This article is part of our two-part series on what foreign buyers of, and investors in, business ventures need to know about the Charter of the French language (the “Charter”) in the context of a business transaction involving operations and employees in Quebec. The first instalment focused on French language issues during the due diligence process. Reference is made to the following hyperlink for access to part one. Continuing our exploration of the Charter in the context of merger and acquisition transactions, this part two focuses on the importance of language compliance during and after the deal-making process, from incorporating language obligations into representations and warranties to post-closing strategies for addressing compliance issues. 6. In the Deal-Making Process: Your Closing Documents Representations and warranties in transaction documents shall generally address language-related matters. For example, the target corporation may be required to represent and warrant that it has fulfilled its language obligations as imposed by the Charter. As a foreign buyer/investor, you may want to ensure that findings from the due diligence investigation are incorporated into the representations and warranties of your share or asset purchase agreement. As you prepare your closing agenda, it is of utmost importance to assess whether the principal and accessory agreements themselves will be subject to French language requirements. For example, it will be advisable to translate into French restrictive covenant agreements or intellectual property assignment agreements that will be applicable to Quebec-based employees or other agreements that may be deemed contracts of adhesion. The requirement to translate any agreement or documents following the results of the due diligence analysis can be included as a closing deliverable in a form satisfactory to the foreign buyer/investor. 7. Post-Closing: Addressing Language Compliance Beyond the Deal Obviously, not all aspects of French language compliance under the Charter will be addressed during the merger and acquisition transaction itself. Potential areas of non-compliance noted during the due diligence stage can give dealmakers a roadmap of steps to undertake after closing to mitigate risks. In recent transactions, there has been a growing need for law firms to provide post-closing support in French language matters. If a purchase price adjustment clause is included in the share or asset purchase agreement, a buyer/investor could benefit from using the costs associated with rectifying any translation defaults as a lever for the negotiation of the price to be paid. This could also include any penalties imposed by the OQLF on the target corporation. Recent amendments to the Charter have significantly increased the fines that a corporation may face for non-compliance with an order issued by the OQLF, which range from $3,000 to $30,000. These fines are doubled for a second offence and tripled for subsequent offences. If an offence persists for more than one day, it is considered a separate offence for each day it continues. Additionally, directors of the corporation are presumed to have committed the offence unless they can demonstrate that they exercised due diligence by taking all necessary precautions to prevent the offence. In cases of complaints, our experience indicates that the OQLF tends to prioritize achieving compliance rather than imposing fines when companies are responsive to complaints. This presents a positive outlook for foreign buyers/investors, as it underscores that the intent of the new Charter and its enforcement provisions is not to penalize foreign buyers/investors, but rather to reaffirm the status of the French language as the official language of work and business in Quebec. Conclusion Prospective foreign buyers/investors may question the wisdom of doing business in Quebec, given its Charterrequirements. However, achieving Charter compliance can provide a distinct competitive edge. By embracing it, you open doors to the predominantly French-speaking market in and outside Quebec, unlock opportunities in thriving sectors like mining, renewable energy and aerospace, and pave the way for lucrative partnerships with the Quebec government. However, considerations relating to the French language shall not be overlooked when it comes to due diligence or other phases of a merger and acquisition transaction as compliance is key to accessing the thriving Quebec market. Moreover, failing to address these aspects could result in various challenges to a buyer/investor’s entry into the market, such as the unenforceability of restrictive covenant agreements with key employees, potential fines, penalties and director liability. A reputational risk can also be associated with non-compliance with the Charter, in light of the media attention that surrounds this type of issue in the Quebec landscape. By adhering to the requirements of the Charter, foreign buyers/investors can position themselves as responsible corporate citizens and set the stage for successful ventures in Quebec's dynamic business landscape. As more guidance becomes available regarding the application of the new provisions of the Charter, and as we gain practical experience from upcoming transactions with foreign investor/buyers, additional instalments to this series will be published.

This article is part of our two-part series on what foreign buyers of, and investors in, business ventures need to know about the Charter of the French language (the “Charter”) in the context of a cross-border transaction involving operations and employees in Quebec. This first instalment will focus on French language matters during the due diligence process. The upcoming second part will address the importance of language compliance during and after the deal-making process. While much has been said about the impact of the Charter on business operations and commercial activities in Quebec, we are here to tackle the Charter's crucial considerations within the realm of merger and acquisition transactions. This is a direct address to foreign dealmakers, not just those conducting business in Quebec. Lavery understands that the new Charter requirements may appear daunting and potentially deter prospective foreign dealmakers. Let us help you understand how to address French language issues in the context of a merger and acquisition transaction in this two-part series.  1. Your First Step: Initiating an Access to Information Request with the Quebec French Language Board One of the initial steps that should generally be taken is submitting an access to information request to the Quebec French Language Board (“OQLF”), which is the administrative body responsible for defining and conducting the province’s policy on linguistic matters. This allows for the uncovering of any undisclosed complaints or claims related to language matters that may have been processed by the OQLF. By making an access to information request to the OQLF, a party can also obtain information about the status of the francization procedures of the target corporation (e.g., whether it has registered with the OQLF, has obtained a francization certificate or is required to implement a francization program). Depending on the size of the workforce of the target corporation in Quebec, Charter obligations will vary. The francization process refers to the steps that must be taken by corporations to comply with Title II, Chapter 5 of the Charter. For enterprises with a workforce of at least 25 employees in Quebec, registration with the OQLF is mandatory as of June 1, 2025.1 Following registration, the enterprise must provide an analysis of its linguistic situation within a period of three (3) months. The ultimate objective of the linguistic analysis program is to obtain certification of francization confirming that French is widely used within Quebec operations. If the OQLF deems that the use of French is not widespread, the corporation will be required to develop and adopt a francization program, which may entail, for example, a requirement to translate into French various types of materials applicable to employees or relating to Quebec operations. For corporations with a small number of employees in Quebec (less than 25), there is no requirement to register with the OQLF or to demonstrate the widespread use of French in Quebec. In such cases, risks associated with language matters usually arise on a complaint basis. Depending on the scope and materiality threshold of the due diligence, a buyer/investor may elect to focus less on French language matters during the employment due diligence investigation if the corporation has a limited number of employees in Quebec. 2. Main Compliance Considerations: Employment Agreements and HR Documentation Among other requirements, the Charterentitles Quebec staff to receive written communications from their employer in French. As such, during due diligence, it is important to revise employment-related policies and documentation and inquire as to whether this documentation has been made available to employees in French. Particular attention shall also be paid to the language of employment agreements. Further to recent amendments of the Charter, employers must now generally provide employees, since June 1, 2022, with a French version of their employment agreements prior to execution. Employees may agree to be bound by the English version only if, after being provided with a French version, they specifically request to be bound by the English version. If a French version was not provided prior to execution, the enforceability of the employment agreements could be at risk (including any restrictive covenants contained therein, such as non-competition, non-solicitation and intellectual property assignment clauses). Post-closing, steps shall be undertaken to ensure that all template employment agreements that target Quebec employees are translated into French. If the dynamics of the deal allow for it, these steps can also be taken prior to closing during the deal-making process. 3. Contract Checkpoint: Analyze the Target Corporation’s Agreements and Understand Its Business Relationships As a foreign buyer/investor, it is essential to consider the nature of the target corporation’s commercial transactions, whether they involve businesses or individual consumers.  If such transactions involve the execution of contracts of adhesion, i.e., contracts predetermined by one party that are not negotiable, it is essential to ensure that a French version of these contracts exists. The reason is simple: since June 1, 2023, the Charter mandates that an adhering party must be presented with the French version of a contract of adhesion before the parties can expressly agree to be bound by a version in another language. For example, a standardized service agreement that is not open to negotiation would be subject to such requirement. If the target corporation has not complied with the above-described requirement, the adhering party may request the annulment of the agreement under the provisions of the Charter. As a consequence, the risks associated with the enforceability of contracts of adhesion must be taken into account during the due diligence process. Further, if the due diligence investigation reveals that the target corporation has not prepared a French version of its contracts of adhesion, the buyer or investor may request that such versions be prepared as part of the closing deliverables of the merger and acquisition transaction. As part of the due diligence process, a prudent foreign buyer/investor shall also carefully consider the language in which real estate agreements are drafted as well as the language of registrations made in the Quebec register of personal and movable real rights (“RPMRR”) and the Quebec land register (“Land Register”). As of June 1, 2022, contracts for the sale or exchange of residential properties—particularly those with fewer than five dwelling units or the contracts for the sale or exchange of a fraction of an immovable held in co-ownership must be drafted in French. This requirement extends to promises to contract and preliminary agreements made between the buyer (if the buyer is a natural person) and the builder or developer. While parties do have the option to draft these documents in another language if they explicitly choose to do so, if such contracts are intended for registration in the Land Register, they must be accompanied by a certified French translation. This would be the case, for instance, if they were originally drafted and signed in English. Since September 1, 2022, the Charter provides that all applications for registration in the RPMRR and the Land Register must be drawn up exclusively in French.  Applications for registration in the RPMRR are made using a prescribed form. As such, only the information required by the form (e.g., description of the property covered by a movable hypothec) needs to be translated into French. The rule applies differently for registration in the Land Register as the entire deed, in which case a summary or extract thereof must be submitted. Given this context, it is imperative to analyze the target corporation’s real estate contracts to identify any documents that may require translation. 4. Trademark Compliance Check Before the publication of the Regulation to amend mainly the Regulation respecting the language of commerce and business in its final form on June 26, 2024 (the “Regulation”), there was considerable concern regarding the use of unregistered trademarks in a language other than French. The Regulation has reintroduced the exception for “recognized” trademarks, which includes trademarks that are registered with the Canadian Intellectual Property Office and common law marks. For more information on the French language rules applicable to the use of trademarks in a language other than French as a result of the adoption of the Regulation, we invite you to refer to the following article [include hyperlink] written by our intellectual property experts. In this context, the due diligence process regarding trademarks remains unchanged. Registration of trademarks within a transactional framework remains of critical importance to protect an owner’s rights. Although the exception provided by the Charter for common law trademarks can be relied upon, it is highly recommended to proceed with the registration of such trademarks to prevent any debates as to whether a trademark qualifies as a common law mark. Post-closing, any of the target corporation’s trademarks should ideally be registered. 5. On Website Watch: Review of Target’s Commercial Documentation and Website A cautious buyer/investor will want to request that the target corporation provide all commercial publications that it makes available to the public (whether in a paper or electronic format). In accordance with the Charter, any catalogues, brochures, commercial directories, order forms and any other documents of the same nature that are available to the public must be available in French. Moreover, such documents must be equally accessible to their counterparts in another language. During the due diligence investigation, it is crucial for a buyer/investor to thoroughly review the target corporation's website to ensure compliance with the Charter. The buyer/investor shall examine if all commercial publications and relevant documents of a commercial nature are available in French. In practice, a buyer/investor may decide to completely translate the target corporation’s website. A cautious buyer/investor will also carefully analyze the French version of the target’s commercial documentation to ensure that it meets the same standards of accessibility and quality as the version in the other language. Conclusion Understanding and prioritizing compliance with the Charter is essential for foreign buyers and investors engaging in business transactions involving operations and employees in the province of Quebec. By proactively addressing the linguistic considerations outlined in the Charter, dealmakers can navigate potential challenges and ensure a smoother entry into the Quebec market. From initiating access to information requests with the OQLF to reviewing employment agreements, contracts, and commercial documentation, thorough due diligence is key to mitigating risks and demonstrating a commitment to linguistic compliance. Join us for part two of this article to learn about Charter considerations at the closing and post-closing stages. Currently, registration with the OQLF is mandatory for enterprises with 50 employees or more working in Quebec.

On June 23, 2023, major amendments to section 45 of the Competition Act1 (the “Act”) are set to come into force. Adopted in 2022 by the Parliament of Canada, these amendments are primarily designed to harmonize Canadian non-competition law with legislation in various other countries, particularly the U.S., which restricts certain business practices regarded as harmful to workers. The amendments to the Act will have an impact on employers across Canada, whether or not they operate in an area of federal or provincial jurisdiction. Beginning on June 23, 2023, the Act will prohibit “unaffiliated” employers from entering into agreements aimed at: i) fixing wages or employment conditions; or ii) restricting the job mobility of employees by means of reciprocal non-solicitation and no-poaching agreements. In this regard, it should be noted that agreements between affiliated companies (e.g., controlled by the same parent company) do not violate the Act. This bulletin seeks to provide a summary of various amendments of interest to employers in light of the official version of the related enforcement guidelines (the “Guidelines”), which were published by the Competition Bureau (the “Bureau”) on May 30, 2023.2 Although the Guidelines do not have the force of law, they set out the Bureau’s approach when interpreting applicable prohibitions and defences. AGREEMENTS FIXING WAGES AND EMPLOYMENT CONDITIONS Paragraph 45 (1.1) (a) of the Act prohibits agreements between unaffiliated employers aimed at fixing, maintaining, decreasing or controlling wages and other employment conditions. In this regard, the Bureau’s Guidelines state that “terms and conditions of employment” typically refer to any condition that could affect a person’s decision to enter into, or remain in, an employment contract. This may include “job descriptions, allowances such as per diem and mileage reimbursements, non-monetary compensation, working hours, location and non-compete clauses, or other directives that may restrict an individual’s job opportunities”. Citing an example of a problematic case in light of the Act’s new provisions, the Bureau describes a situation in which two unaffiliated employers hold a lunch meeting during which they agree to limit the annual bonuses of their employees to 5% of their gross salary. This type of agreement would, in all likelihood, be prohibited under the Act. NON-POACHING AND NON-SOLICITATION AGREEMENTS Paragraph (1.1) (b) of the Act also prohibits agreements between unaffiliated employers that could limit the prospects of their employees being hired by the other employer. This new provision concerns reciprocal non-solicitation and non-poaching agreements between employers. These agreements are found fairly frequently in commercial contracts covering mergers/acquisitions, joint ventures, partnerships, sales, procurement/supplies of goods and services, franchises, recruitment and personnel placement, etc. However, as discussed below, it should be noted that these types of agreement would only violate the Act if the parties had reciprocal non-poaching obligations in place. In other words, if the obligation is only “one-way”, i.e., only one of the parties is subject to the obligation not to solicit or poach the employees of the other employer, there is no infraction. POTENTIAL EXEMPTIONS AND DEFENCES The main defence against proceedings initiated under subsection 45 (1.1) is based on the ancillary restraints defence (“ARD”). To use it, employers must demonstrate that: The restraint is ancillary to a broader or separate agreement between the parties; The restraint is directly related to and reasonably necessary for achieving the objective of the broader or separate agreement; and The broader or separate agreement does not otherwise violate subsection 45 (1.1) of the Act (when considered without the restraint). For example, it is reasonable to expect that an agency specializing in temporarily placing personnel with its clients would want to prevent its clients from hiring said personnel for the duration of their agreement. In that case, the ARD defence could be used. The agreement, however, must be carefully drafted so the employer can demonstrate that it was reasonably necessary for achieving the desired objective. In this regard, the Bureau notes that the  duration, objective and geographical scope of the restraint, among other factors, will be examined when determining whether the agreement is in fact “reasonably necessary”. The Guidelines states that the Bureau “will generally not assess wage-fixing or no-poaching clauses that are ancillary to merger transactions, joint ventures or strategic alliances under the criminal provisions”. However, the Bureau “may start an investigation under subsection 45(1.1), where those clauses are clearly broader than necessary in terms of duration or affected employees, or where the business agreement or arrangement is a sham.” Other exemptions and defences may also apply, such as the defence based on regulated conduct3 or the exemption with respect to collective bargaining.4 APPLICABLE SANCTIONS Violations of the new subsection 45 (1.1) could lead to criminal charges. A person found guilty of an offence could be subjected to a fine at the discretion of the court or may be imprisoned for up to 14 years, or both. In addition, under section 36 of the Act,individuals (in all likelihood workers) who suffer losses or damages due to violations of provisions of the Act, including section 45 (thus including the new subsection 45 (1.1)), can claim from the person engaging in such misconduct (in this case, the employer) a sum corresponding to the amount of the losses or damages suffered. Therefore, violations of these provisions could lead to civil suits and possibly, in certain cases, to a class action suit. SPECIFICATIONS REGARDING EXISTING AGREEMENTS AND NEXT STEPS The Guidelines specify that the prohibitions set in out subsection 45(1.1) apply not only to agreements entered into on or after June 23, 2023, but also to conduct that reaffirms or implements agreements that were entered into before that date. In this respect, at least two of the parties to these prior agreements must reaffirm or implement the restraint. This may include, for example, the renewal by two or more parties of an agreement containing a prohibited undertaking. The Bureau also notes that it will be focusing on the intent of the parties on or after June 23, 2023. In that context, companies are advised to review their contract templates and to update their pre-existing agreements in the normal course of business. We therefore recommend that all companies, whether operating in an area of provincial or federal jurisdiction, examine the contracts currently in effect to which they are party and identify any clauses that might constitute violations under the new provisions of the Act. Various strategies or corrective measures aimed at limiting business risks could then be evaluated and implemented depending on the necessity and reasonableness of the undertakings in question are (e.g., renegotiating an undertaking or adopting a directive confirming that the employer will not apply an undertaking on or after June 23, 2023, etc.). Please feel free to contact the members of our teams for further details or for ad R.S.C. 1985 c. C-34, as amended by Bill C-19, Budget Implementation Act 2022, No. 1, S.C. 2022, c. 10. Competition Bureau. Enforcement guidelines on wage-fixing and no-poaching agreements on line, May 30, 2023. Subsection 45(7) of the Act. Section 4 of the Act.

The Canada Emergency Wage Subsidy (the “CEWS”) is a key component of the Government of Canada’s COVID-19 economic response plan. The purpose of the CEWS, adopted on April 11, 2020, is to help Canadians keep their jobs during the crisis and help companies maintain an employment relationship with their employees in order to recover more quickly when the economy returns to normal. On July 13, 2020, when the Canada Revenue Agency had already approved 667,400 applications, the Prime Minister of Canada confirmed that the CEWS will be extended until December 2020. A few days later, on July 17, the Minister of Finance of Canada announced that the CEWS will be extended until December 19, 2020. He also announced major changes to the structure of the CEWS, which, for the time being, should apply until November 21, 2020. Details are expected to follow for the eligibility period from November 22 to December 19, 2020. Summary of changes As the draft legislative proposal has not yet been adopted, the proposed changes may be modified. Duration of the CEWS Pursuant to the legislative proposal, the CEWS would now be available until November 21, 2020, and CEWS applications may be accepted until February 2021. Eligibility The concept of eligible entity remains the same, except that trusts would now be eligible for the CEWS. The changes to the CEWS are intended to make the eligibility criteria more flexible to enable more employers to benefit from the subsidy. Businesses that do not meet the 30% drop in revenue test would now be eligible to the CEWS. The base rate of the CEWS would now vary depending on the revenue decline’s level, and its application would be extended to employers with a revenue decline of less than 30%. However, despite being more flexible, the criteria would be more complex than those applicable to initial eligibility periods. CEWS’s “base” and “top-up” subsidy The amount of the CEWS for each employee would now vary according to the employer’s drop in revenue, expressed as a percentage. The CEWS would consist of two parts: a “base” subsidy and a “top-up” subsidy. During an eligibility period, the CEWS amount would be calculated by adding the base and top-up percentages, as defined in Appendix A below. Base subsidy: The maximum base CEWS rate would be gradually reduced from 60% in eligibility periods 51 and 6 to 20% for the last period (Period 9). The maximum base CEWS rate would be available for eligible entities that have experienced a revenue drop of more than 50%. It would then be gradually reduced by the percentage of the eligible entity’s revenue decline from the maximum base rate for the relevant eligibility period to zero. For example, for a revenue drop of 50% or more, the maximum CEWS amount would now be 60% for Periods 5 and 6, to be reduced to 50% for Period 7. Top-up subsidy: A maximum top-up subsidy of 25% would be offered in certain cases to provide additional support to companies particularly affected by the crisis. The top-up subsidy would be available to eligible entities that have experienced a revenue drop of more than 50% for a given eligibility period. To be eligible for the maximum top-up subsidy, a revenue drop of 70% or more must be registered for the three months preceding the relevant period. A transitional rule is provided for Periods 5 and 6 to allow eligible employers to elect the most advantageous subsidy, that is, the CEWS rate of 75% under the initial structure with a threshold of 30% or one of 60% (+ potentially 25%) under the new structure. In addition, the special rule providing for automatic eligibility forthe subsequent period would also be modified. Thus, an entity that qualified for Period 3 would automatically qualify for Period 4. However, for subsequent periods, the revenue reduction percentage from the previous qualifying period could be applied if the revenue reduction percentage for the current qualifying period is lower. For example, if an eligible entity had a 45% revenue reduction for Period 6 but its revenue reduction for Period 7 fell to 25%, the entity could benefit from the Period 6 percentage, that is, 45%. The base and top-up CEWS would apply to the remuneration of active employees. A separate CEWS rate structure would apply to furloughed employees. For furloughed employees, for Periods 5 and 6, the CEWS calculation would remain the same as it is now, but would be adjusted for Periods 7 to 9 to harmonize with income support through the Canada Emergency Response Benefit (“CERB”) and/or Employment Insurance. Calculating the CEWS In order to calculate the CEWS, the proposed legislation introduces three new definitions that are further described in Appendix A below. These definitions are used to calculate the base and top-up subsidies. Base percentage (if revenue decline < 50 %) Base percentage (if revenue decline = 50 %) Top-up percentage (if revenue decline > 50 %) CEWS Period 5: July 5 to August 1st, 2020 CEWS Period 6: Period 6 : August 2 to August 29, 2020 1.2 x % decline 60 % 1.25 x (% of revenue decline on preceding three-month average – 50 %) Max 25 % CEWS Period 7: August 30 to September 26, 2020 1 x % decline 50 % 1.25 x (% of revenue decline on preceding three-month average – 50 %) Max 25 % CEWS Period 8: 27 septembre au 24 octobre 2020 0.8 x % decline 40 % 1.25 x (% of revenue decline on preceding three-month average – 50 %)Max 25 % CEWS Period 9: October 25 to November 21, 2020 0.4 x % decline 20 % 1.25 x (% of revenue decline on preceding three-month average – 50 %)Max 25 % CEWS amount The maximum weekly amount per employee would be increased from $847 to a maximum percentage of 85% (maximum base and top-up subsidies) of the lesser of the weekly remuneration paid and $1,129, for a maximum of $960 per week, per employee. This percentage would be reduced according to an eligible employer’s revenue decline. The concept of eligible remuneration would remain the same, but the concept of basic remuneration would no longer apply as of Period 5, except in the case of employees that do not deal at arm’s length with the employer. Other significant changes to the CEWS A variety of other changes were announced, including: An appeal process based on the existing Notice of Determination procedure to make it possible to appeal to the Tax Court of Canada. For example, an employer denied the CEWS in whole or in part could avail itself of the objection and appeal process under the Income Tax Act to challenge the CRA decision in this regard. On June 17, 2020, as part of the economic response plan, the CRA announced that it would begin post-payment audits of CEWS claims as early as September 2020. Employers whose employees are paid through a payroll service provider would now be able to claim CEWS for the salaries of their eligible employees; For reference periods beginning July 5, employees who have not received remuneration for 14 consecutive days would still be granted eligible status; New optional reference periods have been added to each qualifying period to account for the particularities of seasonal businesses; Corporations formed on an amalgamation would be deemed to be the same corporation and a continuation of each of the corporations existing immediately before the amalgamation; Trusts would now be eligible entities; Continuity rules would be introduced to make it possible for employers who have purchased all or substantially all the assets of a business to calculate their drop in revenues for the purposes of CEWS. Labour and employment law considerations As in the previous version of CEWS, an employer would not be required to pay employees the pre-crisis remuneration they were receiving in order to be eligible to the CEWS2. However, it is important to remember that a substantial change in an employee’s working conditions, especially one lasting for an extended period of time, may give rise to allegations of constructive dismissal. An analysis of the employment contract of employees affected by a change in their working hours, remuneration, position or duties is recommended, as well as obtaining legal advice. Considering the elimination of the requirement that an employee should not be “without remuneration from the eligible employer in respect of a period of 14 or more consecutive days in the claim period,” employers will now have more flexibility in terms of call-back dates and employee schedules. Caution is still advised when calling employees back to work. While employer eligibility for CEWS is no longer dependent on the “14-day rule,” employees may still be required to reimburse the CERB benefits received, depending on their income level during the applicable eligibility period. Currently, an employee must reimburse the CERB in the following cases: 1st1 CERB eligibility period Other CERB eligibility periods An employee will be required to reimburse the sum of $2,000 if they have earned or will earn, for at least 14 consecutive days during that period, , more than $1,000 (before deductions) in employment or self-employment income. An employee will be required to reimburse the sum of $2,000 if they have earned or will earn more than $1,000 (before deductions) in employment or self-employment income during this period. Finally, despite CEWS’s rules being more flexible, some employers will have to consider permanently laying off part of their workforce. Legal advice should be obtained in order to assess an employer’s obligations under the employment contracts’ terms and applicable law. Particular considerations also apply to notice and severance pay for an employer benefiting from the CEWS, as the amounts paid generally cannot be subsidized through the CEWS. Lavery’s tax and labour law teams are available to answer all your questions regarding the application of the CEWS and to support in the case of audits by tax authorities. APPENDIX A “Revenue reduction percentage” means the percentage of revenue reduction for the qualifying period relative to revenue for the reference period used to determine eligibility. For qualifying periods beginning July 5, 2020, employers would now have the option of calculating their revenue reduction percentage by electing the greater of: The revenue reduction obtained by comparing the current month with the same month in 2019; and The revenue reduction obtained by comparing the previous month with the same month in 2019. Otherwise, an eligible employer would have the possibility of electing to calculate the revenue reduction percentage by comparing either: The current month and the average of January and February 2020; or The previous month and the average of January and February 2020. Employers would be able to decide which calculation method they wish to use for the qualifying period beginning July 5, regardless of the election they made for qualifying periods prior to that date. The method chosen for the eligibility period beginning July 5 would become mandatory for all subsequent qualifying periods. The reference periods for the purposes of calculating the revenue reduction percentage of an eligible employer would thus be as follows: Reference period (revenue reduction percentage) Optional reference period (revenue reduction percentage) Qualifying period 5: July 5 to August 1, 2020 July 2020 compared to July 2019 or June 2020 compared to June 2019 July or June 2020 compared to the average of January and February 2020 Qualifying period 6: August 2 to August 29, 2020 August 2020 compared to August 2019 or July 2020 compared to July 2019 August or June 2020 compared to the average of January and February 2020 Qualifying period 7 : August 30 to September 26, 2020 September 2020 compared to September 2019 or août 2020 comparé à août 2019 September or August 2020 compared to the average of January and February 2020 Qualifying period 8: September 27 to October 24, 2020 October 2020 compared to October 2019 or September 2020 compared to September 2019 October or September 2020 compared to the average of January and February 2020 Qualifying period 9: October 25 to November 21, 2020 November 2020 compared to November 2019 or October 2020 compared to October 2019 November or October 2020 compared to the average of January and February 2020 “Top-up percentage” is the percentage equal to the lesser of: 25%; 1.25 multiplied by the result of the following subtraction: The average monthly revenue for the last three calendar months divided by the average decrease in revenue compared to their respective reference period; minus 50% The qualifying periods and their corresponding reference periods for the purpose of calculating the top-up percentage are set out in the table below: Qualifying period Reference period (top-up percentage) July 5 to August 1, 2020(Period 5) Average of April to June 2020 compared to the average of April to June 2019 or January and February 2020 August 2 to August 29, 2020(Period 6) Average of May to July 2020 compared to the average of May to July 2019 or January and February 2020 August 30 to September 26, 2020 (Period 7) Average of June to August 2020 compared to the average of June to August 2019 or January and February 2020 September 27 to October 24, 2020(Period 8) Average of July to September 2020 compared to the average of July to September 2019 or January and February 2020 October 25 to November 21, 2020(Period 9) Average of August to October 2020 compared to the average of August to October 2019 or January and February 2020 “Base percentage” means the percentage calculated based on the base percentage defined above and the qualifying period, as set out in the table below: Reference period (base percentage) Base percentage if the revenue reduction percentage exceeds 50% Base percentage if the revenue reduction percentage does not exceed 50% Qualifying period 4: June 7 to July 4, 2020 June 2020 compared to June 2019 or the average of January and February 2020 N/A N/A Qualifying period 5: July 5 to August 1, 2020 July 2020 compared to July 2019 or the average of January and February 2020 60 % 1.2 x revenue reduction percentage Qualifying period 6: August 2 to August 29, 2020 August 2020 compared to August 2019 or the average of January and February 2020 60 % 1.2 x revenue reduction percentage Qualifying period 7: August 30 to September 26, 2020 September 2020 compared to September 2019 or the average of January and February 2020 50 % 1 x revenue reduction percentage Qualifying period 8: September 27 to October 24, 2020 October 2020 compared to October 2019 or the average of January and February 2020 40 % 0.8 x revenue reduction percentage Qualifying period 9: October 25 to November 21, 2020 November 2020 compared to November 2019 or the average of January and February 2020 20 % 0.4 x revenue reduction percentage As set out in the table above, the base percentage rate, and therefore the total amount of CEWS paid relative to an employee’s salary, would gradually decrease over the qualifying periods. The maximum CEWS for an employee’s salary for a given week in the last qualifying period beginning October 25, 2020, would be $508. New CEWS calculation For qualifying periods beginning August 30, the amount of the CEWS that may be claimed for each employee would be calculated as follows: If the employee deals at arm’s length with the employer and is not on paid leave in a particular week: The percentage obtained by adding the base percentage and the top-up percentage for the qualifying period multiplied by the lesser of: The remuneration paid in respect of that week; and $1,129.00. If the employee does not deal at arm’s length with the employer and is not on paid leave for a particular week: The lesser of: The eligible amount of remuneration paid in respect of that week; An amount prescribed by regulation; and $0 if both the revenue reduction percentage and the top-up percentage are 0%. Eligibility periods: March 15, 2020, to April 11, 2020 (Period 1), April 12, 2020, to May 9, 2020 (Period 2), May 10, 2020, to June 6, 2020 (Period 3), June 7, 2020, to July 4, 2020 (Period 4), July 5, 2020, to August1, 2020 (Period 5), August 2, 2020, to August 29, 2020 (Period 6), August 30, 2020, to September 26, 2020 (Period 7), September 27, 2020, to October 24, 2020 (Period 8), and October 25, 2020, to November 21, 2020 (Period 9). It should be noted that the government strongly encouraged businesses to supplement employee remuneration to bring it back to pre-crisis levels wherever possible.