Canada Emergency Response Benefit and Employment Insurance Emergency Response Benefit Remission Order: SI/2021-19

Canada Gazette, Part II, Volume 155, Number 10

Registration
SI/2021-19 May 12, 2021

FINANCIAL ADMINISTRATION ACT

P.C. 2021-363 April 30, 2021

His Excellency the Administrator of the Government of Canada in Council, considering that the collection of certain overpayments and certain payments is unreasonable and unjust, on the recommendation of the Minister of Employment and Social Development and the Treasury Board, pursuant to subsection 23(2.1) ^{footnote a} of the Financial Administration Act ^{footnote b}, makes the annexed Canada Emergency Response Benefit and Employment Insurance Emergency Response Benefit Remission Order.

Canada Emergency Response Benefit and Employment Insurance Emergency Response Benefit Remission Order

Remission — Canada emergency response benefit

1 (1) Remission of overpayments of income support that are repaid or to be repaid under subsection 12(1) of the Canada Emergency Response Benefit Act is granted to any person who meets the following conditions:

• (a) the person would have been eligible to receive the income support payment if their self-employment gross income had been taken into account for the purpose of paragraph (b) of the definition worker in section 2 of that Act; and
• (b) the person has filed with the Minister of National Revenue, not later than December 31, 2022, a return of income under the Income Tax Act in respect of the 2019 and 2020 taxation years.

Claim

(2) If the person has repaid the overpayment, remission is granted only if they make a claim for remission in writing to the Minister of Employment and Social Development.

Remission — employment insurance emergency response benefit

2 (1) Remission of employment insurance emergency response benefit payments that are repaid or to be repaid under section 43 of the Employment Insurance Act, or that are returned or to be returned under section 44 of that Act, is granted to any person who meets the following conditions:

• (a) the person would have been eligible for the employment insurance emergency response benefit if their self-employment gross income had been insurable earnings for the purpose of subparagraphs 153.9(1)(a)(iii) and (c)(iii) of that Act; and
• (b) the person has filed with the Minister of National Revenue, not later than December 31, 2022, a return of income under the Income Tax Act in respect of the 2019 and 2020 taxation years.

Claim

(2) If the person has repaid or returned the payment, remission is granted only if they make a claim for remission in writing to the Minister of Employment and Social Development.

Coming into force

3 This Order comes into force on the day on which it is made.

EXPLANATORY NOTE

(This note is not part of the Order.)

Proposal

The Administrator of the Government of Canada in Council, finding that it is unreasonable and unjust to collect the debt, approves the Canada Emergency Response Benefit and Employment Insurance Emergency Response Benefit Remission Order pursuant to subsection 23(2.1) of the Financial Administration Act (FAA).

The Order will allow for the remission of overpayments made to individuals that received the Canada emergency response benefit (CERB) or the employment insurance emergency response benefit (EI-ERB) and that, being otherwise eligible to receive the CERB or EI-ERB,

• (1) were not eligible under the Canada Emergency Response Benefit Act (CERBA), on the basis that they did not have $5,000 in net income from self-employment, but would have been eligible had the requirement been based on gross self-employment income; or
• (2) were not eligible on the basis of insurable earnings criteria set out in Part VIII.4 of the Employment Insurance Act (EIA), but would have been eligible had the requirement been based on gross self-employment income.

Objective

The objectives of the Order are

• (1) to limit the financial hardship on Canadians resulting from the COVID-19 pandemic by remitting debts to the Crown of self-employed individuals who, despite applying for the CERB or EI-ERB and attesting to their eligibility in good faith, and potentially after receiving incorrect or inaccurate information originating from the Government of Canada on the eligibility criteria as they relate to self-employment income, received the CERB or EI-ERB; and
• (2) to maintain the original policy intent of the CERB to provide income support to workers who were unable to work for reasons related to COVID-19, and to preserve the requirement that the income requirement be based on net self-employment income.

Background

Due to COVID-19, many Canadians have been unable to work, and many have lost their employment. To mitigate the economic impact of the COVID-19 pandemic on workers in Canada, the Government of Canada introduced the CERB, an emergency income support program for individuals unable to work due to COVID-19, through the CERBA. The CERB was delivered through the Canada Revenue Agency (CRA). At the same time, the Government of Canada also introduced the EI-ERB through the EIA to enable expedited emergency income support, in consideration of the extraordinary circumstances related to the outbreak of COVID-19. Service Canada (SC) administered the EI-ERB. The EI-ERB was intended for individuals with insurable income, whereas the CERB was intended for individuals, such as self-employed individuals, whose income was not insurable.

While some eligibility criteria for the EI-ERB were different from the CERB, for simplicity of communication to the public, the two programs (CERB and EI-ERB) were communicated as one Canada emergency response benefit. The objective was to ensure that Canadians applying for either income support under the CERBA or the EIA were treated in a similar manner.

The CERB and the EI-ERB both provided a flat-rate taxable benefit of $500 per week, for up to a maximum of 28 weeks between March 15, 2020, and October 3, 2020, to workers who had stopped working and were without employment or self-employment income for reasons related to COVID-19. In order to expedite the processing of payments, both the CERB and EI-ERB were attestation-based programs that required applicants to confirm they met the program eligibility criteria in order to access the benefit, with verification to take place at a later date. Therefore, records of employment (normally required by the EI program) were not a requirement under the CERBA or the EIA.

One of the eligibility criteria for the CERB was that an individual must have a total income of at least $5,000 from employment or self-employment in 2019 or in the 12 months prior to the making of an application. For the EI-ERB, the equivalent criterion was insurable earnings of at least $5,000 in 2019 or in the 52 weeks preceding the day of application. This income threshold was introduced to ensure that individuals had recent labour market attachment. Therefore, these individuals were at material risk of losing significant income if they could not work as a result of the pandemic.

For self-employed workers, the policy intent was that the $5,000 threshold should apply to net pre-tax self-employment income (i.e. gross self-employment income minus expenses incurred to earn that income).

In the initial weeks after the CERB was launched, information provided on the Government of Canada’s website (Canada.ca) and relayed by CRA call centre agents on eligible self-employment income was unclear and incorrect, and some individuals applied for and received the CERB or the EI-ERB after interpreting the income requirement as “gross self-employment income” rather than “net self-employment income” or “insurable earnings.” Additionally, because of the attestation-based nature of CERB and EI-ERB, some claimants who did not meet the insurable earnings eligibility criteria for EI-ERB were nevertheless paid benefits under that program when those claimants should likely have applied for CERB through the CRA. Some of these claimants would also have attested to their eligibility based on their gross self-employment earnings. In this context, a number of self-employed individuals who applied based on attested gross self-employment income received the CERB or the EI-ERB despite not being eligible on the basis of the net self-employment income or insurable income requirements.

On November 26, 2020, the CRA began issuing letters to approximately 441 000 recipients of the CERB, where the CRA was unable to confirm their employment and/or self-employment income of at least $5,000 in 2019 or in the 12 months prior to the date of their application. The purpose of the letters was to educate recipients about the eligibility requirements and to encourage those who knew that they did not meet the requirements to make their repayments. The letters also asked recipients to file their 2019 tax returns if they had not done so. To date, the CRA has not required any individuals to repay the CERB and no repayment deadline has been established.

In response to the letters, individuals reported that they had submitted their applications on the basis that “income” means “gross” and not “net.” Many of these individuals indicated that they were unaware of the requirement to use their net self-employment income to establish their eligibility.

Given that the eligibility criteria with respect to self-employment income were initially unclear and that individuals applied on the basis of these criteria, these individuals may be facing hardship if required to repay these monies. In this case, it would be unreasonable and unjust for the Crown to collect the debt. Therefore, a remission order is being sought to remit the debt incurred by individuals who received an overpayment of the CERB or EI-ERB due to applying on the basis of gross self-employment income rather than their net self-employment income or insurable earnings.

Implications

Individuals that received the CERB or EI-ERB based on their gross self-employment income will have their debt remitted. Specifically, this group would comprise self-employed individuals that received CERB or EI-ERB payments and met the following criteria:

• (a) they claimed benefits based on self-employment income;
• (b) they had net self-employment income (or insurable income) of less than $5,000;
• (c) they had gross self-employment income of $5,000 or more;
• (d) they were otherwise eligible to receive benefits under the CERBA or EIA;
• (e) they filed their income tax returns for 2019 and 2020 by December 31, 2022; and
• (f) if they met the above criteria, they have repaid part or all of the CERB or EI-ERB they had received, and will make a claim to the CRA requesting that those monies be returned to them.

Self-employed individuals meeting these criteria would not be required to return any of their CERB or EI-ERB payments. As with other CERB or EI-ERB recipients, they are required to pay income tax in relation to those payments. If an individual fails to file their tax returns for 2019 and 2020 before December 31, 2022, that individual’s debt will not be remitted.

For self-employed individuals, to whom this Order applies, who have already repaid the CERB or EI-ERB, either partially or fully, the remission Order would authorize the remission of those amounts. These individuals will be required to make a claim in writing to the CRA. These repayments will only occur once all other eligibility criteria are confirmed including the filing of an income tax return for 2019 and 2020 by December 31, 2022.

The CRA estimates that approximately 30 000 individuals will benefit from the remission Order. These individuals could have applied using gross income and may have received an average of $8,000 of CERB or EI-ERB. This estimate is based on a sampling methodology to identify the volume of self-employed individuals who indicated $5,000 gross income and less than $5,000 net income on their 2019 income tax return. Based on this analysis, costs are estimated to be $240 million for an estimated 30 000 individuals. These are estimates, as the income eligibility criterion for individuals can only be verified once a 2020 income tax return is filed.

The cost estimate of the remission Order includes approximately $52 million to refund the individuals who have already repaid their CERB or EI-ERB overpayment. This estimate is based on an analysis of repayments that have already been made. This analysis suggests that up to approximately 6 500 individuals could receive a projected average repayment of $8,000.

Consultation

Given the nature of the Order and limited time in which to act, the Government took into consideration comments from several self-employed CERB recipients who used their gross income to apply for the CERB and who requested action from the Government to forgive their debt. On February 9, 2021, the Government announced that self-employed individuals who applied for the CERB and would have qualified based on their gross income will not be required to repay the benefit, provided they were otherwise eligible. The same approach will apply whether the individual applied through the CRA or SC.

Contact

Steven Coté
Acting Executive Director
Employment Insurance Policy
Skills and Employment Branch
Employment and Social Development Canada
Email: steven.f.cote@hrsdc-rhdcc.gc.ca