COVID-19 Related Closures and Layoffs:  What is a SUB Plan and how can it benefit my employees?

A Supplemental Unemployment Benefit (SUB) is a type of payment made by employers to employees in addition to employment insurance (EI) payments. Unlike many other payments, SUB payments are not deducted from the employee’s EI payments. Employers can use SUB plans to support their employees during the COVID-19 pandemic related layoffs or illness related absences. SUB plans can be used to boost what an employee receives on EI up to 95% of their normal weekly earnings.

To provide SUBs for regular or sickness EI benefits, the employer must register a SUB Plan with Service Canada’s SUB Program. Failure to register a SUB plan with Service Canada will mean that any payments made to them will be deducted from their EI. That leaves the employee no better off and the employer footing the EI bill. This article outlines the requirements of such a plan and how to register it.

What Does a SUB Plan Require?

SUB Plans can come in many different forms: union agreements, trust document, employee handbooks, or any other signed employer commitment. The basic requirements of a SUB plan are that the plan:

    • Identifies the group of employees who are covered and the plan’s duration;
    • Provides a complete description of benefits received by eligible employees (including the number of weeks that benefits will be provided);
    • Covers a period of unemployment caused by 1 or a combination of (a) temporary stoppage of work, (b) training, and/or (c) illness, injury or quarantine;
    • Requires employees to apply for and be in receipt of EI benefits in order to receive the SUB payments, unless the employee: (a) is serving the EI waiting period, (b) has insufficient hours of insurable employment to qualify for benefits, or (c) has received all the benefits that the employee is entitled to.
    • Requires that the combined weekly payments from the plan and the portion of the EI weekly benefit rate does not exceed 95% of the employee’s normal weekly earnings;
    • Requires the plan to be entirely financed by the employer and that the method of financing be stated in the plan (see the links below for more details);
    • State that the employer will keep a record of all SUB payments;
    • Requires that on the plan’s termination, all of the plan’s remaining assets will revert to the employer or be used for plan payments or for the plan’s administrative costs;
    • Requires that written notice of any change to the plan (or organizational merger or take-over) be given to Service Canada within 30 days after the effective date of the change;
    • Provides that the employees have no vested right to payments under the plan except during a period of unemployment specified in the plan;
    • Provides that payments in the form of guaranteed annual remuneration, deferred remuneration or severance pay will not be reduced or increased by payments received under the plan (including vacation pay, sick leave, commissions, bonuses, etc.); and
    • When the plan will start and end, with a minimum length of one year and a maximum of five years; if the plan is in a collective agreement, it expires when the collective agreement expires.

Note, the employer may not pay the SUB out all at once, but must do so periodically (e.g. biweekly). ­

How to Register a Plan

SUB plans are considered to be registered on the date they are received by Service Canada’s SUB Program if all required conditions are met and supporting documents received. Notification is sent to the employer if approved. Plans usually take about 48 hours to process once received.

Normally, SUB plans must be submitted and registered before their effective date (registration normally being the date that they are received). However, in light of COVID-19, plans submitted and approved prior to the end of this week (March 20, 2020) will be backdated to March 15, 2020 to allow earlier payments. It is not yet clear whether special rules will apply to next week (March 22, 2020 to March 28, 2020).

To submit a SUB Plan, you will have to send a completed SUB Plan Registration Form, a copy of your SUB Plan, and any additional required documents to Service Canada’s SUB program by mail, fax, or e-mail.

We strongly recommend seeking legal advice before submitting a SUB Plan for registration or making commitments to your employees regarding such plans.