through the new Emergency Care Benefits and Emergency Support Benefits programs) will receive a one-time $1,000 payment from the province. A second payment of $564 will be made to eligible workers in July 2020 as a climate action credit.
More information: Relief for Workers – BC COVID-19 Action Plan
What are my obligations as an employer if an employee is required to self-isolate?
The British Columbia Government has passed legislation for job-protected leave for workers required to self-isolate during the COVID-19 pandemic. This leave extends to workers who are unable to work as a result of having to care for a child or dependent adult. Once able to return to work, the worker must be returned to the same position, or an equivalent position.
More information: BC Passes Job-Protection Legislation Related to COVID-19
What must I consider from a privacy law perspective if I am requiring my employees to work from home?
Employers should remind employees working from home to password protect devices and USBs, ensuring software is up-to-date, and being diligent about using work email accounts rather than personal ones for work-related emails, in order to maintain control over personal data. More details about setting up remote workspaces can be found in a guidance document released by the BC Office of the Information Privacy Commissioner on March 17, 2020.
More information: Remote work and Information Privacy
Investment / M&A Transactions
What recourse do I have if I have signed a purchase or investment agreement, but COVID-19 has changed the nature of the investment.
A purchaser may have the option to withdraw from a transaction without liability if it is clear that the pandemic will have a materially negative impact on the target company’s business. Assuming a binding acquisition agreement has been signed by the parties with an interim period (the period between signing and closing), there are a number of potential avenues that may permit a purchase to terminate, including material change provisions, representations and warranties, and interim covenants. A lawyer should be contacted to review the relevant agreement to determine which rights the purchaser is entitled to thereunder.
More Information: M&A in the midst of a Black Swan Event
Am I still able to access funding through Canada’s Scientific Research and Experimental Development (SR&ED) program?
The Canada Revenue Agency (CRA) has noted that payouts from the SR&ED program have slowed due to the coronavirus pandemic as resources have been allocated to issuing funds under the various government emergency subsidy programs. According to the CRA, those emergency subsidy programs, such as the Canada Emergency Response Benefit, must take precedence over “non-critical services”, which includes processing SR&ED applications.
It is well established that the SR&ED program provides a lifeline to a number of startup technology companies throughout Canada. To that end, the Canadian Advanced Technology Alliance has submitted a request to Prime Minister Trudeau to resume processing SR&ED applications. Further, Etienne Biram, a spokesperson for CRA, has stated that CRA is able to respond to requests from SR&ED claimants who may urgently require their refund. Mr. Biram also advised that as operations begin to resume to normal, CRA will make releasing SR&ED funds a priority, and will take “responsible risks to minimize pre-payment reviews”. As a result, businesses are encouraged to continue to submit SR&ED applications notwithstanding the pandemic, and should contact CRA directly if there in an imminent need for funds.