Employment Insurance Regulations - Amendments

The following information is out of date.

---

Description

The basic reason for the quinquennial review of Employment Insurance (EI) economic regions is to modify regional boundaries, where necessary, in response to changes in labour market conditions. The goal is to ensure continued equity and fairness in the application of the EI program in such a way that people living in regions with high unemployment rates would receive the financial help they need.

The current EI economic regions were adopted in June 2000 and came into force on July 9th 2000 (SOR 2000/268). The changes were based on Statistics Canada data as well as other more recent labour market information.

Experience following the adoption of the Regulations, coupled with further analysis, revealed that the introduction of the new economic regions had an impact that was greater than expected in two specific areas of the country: the regions of Madawaska-Charlotte in New Brunswick and Lower St. Lawrence/North Shore in Quebec.

Although the principles and rationale for the changes introduced in July 2000 are still valid, various factors resulted in people in the two affected areas being unable to adjust to the higher than expected increase in the number of hours needed to qualify for EI. This situation required a transitional measure to smooth out the adjustment period.

A three-year transition period was put in place, using a regulation that averages blended unemployment rates from the new regions and the adjacent regions to which they belonged before the July 9, 2000 changes and uses the higher of the average or the actual rate. The transitional regulation was adopted on September 13, 2000 (SOR/2000-355).

A minor change was also made in April 2002 (SOR/2002-154) to match the dates of the Regulations with the planned release dates of Statistics Canada, which establishes the Unemployment rates in the economic regions.

Following the introduction of the transitional measures, some working committees were formed in the two regions concerned. With the participation of workers, employers and community groups, and Human Resources Development Canada (HRDC) officials, the committees tried to find new solutions to the problems of seasonal workers and to improve their employability. HRDC officials also started working with employers to try to extend the work season.

The third year of the transition period began on October 13, 2002 and was to end on October 11, 2003. After an evaluation of the situation in these two regions, it was found that the adjustment was more difficult than anticipated, particularly for seasonal workers. Therefore, they needed more time to adjust. So, the transition period was extended for an additional year, until October 9, 2004 (SOR/2003- 336), for the two regions affected, to permit the workers and the employers to adjust to the labour market.

The purpose of this change is to extend the transitional measures for these two EI economic regions, for another additional year.

If the transition period were to end on October 9, 2004, the unemployment rate that would be used to establish a claim would be the actual rate provided by Statistics Canada. For these two regions, this would mean an increase in the number of hours of insurable employment required to qualify for EI benefits, a reduction in the number of weeks payable, and in some cases a reduction of the weekly benefit rate caused by the increased divisor.

As an example, for Madawaska-Charlotte in New Brunswick, during the period from April 11 to May 8, 2004, if the actual unemployment rate in force, 10.8 per cent, had been used, a claimant would have needed 525 hours of insurable employment to be able to establish a claim; the minimum number of weeks payable would have been 21 and the maximum, 45 weeks, depending on the number of hours worked. The minimum divisor used to calculate the benefit rate would have been 17. With the transitional rules, the unemployment rate used was 12.2 per cent. Therefore, the number of hours required to qualify was lowered to 455; the minimum number of weeks payable was increased to 24 and the maximum was still 45. Finally, the divisor was lowered to 15.

For Lower St. Lawrence/North Shore in Quebec, for the same period, if the actual unemployment rate in force, 11.8 per cent, had been used, a claimant would have needed 490 hours of insurable employment to be able to establish a claim; the minimum number of weeks payable would have been 23 and the maximum, 45 weeks, depending on the number of hours worked. The minimum divisor used to calculate the benefit rate would have been 16. With the transitional rules, the unemployment rate used was 14.3 per cent. Therefore, the number of hours required to qualify was lowered to 420; the minimum number of weeks payable was increased to 28 and the maximum was still 45. Finally, the divisor was lowered to 14.

Because of the particular situation of these two regions, the transition period would be extended until October 8, 2005 to provide people still having difficulty adapting to the 2000 EI boundaries changes, more time to adjust until the new review of EI economic boundaries, scheduled for 2005, takes effect in 2005-2006.

Meanwhile, the Employment Insurance Commission (the Commission) will review the boundaries of economic regions all across Canada. Subsection 18(2) of the Regulations requires that the Commission review, at least once every five years, the boundaries used by Statistics Canada in relation to its labour force survey for the purpose of determining whether changes to the regions set forth in Schedule I of the Regulations are required. The last review took place in 2000 which led to the regulatory changes effective on July 9, 2000.

Alternatives

The only alternative is the status quo, which would mean that the actual unemployment rate provided by Statistics Canada would apply to these two regions effective October 10, 2004 with the impact previously described.

Anticipated Impact

Claimants in the affected areas will see no increase in the number of hours required to qualify for benefits and no decrease in the maximum number of weeks they can receive as compared to the third-year of the transition period. The formula used to calculate the average of the unemployment rate will remain the same until October 8, 2005.

Benefits and Costs

The qualifying conditions and the duration of benefits will remain the same as calculated under the fourth-year of the transition period.

It is estimated that the measure would benefit approximately 15,000 EI claimants (13,500 current claimants and 1,400 new claimants), who would receive increase access to benefits and longer benefit duration.

The estimated cost for this change is $25 million per year: $12.5million for the 2004-2005 fiscal year and $12.5 million in 2005-2006. Funding will be taken from the EI Account. This estimate is sensitive to the unemployment rates used; that is, an increase in unemployment rates in these regions would reduce the cost of the extension.

It is also estimated that there will be no administrative costs related to this change since the only change is the ending date of the transition period.

Consultation

Consultations have taken place with Human Resources and Skills Development Canada (HRSDC) regional staff, local economists and local interest groups, through the local committees in both affected regions, since the implementation of the July 9, 2000 changes. There have also been consultations with citizens and their elected representatives in the affected areas.

These amendments to the Regulations were prepared by Employment Policy and Program Design in collaboration with Insurance Policy, Strategic Policy, Legal Services, Insurance Program Services and Systems at Human Resources and Skills Development Canada (HRSDC) National Headquarters and the Department of Justice.

All parties involved support the attached proposal. These proposed amendments to the Regulations have also been approved by the Commission which includes representatives of employers, employees and the government.

Compliance and Enforcement

The appropriate HRSDC regional offices will be provided with detailed descriptions of the regulatory changes.

The method for calculating the third year of transitional rates, which came into effect on October 13, 2002, will continue to be the basis for determining the unemployment rate in the region where each claimant lives. This will in turn determine the number of hours of insurable employment claimants need to qualify for EI benefits, the number of weeks of benefits they can potentially receive during the length of their claim, as well as the divisor to calculate the benefit rate.

Existing compliance mechanisms contained in HRSDC’s adjudication and control procedures will ensure that the change is implemented properly. As required by the Regulations, the Commission will proceed in 2005 to its quinquennial review of the economic regions boundaries and determine whether any changes should be made according to Statistics Canada’s labour force survey.

Contact

Jim Little
Senior Policy Advisor
Human Resources and Skills Development Canada
Policy and Legislation Development
Employment Program Policy and Design
140 Promenade du Portage, Phase IV, 9th floor,
Gatineau, Quebec
K1A 0J9
Telephone: (819) 997-8628
FAX: (819) 953-9381