The implications of COVID-19 are being felt at local, national, and international levels. As the threat of this unprecedented virus persists, governments and business owners are forced to respond with various measures to counter the spread of the virus and the impact it has on the operation of business. At this time and in the face of uncertainty many business owners are exercising precaution and preparing as best they can.

Considerations for Business Owners

Fulfilling Contractual Obligations — First and foremost, contact the other party to the contract and request relief in light of the circumstances. If relief is provided, be sure to document specifics including the length of time the relief will be provided. If this is unsuccessful, review your agreement for force majeure provisions or material adverse change provisions. These provisions may allow you to break out of the contract, relieving you of your obligations. If your contract does not contain a provision of this nature, you may still have relief through the legal principle of contractual frustration, which provides similar relief. (For more information click here.)

Paying the Lease — The advice above relating to fulfilling contractual obligations also applies to leases. Tenants should consult with landlords and request relief, if required. Alternatively, if relief is not provided, contractual terms or legal principles may apply and you need to review your lease carefully.

Unable to Pay Utilities — Small businesses can defer electricity and natural gas bill payments for 90 days, regardless of the service provider. Call your utility provider directly to arrange for a 90-day deferral on all payments. (For more information click here.)

Business Interruption Insurance or Other Insurance Coverage for Losses — It is unlikely that business interruption insurance will cover business losses resulting directly or indirectly from COVID-19. An important consideration to keep in mind is that most business interruption policies will provide coverage only when physical loss or damage has been caused to the insured's premises or property used in the operation of the business. Specialty coverage for disruption of business due to a pandemic does exist. But the number of companies that have this type of coverage is limited being that the coverage has always been expensive and limited in scope. Nevertheless, if you are unsure, review your policy and contact your insurer. (For more information click here.)

Deferring Bank Payments and Accessing Credit — Most of the major banks have made a commitment to work with small business banking customers on a case-by-case basis to provide flexible solutions to help them manage through challenges due to COVID-19. Some of the measures that have been take and thing to ask about, include:

  • Payment deferral based on small business circumstances;
  • Increases to operating line of credit limits;
  • Waiving of credit card minimum payments;
  • Access additional working capital through the Business Credit Availability Program. (For more information click here.)

Filing and Paying Taxes — Individuals and businesses can defer payment of any income tax amounts owing today, and before September 2020 until August 31, 2020. Additionally, while there does not technically appear to be a delay in corporate tax filing deadlines, since payments may be deferred until after August 31, 2020 without penalty, there should be effectively no penalty for late filing T2 income taxes during that period. (For more information click here.)

Documentation of Losses — It is crucial that businesses maintain meticulous books and records. Be sure to document losses suffered as a result of the pandemic because it could lead to a deduction in terms of an allowable business-investment loss. The Income Tax Act contains various devices that allow you to convert capital losses into non-capital losses, which can then be used against regular business income.

Government Relief for the Self-Employed — The federal government has introduced an Emergency Care Benefit providing up to $900 bi-weekly, for up to 15 weeks. This flat-payment Benefit would be administered through the Canada Revenue Agency (CRA) and provides income support to:

  • workers, including the self-employed, who are quarantined or sick with COVID-19 (or who are taking care of a family member who is sick with COVID-19), but do not qualify for EI sickness benefits; and ∙ parents with ch
  • parents with children who require care or supervision due to school or daycare closures, and are unable to earn employment income, irrespective of whether they qualify for EI or not.

Emergency Care Benefit

Application to the Emergency Care Benefit will be available in April 2020, and require Canadians to attest that they meet the eligibility requirements. They will need to re-attest every two weeks to reconfirm their eligibility. Canadians will select one of three channels to apply for the Benefit:

  • by accessing it on their CRA MyAccount secure portal;
  • by accessing it from their secure My Service Canada Account; or
  • by calling a toll free number equipped with an automated application process.

(For more information click here.)

Employment Considerations for Employees

Employees Requesting Leave to Quarantine — Changes to the Employment Standards Code will allow full and part-time employees to take 14 days of job-protected leave if they are required to self-isolate, caring for a child or dependent adult that is required to self-isolate. This leave will not require employees to have a medical note or to have worked for an employer for 90 days (does not apply to self-employed individuals or contractors).

Encouraging Employees to Use Vacation Pay, Leave or Banked Overtime — Employers can request that employees voluntarily take vacation leave and/or use their vacation pay. Alternatively, Employers can require employees to take their vacation by giving two weeks' notice.

Advising Employees to Apply for Employment Insurance — Employees can apply for federal Employment Insurance benefits, which allows up to 15 weeks of assistance if a person cannot work due to medical reasons such as self-isolation or self-quarantine. At present, the government has waived the one-week waiting period for Employment Insurance benefits. It should also be noted that employees that are laid-off can file for employment insurance.

Consider the Supplemental Unemployment Benefit Program — This program allows employers to register Supplemental Unemployment Benefit (SUB) plans, which provide supplemental payments to Employment Insurance benefits during a period of unemployment due to temporary stoppage of work, illness, injury or quarantine. The plan may also provide SUB payments up to a maximum of 95% of the normal weekly earnings when the employee is not in receipt of EI benefits, and is serving the one-week EI waiting period, has insufficient hours of insurable employment to qualify for EI benefits, or has exhausted the EI benefit entitlement. (For more information please click here).

For more detailed explanation of the information presented, see our publication: COVID-19 Frequently Asked Questions by clicking here.

Temporarily Laying-off Employees — The Employment Standards Code permits employers to temporarily lay off employees so long as the appropriate notice is provided. If an employee is laid off for 60 days in a 120-day period, the employee will be deemed terminated and termination pay will be owing under the Employment Standards Code. To be valid, a temporary layoff notice must (1) be in writing; (2) state that it is a temporary layoff notice and its effective date; and (3) include the text of sections 62 to 64 of the Employment Standards Code. The notice periods for temporary layoffs are: 1 week if the employee has been employed for less than 2 years; and 2 weeks if the employee has been employed by the employer for 2 years or more. However, it should be noted that in the present circumstances notice of layoff may not be required due to the unforeseen circumstances caused by COVID-19.

(Caveat: There is some risk to temporary layoffs. They are technically not permitted unless it is stipulated in a contract, forms part of the employer's policy, or it is generally known that the employer has a pattern and habit of layoffs. Nevertheless, the risk is mitigated by the fact that we are dealing with exceptional circumstances and practically speaking most employees will prioritize keeping their jobs over claiming a constructive dismissal.)

Mandating Unpaid Leaves of Absences or Furloughs — A compulsory leave of absence, without a contractual right to mandate such a leave, may also amount to a constructive dismissal. That is especially so when it is unpaid with no guarantee of eventual employment and is of an indefinite duration.

Reducing Wage-related Expenses Instead of Terminating or Laying off Employees — Any reduction in compensation creates a risk of constructive dismissal claims, particularly if over 10% of an employee's total compensation package (e.g., wage reduction; elimination of an RRSP matching program; elimination of incentive pay) is reduced. Across the board reductions of 5% to 10% have been allowed by courts in some cases (although disallowed in others). We often recommend trying to reduce wage costs by reducing overtime or eliminating other expenses arising from an employee's duties (e.g., travel) prior to effecting an across the board compensation decrease.

We strongly encourage you to consider the information presented and to be proactive at this time to mitigate any potential liabilities or loss that may arise as a result of COVID-19.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.