Vol. 135, No. 38 — September 22, 2001

Regulations Amending the Employment Insurance Regulations

Statutory Authority

Employment Insurance Act

Sponsoring Department

Department of Human Resources Development

REGULATORY IMPACT ANALYSIS STATEMENT

Description

In the context of the 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).

First Pilot Project — April 1997 to November 1998

To increase work incentives, two temporary adjustment projects were introduced in 29 economic regions with high unemployment rates. These projects were:

— "Excluding" which ignored small weeks (less than $150) from the averaging process used to calculate a weekly benefit rate; and

— "Bundling" which consolidated small weeks into other weeks with higher earnings attributed to them before the averaging process.

Both methods yielded identical benefit rates, which were higher than would have otherwise been the case. However, "bundling" was difficult to explain and understand, as well as more costly to administer. These small weeks adjustment projects did not apply to benefit periods established after November 14, 1998.

Second Pilot Project — November 1998 to November 2001

Effective November 15, 1998, a new pilot project was established. Its purpose was to allow for thorough evaluation over the following three years of the impact on work patterns of reducing the effect that small weeks of earnings had on a claimant's weekly benefit rate. In essence, this project was a sequel to the two temporary adjustment projects. It extended "excluding" to all 29 of the original participating economic regions. Two other economic regions (Hull, Quebec and Sudbury, Ontario), which had experienced a consistent unemployment rate of over 10 percent between April and July 1998, were also added.

The operation of this pilot project only affects the calculation of weekly benefit rates. It does not affect any other aspect of entitlement. The earnings from small weeks will still be deducted from EI benefits, if the claimant is on claim. In addition, all hours of work are still used to determine whether a claimant has enough hours to set up a claim and to establish the maximum number of weeks the claim could last.

Results from evaluation studies indicate that the initiative has been successful. Specifically, it is estimated that participants in the pilot project have worked two more weeks on the average than they would have without it. This is particularly noteworthy given that the unemployment rates of the EI regions participating in the project were higher than the national average. In addition, this initiative has been particularly positive for women and youth who are more likely than others to work in part-time and temporary employment.

The small weeks pilot project helps improve the efficiency and effectiveness of the labour market by encouraging Canadians to accept part-time and temporary employment, thereby filling short term labour shortages faced by employers in certain industries and regions. Further, it recognizes the non-standard work patterns experienced by women and youth in part-time or temporary employment.

However, the small weeks pilot project cannot last for more than three years (section 110 of the Employment Insurance Act) and therefore cannot apply to benefit periods established on or after November 18, 2001. In order to continue the benefits of the initiative to the current participating EI regions and extend it to the other regions, a permanent regulatory amendment is necessary to continue the small weeks provisions after November 18, 2001.

Alternatives

One option is to allow the pilot project to sunset. According to the evaluation study, feedback from employers and workers and the ongoing recommendations of Parliamentarians of all parties, the project has been a success. It is also clear that the way in which small weeks were treated during the pilot project has removed the disincentive to accept "small weeks" of work. Therefore, this is not considered a viable solution.

A better alternative is to extend the small weeks initiative to all EI regions, making it a permanent and national feature of the EI program. The project has had a very positive effect on the efficiency of the labour market in general and has proven to be of benefit to women and youth in particular. Consequently, this alternative is considered to be the optimal solution.

Benefits and Costs

The proposed change would create access to the small weeks initiative across all provinces and territories. It 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 estimated that approximately 220 000 claimants a year will be eligible for small weeks. Based on their relatively high participation rates in the pilot project, women and youth are expected to be significant beneficiaries of the initiative.

The estimated cost to the EI account in additional benefits paid is $31.4 Million (M) in fiscal year 2001-02 and $85M in fiscal year 2002-03 and each year thereafter. The administrative cost for the extension of small weeks to all economic regions is $4.0M in fiscal year 2001-02, $3.9M in fiscal year 2002-03 and $3.7M in fiscal 2003-04 and each year thereafter. Funding will be from Part I of the EI account.

Consultation

Initially, the impact of the small weeks situation upon weekly benefit rates on EI claims and possible solutions were the object of consultation with advocacy groups and Members of Parliament, Treasury Board and the Department of Finance. Suggestions were made by the Advisory Group of Atlantic Members of Parliament. Following analysis of the situation and the proposals for potential solutions, the design elements of the original adjustment projects were selected.

Throughout the pilot phases, the small weeks projects have had wide support across Canada. More recently, witnesses representing employers, employees and other interested groups supported the small weeks initiative when appearing before the Standing Committee on Human Resource Development and Persons with Disabilities. That committee was studying An Act to Amend the Employment Insurance Act and the Employment Insurance (Fishing) Regulations (Bill C-2) and unanimously recommended making this initiative a permanent feature of the EI program. Members of Parliament from all parties, particularly from Atlantic Canada, have made similar representations.

These Regulations were prepared by Insurance Policy in consultation with Strategic Policy, Legal Services, Insurance Program Services and EI Systems at Human Resources Development Canada (HRDC) National Headquarters and the Department of Justice. All parties support the proposal presented in the attached schedule.

Compliance and Enforcement

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

Contact

Mary Chin-Pang, Senior Policy Advisor, Policy and Legislation Development, Insurance Policy, Human Resources Development Canada, 140 Promenade du Portage, 9th Floor, Ottawa, Ontario K1A 0J9, (819) 994-4455 (Telephone), (819) 953-9381 (Facsimile).

PROPOSED REGULATORY TEXT

Notice is hereby given that the Canada Employment Insurance Commission, pursuant to paragraph 54(z) of the Employment Insurance Act (see footnote a), proposes, subject to the approval of the Governor in Council, to make the annexed Regulations Amending the Employment Insurance Regulations.

Interested persons may make representations with respect to the proposed Regulations within 30 days after the date of publication of this notice. All such representations must cite the Canada Gazette, Part I, and the date of publication of this notice, and be addressed to Mary Chin-Pang, Policy and Legislation Development, Insurance Branch, Human Resources Development Canada, 9th Floor, 140 Promenade du Portage, Ottawa, Ontario K1A 0J9.

Ottawa, September 20, 2001

RENNIE M. MARCOUX
Acting Assistant Clerk of the Privy Council

REGULATIONS AMENDING THE EMPLOYMENT INSURANCE REGULATIONS

AMENDMENTS

1. The Employment Insurance Regulations (see footnote 1) are amended by adding the following after section 24.1:

Exclusion of Low-earning Weeks in the Calculation of Weekly Benefit Rates

24.2 (1) The definitions in this subsection apply in this section.

"low-earning week" means a week in respect of which a claimant has less than $150 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 $150 or more of insurable earnings, excluding monies paid or payable by reason of lay-off or separation from employment. (semaine de rémunération régulière)

(2) For the purposes of the definitions "low-earning week" and "regular-earning week" in subsection (1), insurable earnings do not include insurable earnings of a fisher referred to in subsection 5(5) of the Employment Insurance (Fishing) Regulations.

(3) For the purposes of section 14 of the Act, low-earning weeks shall be excluded from the calculation of the rate of weekly benefits payable to a claimant.

(4) A claimant's low-earning weeks shall be excluded in the calculation of the rate of weekly benefits payable to the claimant if the claimant has at least one regular-earning week in the rate calculation period and the aggregate of the claimant's low-earning weeks and regular-earning weeks in the rate calculation period is greater than the applicable divisor set out in the table to paragraph 14(2)(b) of the Act.

(5) For the purpose of determining the insurable earnings of a claimant in the rate calculation period under subsection 14(3) of the Act and the divisor under subsection 14(2) of the Act, low-earning weeks shall be excluded as follows:

(a) if the claimant has accumulated a number of regular-earning weeks in the rate calculation period that is equal to or greater than the applicable divisor set out in the table to paragraph 14(2)(b) of the Act,

(i) the claimant's low-earning weeks shall be excluded when determining the divisor in accordance with subsection 14(2) of the Act, and
(ii) the insurable earnings for those low-earning weeks shall be excluded when determining the claimant's insurable earnings in the rate calculation period; and

(b) if the claimant has accumulated a number of regular-earning weeks in the rate calculation period that is less than the applicable divisor set out in the table to paragraph 14(2)(b) of the Act,

(i) a sufficient number of the claimant's low-earning weeks with the highest amount of insurable earnings shall be added to the claimant's regular-earning weeks so as to equal the applicable divisor set out in that table, and
(ii) the claimant's insurable earnings in the rate calculation period shall be the total insurable earnings for the claimant's regular-earning weeks and for the claimant's low-earning weeks that were added under subparagraph (i), and the divisor shall be the applicable divisor set out in that table.

(6) For greater certainty, the exclusion of low-earning weeks in the calculation of the rate of weekly benefits payable to a claimant does not affect the insurability of the claimant's employment, the collection of premiums for the purposes of the Insurable Earnings and Collection of Premiums Regulations or the application of sections 7, 7.1 and 12 and subsection 14(4) of the Act.

2. Section 77.1 (see footnote 2) of the Regulations and the heading (see footnote 3) before it are repealed.

TRANSITIONAL PROVISION

3. The exclusion of low-earning weeks from the calculation of the rate of weekly benefits payable to a claimant for a benefit period established before November 18, 2001 shall be calculated in accordance with section 77.1 of the Regulations as it read immediately before that date.

COMING INTO FORCE

4. These Regulations come into force on November 18, 2001.

[38-1-o]

Footnote a

S.C. 1996, c. 23

Footnote 1

SOR/96-332

Footnote 2

SOR/2000-268

Footnote 3

SOR/98-551

NOTICE:
The format of the electronic version of this issue of the Canada Gazette was modified in order to be compatible with extensible hypertext markup language (XHTML 1.0 Strict).