Vol. 138, No. 11 — June 2, 2004

Registration
SOR/2004-146 21 May, 2004

EMPLOYMENT INSURANCE ACT

Regulations Amending the Employment Insurance Regulations

RESOLUTION

The Canada Employment Insurance Commission, pursuant to section 109 of the Employment Insurance Act (see footnote a), hereby makes the annexed Regulations Amending the Employment Insurance Regulations.

May 19, 2004

P.C. 2004-730 21 May, 2004

Her Excellency the Governor General in Council, on the recommendation of the Minister of State styled Minister of Human Resources and Skills Development and the Treasury Board, pursuant to section 109 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 Employment Insurance Regulations (see footnote 1) are amended by adding the following after section 77.1:

Pilot Project Relating to Increased Weeks of Benefits

77.2 (1) The Commission establishes Pilot Project No. 6 for the purpose of assessing the costs and impact of increasing weeks of benefits in selected economic regions.

(2) Pilot Project No. 6 includes each claimant

(a) whose benefit period is established in the period beginning on June 6, 2004 and ending on June 4, 2006; and

(b) who, at the time the benefit period is established, is ordinarily resident in a region described in Schedule I that is set out in Schedule II.1.

(3) Despite subsection 12(2) of the Act, the maximum number of weeks for which benefits may be paid in a benefit period that is established for a claimant who is included in Pilot Project No. 6 shall be determined in accordance with the table set out in Schedule II.2 by reference to the regional rate of unemployment that applies to the claimant and the number of hours of insurable employment of the claimant in their qualifying period.

2. The Regulations are amended by adding, after Schedule II, the schedules that are set out in the schedule to these Regulations.

COMING INTO FORCE

3. These Regulations come into force on the day on which they are registered.

SCHEDULE (Section 2)

SCHEDULE II.1 (Paragraph 77.2(2)(b))

REGIONS INCLUDED IN PILOT PROJECT NO. 6

SCHEDULE II.2
(Subsection 77.2(3))

TABLE OF WEEKS OF BENEFITS FOR PILOT PROJECT NO. 6

REGULATORY IMPACT ANALYSIS STATEMENT

(This statement is not part of the Regulations.)

Description

One of the results of Employment Insurance (EI) reform was to reduce the total number of weeks of EI benefits available to claimants. Evidence indicates that, in general, claimants have adapted well to the new entitlement structure. However, for some workers the very nature of their work prevents them from obtaining sufficient hours of work to qualify for EI benefit durations long enough to cover the off-season year after year. This is particularly true for those employed in seasonal industries, where work is often sporadic and limited by weather and resource availability.

Seasonal industries are an important part of the Canadian economy. Although seasonal workers represent only about 3% of the labour market, their work forms an important part of our social and economic fabric. The economic importance of seasonal industries goes far beyond their direct impact on Gross Domestic Product (GDP) and employment figures.

But, seasonal work presents unique challenges for individual Canadians. Often these individuals face a limited working season, sporadic work durations and, in many rural areas, a lack of employment alternatives. As a result, the relationship between such workers, the industries that employ them and the Employment Insurance (EI) program is complex and the design of the program has the potential to create distinctive challenges for the many Canadians who have such employment patterns.

Despite recent adjustments aimed at assisting workers in seasonal industries and other non-standard workers, experience suggests that there are anomalies in the way some clients and industries interact with the EI program. For example, about one fifth of seasonal workers that rely on EI run out of benefits before they can return to work. This is the so-called "gappers" issue.

In addition, the labour market has changed significantly since the 1996 reform, with an increase in the proportion of those employed in part-time and other non standard work, which often offer shorter employment spells. As a result, a significant number of workers face situations where their EI benefits end prior to finding new employment. While attempts have been made to strengthen work incentives for these claimants as well as seasonal claimants through provisions such as the small weeks provision and the divisor, these incentives have focused on benefit rates and have not addressed issues related to benefit duration. This has led to questions regarding the adequacy of EI entitlement in some situations.

Workers in other non-standard employment often face similar situations to those in seasonal employment. Many of these workers have specific and non-transferable skill sets. Thus, it can be challenging for them to find suitable employment within the short period to which they are entitled to EI benefits. Given these circumstances, the entitlement table adopted in 1996 may not be meeting the needs of those with seasonal and non-standard employment patterns. As such, it is anticipated that increasing benefit durations, while maintaining the link to work effort through embedded work incentives in the entitlement table, will help these claimants reduce or eliminate this "gap" period and help the 30% of EI claimants who exhaust their EI benefits each year.

Having previously taken steps to address issues around benefit levels, the proposed pilot project would place emphasis on the issue of benefit duration. However, it is possible that increasing benefit durations could have some effect on the existing array of work incentives that are integral to the program, particularly in urban centers where seasonal industries co-exist with a variety of other industries which offer more opportunities for alternate work. Therefore, there is a need to test whether offering additional entitlement would have any potential to erode existing EI work incentives in these areas. Understanding the differential impact in urban and rural centers should assist in determining if the current criteria used in the entitlement table (hours worked and unemployment rate) are too restrictive and should be expanded to take other factors into account such as the industrial structure of the local labour market or whether it is predominantly urban or rural.

Given the complexity of the issue and the uncertain effect it will have on behaviour, a two-year pilot project is being implemented to test a potential solution and its effectiveness. Before considering amending the legislation the government would consider the results of this pilot project and assess the broader implications of national implementation. This approach will enable the Government to conduct program analysis and modeling to ensure that the pilot project does not have any adverse effects on other claimants and maintains current incentives to work.

Section 77.2 — Pilot Project Number 6

The pilot project will be tested in those economic regions where the unemployment rate was 10% or more in at least one month in the six month period ending May 8, 2004 and will increase EI entitlement five additional weeks of EI entitlement for all EI claimants in those regions. The regions involved are listed in the Regulation. The table included in the Regulation sets out the number of weeks of benefits payable to claimants involved in the project based on a combination of hours worked and the unemployment rate in the claimant's region.

Section 77.2 will become effective on June 6, 2004 for benefit periods that are established on or after that date and will end two years later. It applies to claims for regular benefits but not to benefit periods established under the Employment Insurance (Fishing) Regulations, nor to benefits periods in regard to maternity, parental, sickness or compassionate care benefits.

Section 77.2 replaces the entitlement table referred to in subsection 12(2) of the Employment Insurance Act (EI Act) with the entitlement table in the pilot regulation that applies only to EI economic regions listed in the table. Under the pilot regulation, all EI claimants in those regions, including seasonal workers who run out of EI benefits before returning to their job, as well as other exhaustees would have access to five (5) additional weeks of entitlement (see example under Costs and Benefits section below).

Alternatives

The Prime Minister has established a Task Force on Seasonal Work that is expected to issue a report later this year. This report could contain recommendations for amendments to the EI Act and to address particular circumstances related to seasonal work patterns for enhancements to the EI Program in the mid-term and longer term. The government is committed to giving any such proposed EI amendments serious consideration.

In the meantime, as part of a multi-pronged approach, the government is acting to address the challenges faced by workers employed in part-time, non-standard and seasonal work by moving forward with this pilot project. The Government believes that the best approach is to test these changes to the entitlement conditions as soon as feasible. By decreasing the gap between the time EI benefits run out and the new work season begins the EI Act would be recognizing the importance of these industries, while at the same time respecting and better responding to the unique nature and the challenges that sporadic and temporary work patterns can create for individual Canadians.

Benefits and Costs

It is estimated that 100,000 claimants would receive an additional ($1,000) per claim. Overall, the pilot will cost an estimated $100M per year in program costs which will be paid for from the EI Account (2004-05 — $15M, 2005-06 — $95M, 2006-07 — $90M). Administrative costs to implement these changes are estimated at $2.1M in 2004-05, $1.2M in 2005-06 and $0.3M in 2006-07 and will be funded out of the EI Account.

Example

The example set out below demonstrates the impact of the pilot project on individual claimants.

A worker lives in a region where the unemployment rate is 14.5% and normally has a seasonal pattern of 16 weeks of work (i.e., 560 hours at 35 hours per week). Under the pre-pilot rules (subject to the normal entitlement conditions), the claimant would be entitled to 30 weeks of EI benefits when he is laid off. Under the pilot project this claimant would receive 35 weeks of benefits.

Consultation

The Government has received a number of submissions, recommendations, reports and other suggestions that propose a variety of ways to deal with issues surrounding the adequacy of benefits for seasonal workers. Several of the proposals have addressed the issue of work incentives and the EI entitlement period.

The Prime Minister's Task Force on Seasonal Work has undertaken broad-based consultations on the issue of seasonal work and this pilot project responds to elements of their early recommendations. If, based on the results of future consultations, additional amendments are recommended to the EI Act to address particular circumstances related to seasonal work patterns; the government is committed to giving any such proposed EI amendments serious consideration.

Compliance and Enforcement

An analysis of the pilot will be included as part of Human Resources and Skills Development Canada's annual Monitoring and Assessment Report.

Contact

Jim Little
Senior Policy Advisor
Policy and Legislation Development,
Employment Program Policy and Design
Human Resources Development Canada
140 Promenade du Portage, Phase IV, 9th Floor
Gatineau, Quebec
K1A 0J9
Telephone : (819) 997-8628
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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