Vol. 137, No. 18 — August 27, 2003

Registration
SOR/2003-306 13 August, 2003

EMPLOYMENT INSURANCE ACT

Regulations Amending the Employment Insurance Regulations

RESOLUTION

The Canada Employment Insurance Commission, pursuant to paragraph 54(z) of the Employment Insurance Act (see footnote a) , hereby makes the annexed Regulations Amending the Employment Insurance Regulations.

July 14, 2003

P.C. 2003-1288 13 August, 2003

Her Excellency the Governor General in Council, on the recommendation of the Minister of Human Resources Development and the Treasury Board, pursuant to paragraph 54(z) of the Employment Insurance Act (see footnote b) , hereby approves the annexed Regulations Amending the Employment Insurance Regulations made by the Canada Employment Insurance Commission.

REGULATIONS AMENDING THE EMPLOYMENT INSURANCE REGULATIONS

AMENDMENTS

1. The definitions "low-earning week" and "regular-earning week" in subsection 24.2(1) of the Employment Insurance Regulations (see footnote 1)  are replaced by the following:

"low-earning week" means a week in respect of which a claimant has less than $225 of insurable earnings, excluding monies paid or payable by reason of lay-off or separation from employment. (semaine de faible rémunération)

"regular-earning week" means a week in respect of which a claimant has $225 or more of insurable earnings, excluding monies paid or payable by reason of lay-off or separation from employment. (semaine de rémunération régulière)

COMING INTO FORCE

2. These Regulations come into force on September 7, 2003.

REGULATORY IMPACT
ANALYSIS STATEMENT

(This statement is not part of the Regulations.)

Description

In the context of Employment Insurance (EI) reform, an hours-based system and a new method of calculating benefits came into effect in January 1997. This system was designed to encourage workforce attachment and to better reflect the modern labour market by counting every hour of work. However, it had an unintended effect of creating a disincentive to work.

Under the previous weeks-based system of Unemployment Insurance, weeks with less than 20 percent of the maximum insurable earnings ($150 in 1996) and less than 15 hours were not insurable. These weeks did not count for either qualifying for a claim or determining a weekly benefit rate. The hours-based system better recognized the variety of work patterns of Canadian workers by counting all their hours of work for purposes of qualification for a claim.

However, the problem was that accepting one or more weeks of work with lower than average earnings ("small week") during the period used to calculate a claimant's weekly benefit rate resulted in a reduced benefit level. Immediately following the introduction of this system, employers and workers raised this concern. This predicament was particularly serious for many seasonal workers who had already met the minimum hourly requirement to set up a claim. Consequently, it was better to have a week without earnings than to have worked a small week. In response to these concerns, the Government began testing approaches to remove the work disincentive through the pilot project provisions of the Employment Insurance Act (section 109).

After evaluation, the preferred approach was to exclude low-earning weeks (small weeks) for the calculation of the benefit rate. The threshold amount for small weeks was set at $150. Results from evaluation studies of the pilot projects indicated that the initiative had been successful. Excluding small weeks for the benefit rate calculation helped improve the efficiency and effectiveness of the labour market by encouraging Canadians to accept part-time or temporary employment. At the same time, it helped employers cope with short-term labour shortages. In addition, this system recognized the non-standard work patterns adopted more frequently by women and youth, who tend to accept part-time or temporary work. Given these positive results, the Canadian government made this measure a permanent component of the EI program, which came into effect on November 18, 2001.

The regulatory amendment does not make any structural changes to this measure. It merely raises the threshold of earnings on a "small week" from $150 to $225, so that it more closely matches the national average for part-time work. This level has never been updated since the beginning of the pilot projects to test the measure and has always been $150. On the other hand, our studies show that part-time workers work an average of 18 hours a week at an hourly rate of $12.40, that is to say an average of $223.20 a week. Consequently, from now on, weeks in which insured persons have received less than $225 in insurable earnings can be excluded in the formula used to establish the weekly benefit rate.

The earnings will be excluded only for calculating the benefit rate, but will still be taken into account for other aspects of entitlement. For example, if an insured person is receiving benefits, earnings received for small weeks will still be deducted from the EI benefits according to the usual rules. In addition, all hours of work will continue to be used to determine if an insured person has accumulated enough hours of insurable employment to establish a claim and to determine the maximum number of weeks of benefits payable.

Alternatives

Since the change merely adjusts the earnings threshold for small weeks to more accurately reflect the work patterns of part-time workers, no alternatives were considered.

Benefits and Costs

It is estimated that some 51,000 insured persons per year will be eligible for small weeks. Women and youth should benefit considerably from this initiative. In addition, this measure would maintain the incentive to accept small weeks of work in high unemployment regions where seasonal employment patterns with small weeks of earnings frequently occur, thereby filling short term labour shortages faced by employers in certain industries.

It is also estimated that the EI Account will have to pay out an extra $6 million in benefits during the 2003-2004 fiscal year and an extra $17.5 million in 2004-2005 and every year thereafter. This change will involve an estimated additional administration cost of $1.1 million in the 2003-2004 fiscal year, $0.06 million in 2004-2005 and $0.01 million in 2005-2006. Funding will be taken from the EI Account.

Consultation

These amendments to the regulations were prepared by Insurance Policy in collaboration with Strategic Policy, Legal Services, Insurance Program Services and Systems at Human Resources Development Canada (HRDC) National Headquarters and the Department of Justice. All parties involved support the attached proposal.

This regulatory change has also been approved by the EI Commission, which includes representatives of employers, employees and the government.

Compliance and enforcement

Existing compliance mechanisms contained in HRDC's adjudication and control procedures will ensure that the change is implemented properly. The small weeks provision will be assessed as part of the annual EI Monitoring and Assessment Report, which is prepared by the EI Commission and tabled in the House of Commons every year by the Minister of HRDC.

Contact

Johanne Goyette
Senior Policy Advisor
Human Resources Development Canada
Policy and Legislation Development
Insurance Policy
140 Promenade du Portage
9th Floor, Phase IV
Gatineau, Quebec
K1A 0J9
Telephone: (819) 994-8365
FAX: (819) 953-9381

Footnote a 

S.C. 1996, c. 23

Footnote b 

S.C. 1996, c. 23

Footnote 1 

SOR/96-332

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