Vol. 150, No. 14 — July 13, 2016

Registration

SOR/2016-206 June 30, 2016

EMPLOYMENT INSURANCE ACT

Regulations Amending the Employment Insurance Regulations and the Employment Insurance (Fishing) Regulations

P.C. 2016-666 June 30, 2016

RESOLUTION

The Canada Employment Insurance Commission, pursuant to sections 54 (see footnote a), 153, 153.1 (see footnote b) and 153.2 (see footnote c) of the Employment Insurance Act (see footnote d), makes the annexed Regulations Amending the Employment Insurance Regulations and the Employment Insurance (Fishing) Regulations.

June 23, 2016

Louise Levonian
Chairperson
Canada Employment Insurance Commission

His Excellency the Governor General in Council, on the recommendation of the Minister of Labour, pursuant to sections 54 (see footnote e), 153, 153.1 (see footnote f) and 153.2 (see footnote g) of the Employment Insurance Act (see footnote h), approves the annexed Regulations Amending the Employment Insurance Regulations and the Employment Insurance (Fishing) Regulations, made by the Canada Employment Insurance Commission.

Regulations Amending the Employment Insurance Regulations and the Employment Insurance (Fishing) Regulations

Employment Insurance Regulations

1 Section 12 of the Employment Insurance Regulations (see footnote 1) and the heading before it are repealed.

2 Subsection 25(1) of the Regulations is replaced by the following:

25 (1) For the purpose of section 145 of the Act, a claimant is considered to have been paid a week of benefits when the total of the percentages of benefits paid for one or more weeks of unemployment equals 100.

3 Section 76.1 of the Regulations and the heading before it are repealed.

4 Section 76.11 of the Regulations is replaced by the following:

76.11 The definition insured participant in section 58 of the Act is adapted to include an insured person who requests assistance under employment benefits and, when requesting the assistance, is an unemployed person who has a benefit period established under a provincial plan or has had that benefit period end within the previous 60 months and who would have been entitled to receive special benefits under section 22 or 23 of the Act had they not been entitled to provincial benefits.

5 Section 76.12 of the Regulations and the heading before it are repealed.

6 Section 76.18 of the Regulations is replaced by the following:

76.18 If a week of provincial benefits has been taken into account for the purpose of any of sections 76.11 to 76.14 or 76.19, a week of benefits paid under section 22 or 23 of the Act shall not be taken into account for that same purpose.

7 Section 77.5 of the Regulations and the heading before it are repealed.

8 Section 77.9 of the Regulations and the heading before it are repealed.

9 Paragraph 93(5)(a) of the Regulations is replaced by the following:

10 Schedule I to the Regulations is amended by replacing the references after the heading “SCHEDULE I” with the following:

(Paragraphs 17(1)(a) and (b), subsections 17.1(1) and 18(1), paragraph 77.2(2)(b), subsections 77.7(2) and 77.8(2), paragraph 77.92(2)(a) and subsections 77.93(2), 77.94(2), 77.95(2) and 77.97(2))

11 Schedule II.5 to the Regulations is repealed.

12 Schedule II.9 to the Regulations is repealed.

Employment Insurance (Fishing) Regulations

13 (1) Subsections 8(2) to (3.1) of the Employment Insurance (Fishing) Regulations (see footnote 2)are replaced by the following:

(2) In order to have a benefit period referred to in subsection (1) established in respect of a fisher, the fisher shall prove that they

(2) The portion of subsection 8(4) of the Regulations before paragraph (a) is replaced by the following:

(4) The qualifying period referred to in paragraph (2)(b)

(3) Subsections 8(7) to (8.1) of the Regulations are replaced by the following:

(7) In order to have a benefit period referred to in subsection (6) established in respect of a fisher, the fisher shall prove that they

(4) The portion of subsection 8(9) of the Regulations before paragraph (a) is replaced by the following:

(9) The qualifying period referred to in paragraph (7)(b)

(5) Subsection 8(15) of the Regulations is replaced by the following:

(15) Section 6, subsections 7(1) and (2), sections 8, 9 and 11 and subsections 12(2) and 14(1.1) of the Act do not apply to persons who are claimants under these Regulations.

14 (1) The portion of subsection 11(1) of the Regulations before the table is replaced by the following:

11 (1) Despite subsections 7.1(1) to (2.1), (6) and (7) of the Act, the amount of insurable earnings that an insured person requires under section 8 of these Regulations to qualify for benefits is increased to the amount set out in the applicable column of the table to this subsection if the insured person accumulates one or more violations in the 260 weeks before making an initial claim for benefits.

(2) Subsection 11(2) of the Regulations is repealed.

(3) Subsection 11(3) of the Regulations is replaced by the following:

(3) A violation shall not be taken into account under subsection (1) in more than two initial claims for benefits under these Regulations or Part I or VII.1 of the Act if the claimant qualified for benefits with the increased amount of insurable earnings in respect of each of those claims.

15 Paragraph 12(5)(a) of the Regulations is replaced by the following:

16 Subsection 13(2) of the Regulations is repealed.

17 The heading “New Entrant or Re-Entrant” before section 14.1 and sections 14.1 and 14.2 of the Regulations are repealed.

18 Section 14.5 of the Regulations is replaced by the following:

14.5 If a week of provincial benefits has been taken into account for the purpose of any of sections 76.11 to 76.13 or 76.19 of the Employment Insurance Regulations, a week of benefits paid under section 22 or 23 of the Act shall not be taken into account for that same purpose.

19 The schedule to the Regulations is amended by replacing the references after the heading “SCHEDULE” with the following:

(Paragraphs 8(2)(b) and (7)(b) and 12(5)(a))

Coming into Force

20 These Regulations come into force on the day on which section 209 of the Budget Implementation Act, 2016, No. 1, chapter 7 of the Statutes of Canada, 2016, comes into force, but if they are registered after that day, they come into force on the Sunday after the day on which they are registered.

REGULATORY IMPACT ANALYSIS STATEMENT

(This statement is not part of the Regulations.)

Executive summary

Issues: The elimination of the new entrants and re-entrants (NEREs) provisions announced in Budget 2016 will require amendments to the Employment Insurance Regulations (the EI Regulations) and the Employment Insurance (Fishing) Regulations [the EI (Fishing) Regulations].

A substantial share of the Canadian workforce is in non-standard employment, which encompasses all forms of paid employment that is not permanent full-time (standard work). Many workers in this group do not qualify for employment insurance (EI) benefits, as the NERE provisions require them to have a minimum of 910 insurable hours in their qualifying period, versus a range of 420 to 700 insurable hours for other claimants.

While intended to discourage frequent use of EI, research has shown that NERE status is not the determining factor in future EI usage patterns. The expansion of access to EI for NEREs will ensure that they qualify for EI benefits based on the same criteria as other claimants in the region where they live and that they are eligible for EI-funded training through the Labour Market Development Agreements.

Description: Amendments to the EI Regulations and the EI (Fishing) Regulations are required as a consequence of the elimination of the NERE provisions in the Employment Insurance Act (the EI Act). This ensures that the designation of NERE would no longer exist and that individuals with a benefit period beginning on or after July 3, 2016, would qualify for EI regular benefits based on the same eligibility criteria (i.e. between 420 and 700 hours of insurable employment) as other claimants.

Cost-benefit statement: Based on current work patterns, it is estimated that 50 500 claimants annually would benefit from the elimination of the NERE provisions and result in $3.2B in direct program costs and benefits for EI claimants over the next 10 years (beginning in 2016–2017). There will be net costs of $50.0M (present value) due to additional administrative costs for the Government of Canada and an expected amount of $6.0M on annual ongoing basis.

As a result of this change, more claimants will receive EI regular benefits that can help them cope with periods of unemployment through temporary financial assistance while they search for a new job and/or undertake training.

“One-for-One” Rule and small business lens: The amendments do not impose any new administrative or compliance burdens on businesses. Therefore, the “One-for-One” Rule and small business lens do not apply.

Background

Budget 2016 announced several initiatives to improve EI, including expanding access to EI benefits by eliminating the NERE provisions to allow these claimants the same access to EI benefits as all other Canadians.

The NERE provisions of the EI Act were introduced in 1978. Previous to 1996, a NERE claimant required 20 weeks (approximately 700 hours) of work to qualify for EI regular benefits. The 1996 EI reforms introduced the Variable Entrance Requirement, maintained and strengthened the NERE provisions — raising it from 20 weeks (approximately 700 hours) to 910 hours (approximately 26 weeks of insurable employment) — and introduced NERE provisions for self-employed workers starting at $5,500 in fishing earnings if they are a self-employed fisher. These provisions sought to reduce dependence on EI and ensure there was sufficient labour force attachment prior to collecting EI benefits. The intent of the provisions was also to reinforce the insurance principles of the EI program by ensuring that workers make a reasonable contribution to the system before collecting benefits.

Effective July 1996, any worker who did not have 490 hours of labour force attachment in their pre-qualifying period (the 52 weeks prior to their qualifying period) must have accumulated 910 hours of insurable employment in their qualifying period (generally the 52 weeks prior to their claim). Self-employed fishers are considered NEREs if they had less than $3,000 in employment earnings as a fisher during their pre-qualifying period (again the 52 weeks prior to their qualifying period) and would then require $5,500 in employment earnings as a fisher during their qualifying period to qualify for EI fishing benefits.

NERE pilot projects were in effect from December 2005 to December 2010 to test if reducing the number of hours from 910 to 840 that a new-entrant or re-entrant to the labour market required in order to receive EI benefits would have an impact on work patterns. Over the course of the NERE pilot projects, it is estimated that the reduction in the number of hours required to qualify for EI benefits enabled more NEREs to qualify for EI.

An evaluation of the NERE provisions was conducted by Employment and Social Development Canada (the Department) in 2011. The evaluation found evidence that despite making EI more difficult to access for the first time, the NERE provisions did not act to discourage future frequent use of the program.

Based on the analysis of the Longitudinal Administrative Database (LAD), the characteristic most closely associated with NEREs is age — 37.3% of all youth (i.e. those under 25 years of age) in the workforce in 2004 were NEREs, compared to 10.1% among the rest of the workforce. The share of the 25–29-year-old age group that are NEREs is substantially lower at 13.9%, and drops slightly for the 30–39-year-old group (11.2%) and 40+ age group (8.3%). Youth account for almost half of all NEREs (48.4%). LAD data also indicates that recent immigrants tend to be overrepresented in the NERE population (25.1% versus 15.4%), but less so than youth. Recent immigrants accounted for 4.6% of all NEREs in 2004.

During the 2014 consultations on improving the Labour Market Development Agreements (LMDAs), (see footnote 3) provinces/territories (P/Ts) and other stakeholders strongly supported the efforts to broaden eligibility for LMDA-funded training, primarily for NEREs. The EI Act was amended in 2015 to change the definition of “insured participants” under Part II of the Act to extend eligibility for employment programs, such as training programs, to all those who would meet their local entrance requirement. The new definition allowed claimants, who were denied EI benefits because of the NERE provisions, to nonetheless have access to training under a provincial program funded under an agreement entered into under Part II of the EI Act. However, the new definition has not yet been implemented in respect of the provincial programs funded under the LMDAs since no amendments to these agreements have been signed to date. With these changes, agreements will not need to be signed as insured participants will include former NEREs.

Issues

The nature of work has changed over time. A substantial share of the Canadian workforce is in non-standard employment, which encompasses all forms of paid employment that is not permanent full-time (standard work). Non-standard work (self-employment, permanent part-time employment, and temporary work) accounted for nearly 38% of the workforce in Canada in 2014. Temporary work (and contract work in particular) has experienced significant growth since the late nineties, outpacing all other types of employment.

Canadians engaged in non-standard work often face lower wages as well as reduced job security and income predictability than those employed in comparable standard full-time jobs as a result of a growing emphasis placed on term and contract work. Others are underemployed or hold several jobs and may receive limited employer-sponsored training or benefits. Many workers require retraining in order to transition into new jobs or fields. Competitive pressures are likely to amplify these trends as organizations seek greater flexibility in their workforce or reduce the long-term liabilities posed by more traditional benefit and compensation packages afforded to permanent employees in favour of short-term contractual arrangements.

Access to EI can be challenging for these multiple job holders and temporary employees (both growing categories of work) with differences by region that reflect in part the fact that youth, recent immigrants and individuals in precarious employment can find it difficult to access EI benefits. Many workers in these groups are denied EI due to the requirements that NEREs have a minimum of 910 hours in their qualifying period, versus a range of 420 to 700 hours for other claimants. While intended to discourage frequent use of EI, research has shown that NERE status is not the determining factor in future EI usage patterns.

Objectives

The objective of removing the NERE provisions of the EI Regulations and the EI (Fishing) Regulations is to end the different treatment of the NEREs and ensure that they will have the same access to EI benefits as the rest of the workforce. In addition, these individuals could also have access to provincial employment programs such as training programs that received funding under Part II of the EI Act under the LMDAs.

Description

All definitions and references to NEREs in the EI Regulations and the EI (Fishing) Regulations will be removed. (see footnote 4) After these amendments are made, in terms of qualifying for EI regular benefits, NEREs would be treated exactly the same as any other claimant (i.e. they will need between 420 and 700 insurable hours of employment during their qualifying period).

Regulatory and non-regulatory options considered

The elimination of the NERE provisions requires amending the EI Regulations and the EI (Fishing) Regulations to remove references to NEREs to ensure that the regulations are consistent with the amended EI Act. There are no alternative options to implement this measure.

Benefits and costs

By covering the income gap workers can experience between jobs, EI cushions the financial difficulties of a job loss and helps to ensure that Canadians do not suffer undue financial distress in order to make ends meet while they are looking for new employment.

Eliminating the NERE provisions will expand access to EI and provide additional support to claimants who may be engaged in non-standard work and reduced job security and income predictability. The NERE provisions disproportionately disadvantage youth and recent immigrants from accessing EI. Given the growth in non-standard work, improving access to EI by removing the NERE provisions will benefit these claimants by helping to address the income gaps they experience between jobs. Like all other EI regular claimants, NEREs would also be eligible to receive EI-funded training supports through the Labour Market Development Agreements (LMDAs).

It is estimated that the elimination of NERE provisions for regular and fishing claimants would benefit approximately 50 500 claimants annually. Broken down by age, 32.5% of those who would benefit would be aged between 15–24 years, 27.5% aged 24–34 years, 18% aged 35–44 years and 22% aged 45 and older. Of the claimants who would benefit, 57.5% would be male, and 42.5% would be female. The majority of claimants who would benefit would be located in Quebec (29.2%), Ontario (35.8%) and British Columbia (12.3%) — largely in urban areas.

Using the most recently available coverage survey data for 2014 and taking into account the roughly six months duration of benefits taken by NERE claimants, this would mean an increase in the Employment Insurance Coverage Survey (EICS) (see footnote 5) eligibility ratio by 4.4 percentage points, from 83.1% to 87.5%, depending on economic conditions. Based on current work patterns, it is estimated that 50 500 claimants annually would benefit from this provision, with new claimants receiving an average of $5,940 per claim in additional benefits, which means more claimants will receive benefits that can help them cope with periods of unemployment.

Eliminating the NERE provisions is expected to involve direct program costs of $305M in 2017–2018 (the first full year of implementation) and annual ongoing costs thereafter. This funding would be sourced from the fiscal framework and charged to the EI Operating Account. These costs are due to the fact that an additional 50 500 individuals per year would qualify for EI regular benefits.

Costs to Government

The elimination of the NERE provisions is expected to create additional administrative cost pressures for the Government of Canada. The additional costs associated with 50 500 NEREs who will now be eligible for EI regular benefits and costs to implement the relevant systems changes will result in new administrative costs of approximately $65M over 10 years. This includes $5.8M in upfront costs for implementation and system changes between fiscal years 2016–2017 and 2017–2018 and an estimated $6.0M annually ongoing for processing.

Cost-benefit statement: New entrants and re-entrants

 

First Year 2016–2017

Second Year 2017–2018

Third Year 2018–2019

Total 10 Years (2016–2017 to 2025–2026)

Total (PV)a

Annualized Averagea

A. Quantified impacts (in millions of dollars, 2015 constant dollars)

Benefits

EI claimants: more EI benefits due to NERE legislative and regulatory amendments

$250.0

$305.0

$310.0

$3,100

$2,308

$328.6

Costs

EI Operating Account (NEREs)

$250.0

$305.0

$310.0

$3,100

$2,308

$328.6

Government of Canada (Admin)

$9.2

$8.1c

$5.8

$65.0

$50.0

$7.1b

Net benefits

$(65.0)

$(50.0)

$(7.1)

B. Quantified impacts in non-dollars (number of individuals per year)

Positive impacts

EI claimants: estimated individuals who would qualify for EI regular benefits as a result of the NERE amendments

50 500

Negative impacts

None

C. Qualitative impacts

EI claimants

The amendments will allow NEREs to receive EI regular benefits since they will require a lesser number of insurable hours to qualify for EI regular benefits. At the same time, they would also be eligible for EI-funded training supports available through P/T-administered LMDAs.
 

The regulatory amendments will allow more claimants to receive EI regular benefits that can help them cope with periods of unemployment by receiving temporary financial assistance while they search for a new job and/or undertake training.

a Using a 7% discount rate. Amounts presented are discounted at a rate of 7% as per Treasury Board guidelines.

b Represents an annualized average based on estimates.

c Source of funds for processing have not been identified in 2017–2018 and ongoing. Budget 2016 provided $11.5M in funding for NERE processing and systems changes — $9.2M in 2016–2017 and $2.3M in 2017–2018.

“One-for-One” Rule

The change affects individuals only and, therefore, do not impose any new administrative or compliance burdens on businesses. Consequentially, the “One-for-One” Rule does not apply.

Small business lens

The change affects individuals only and, therefore, do not impose any new administrative or compliance burdens on businesses. Consequentially, the small business lens does not apply

Consultation

A wide range of stakeholders representing organized labour, think tanks, business and SMEs are expected to support these changes to EI. While generally supportive, stakeholders may view the initiatives as an early first action toward future EI changes. Any additional changes to the EI program are beyond the scope of this particular initiative; however this initiative does not preclude the Government from taking future actions to ensure that EI serves the needs of the Canadian workers and employers.

The responsibility for conducting consultations with external stakeholders rests with the Canada Employment Insurance Commission (CEIC). The Commissioner for Workers and the Commissioner for Employers represent their respective stakeholders and convey the positions of workers and employers regarding EI policies and program delivery. To do this, the Commissioners establish and maintain discussions with organizations and individuals interested in and affected by ESDC programs and services, such as the EI program.

In addition, as part of the evaluation cycle of the EI program, the Department regularly seeks out the opinions of Canadians on aspects of the EI program by conducting focus group studies. Academics have also been consulted in the evaluation of the EI program.

A focus group study was conducted as part of the 2011 Summative Evaluation of NEREs. Focus groups were assembled, consisting of youth, re-entrant females, immigrants and frequent users. Participants in the focus groups involving frequent users were asked to discuss the factors that lead to the process of becoming a frequent user of EI benefits. The most common response was that the type of employment, and its seasonality, is the main factor behind the frequent use of EI.

Labour market experts were also consulted as part of the 2011 Summative Evaluation. There was general agreement among the labour market experts interviewed that the level of frequent EI use in Canada is high enough to warrant provisions designed to strengthen the relationship between work effort and entitlement to EI benefits. However, the consensus belief among labour market experts interviewed was that frequent use of EI is not linked to receiving or being denied benefits early on in an individual’s working career (as the NERE provisions are meant to do). Think tanks such as the Mowat Centre and other community organizations have also requested the elimination of NEREs on the basis that it penalizes Canada’s most vulnerable workers.

Rationale

The elimination of the NERE provisions in the EI Regulations and the EI (Fishing) Regulations being made concurrently with changes to the EI Act will provide access to EI to a group of claimants who are disproportionately composed of youth and recent immigrants and who have contributed to the program through paying premiums, but have not had access to benefits. It will ensure that new claimants and claimants re-entering the workforce may qualify for EI benefits based on the same criteria as other claimants. The removal of the NERE provisions aligns well with the realities of the current labour market for workers in precarious employment, as well as part-time workers.

Implementation, enforcement and service standards

Existing implementation and enforcement mechanisms contained in the Department’s adjudication and controls procedures will ensure that these regulatory amendments are implemented properly. Regarding service standards, the Department’s continuing objective is to reach a decision on 80% of all EI claims within 28 days (4 weeks) of the receipt of all pertinent information.

The amended EI Regulations and EI (Fishing) Regulations will come into force on July 3, 2016. The proposed amendments would eliminate the requirement that NEREs to the labour force have 910 hours of insurable employment in their qualifying period in order to be eligible for EI regular benefits. It would also eliminate the requirement that self-employed fishers who are NEREs to the labour force have $5,500 in earnings from employment as a fisher in their qualifying period.

Instead, regular claimants whose benefit period begins on or after July 3, 2016, would need to meet the minimum hours of insurable employment required in their qualifying period based on their regional rate of unemployment in order to qualify for benefits. Self-employed fishers would be required to have the minimum earnings from employment as a fisher required under the EI (Fishing) Regulations to qualify for benefits under those Regulations.

Performance measurement and evaluation

The Department has developed a performance measurement and evaluation plan, and it is available upon request. The Department will also use the EI Coverage Survey and EI administrative data to measure the effect that this change will have on access. Effects of the elimination of NEREs will be reflected in the reporting on key indicators in the Canadian Employment Insurance Commission’s Monitoring and Assessment Report.

The annual Monitoring and Assessment Report provides Canadians and Parliamentarians with analysis of the overall effectiveness of EI income benefits and active measures. The annual report includes administrative data, information from key studies and evaluations that provide insight into the impacts and effectiveness of the EI program, as well as information on Employment Benefits and Support Measures delivered under LMDAs with provinces and territories. Updated evaluation results will be reported in annual EI Monitoring and Assessment Reports. Key indicators measured in the Monitoring and Assessment Report relevant to the elimination of NEREs relate to the coverage, eligibility and access to Employment Insurance regular benefits. Additionally, access to EI benefits is measured in the quarterly EI Coverage Survey.

Contact

Janique Venne
Director
Employment Insurance Policy Directorate
Skills and Employment Branch
Employment and Social Development Canada
140 Promenade du Portage, 5th Floor
Gatineau, Quebec
K1A 0J9
Telephone: 819-654-3067
Fax: 819-934-6631