Employment Insurance Regulations - Amendments

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Description

The purpose of the amendment is to extend transitional boundary measures for two economic regions, (Madawaska -Charlotte in New Brunswick and Lower St. Lawrence and North Shore in Quebec), for another year to October 7, 2006

The extension will maintain the existing transitional measures that were first adopted in September 2000, until the next quinquennial review of the Employment Insurance (EI) economic boundaries scheduled to begin in 2005-2006, has been completed. The formula used to calculate the average of the unemployment rates will remain the same until October 7, 2006. A further regulation change may be required before that date should the formula used in these two regions be affected by the implementation of new economic boundaries.

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.

Under the EI Program, the EI regional boundaries (also referred to as economic regions) ensure that people residing in areas of similar unemployment levels face comparable EI rules, in terms of eligibility and length of benefit entitlement. The current EI economic regions were adopted in June 2000 and came into force on July 9, 2000 (SOR/2000-268). The changes were based on Statistics Canada data and other labour market information. However, 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 and North Shore in Quebec.

In response to the negative impact experienced by many workers in these areas, a three year transitional measure was adopted to smooth out the adjustment period.

As described in section 17.1 of the Employment Insurance Regulations, the approach used was to blend unemployment rates from the new regions and the adjacent regions to which they belonged before the July 9, 2000 changes and use the higher of the blended unemployment rates in the new regions or the actual rate of unemployment in the economic region as published by Statistics Canada. The transitional regulation was adopted in September 2000(S0R/2000-355).

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 and Skills Development Canada (HRSDC) officials. The committees tried to find new solutions to the problems related to seasonal workers arising from the lack of work and to improve their employability. HRSDC officials also started working with employers to try to extend the work season for seasonal workers.

The third year of the transition period began on October 13, 2002 and ended on October 11, 2003(SOR/2002-154). 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, because of the particular situation of these two regions, an amendment to the Regulations extended the October 3rd, 2003 (SOR/2003-336) transition period for these two EI economic regions until October 9, 2004, and again the following year to October 8, 2005(SOR/2004-145).

Extending the transitional boundaries by one year rather than proposing to make them permanent, will ensure that this regulatory amendment does not pre-empt the results of the upcoming quinquennial EI boundary review. A full year extension is advisable to allow sufficient time to determine and implement new economic boundaries which are now expected to be implemented after the current transitional measures expire. The review exercise is a lengthy and complex process requiring detailed analysis by the office of the Chief Actuary to ensure that boundary changes accurately reflect employment conditions in local labour markets.

If the transition period were to end on October 8, 2005, 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. Based on the more recent numbers on unemployment rates, below are some examples of the possible effects in the two affected regions.

As an example, for Madawaska-Charlotte in New Brunswick, during the period of March 13, 2005 to April 9, 2005, if the actual unemployment rate of 9.4 per cent, had been used, a claimant would have needed 560 hours of insurable employment to be able to establish a claim; the minimum number of weeks payable would have been 25 and the maximum, 45 weeks, depending on the number of hours worked. The minimum divisor used to calculate the benefit rate would have been 18. With the transitional rules, the unemployment rate used was 11.0 per cent. Therefore, the number of hours required to qualify was lowered to 525; the minimum number of weeks payable was increased to 26 and the maximum to 45. Finally, the divisor was lowered to 17.

For Lower St. Lawrence and North Shore in Quebec, for the same period, if the actual unemployment rate of 9.9 per cent had been used, a claimant would have needed 560 hours of insurable employment to be able to establish a claim; the minimum number of weeks payable would have been 25 and the maximum 45 weeks, depending on the number of hours worked. The minimum divisor used to calculate the benefit rate would have been 18. With the transitional rules, the unemployment rate used was 12.1 per cent. Therefore, the number of hours required to qualify was lowered to 455; the minimum number of weeks payable was increased to 29 and the maximum was still 45. Finally, the divisor was lowered to 15.

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 9, 2005 with the impact previously described.

Benefits and Costs

The total cost of an extension for a year, from October 9, 2005 to October 7, 2006, for both affected regions is estimated at between $17 and $21 million. The bulk of the impact would be in Lower St. Lawrence and North Shore as this region has, in a typical year, 55,000 claims compared to 14,500 for Madawaska-Charlotte.

It is estimated that this measure will benefit approximately 16,700 claimants (15,500 current claimants and 1,200 new claimants) who would otherwise no longer receive access to benefits and longer benefit duration.

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

HRSDC regional staff engaged in extensive consultations through local committees in both affected regions over an extended period of time following the implementation of new boundaries in 2000. Since then, community representatives and individuals continue to engage HRSDC on this issue.

These amendments to the EI Regulations have been approved by the Commission which includes representatives of employers, workers and the government.

Compliance and Enforcement

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

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

Contact

Judith Richardson
Senior Policy Officer
Human Resources and Skills Development Canada
Employment Insurance Policy 
140 Promenade du Portage Phase IV, 3rd Floor
Gatineau, Quebec
K1A 0J9
Telephone: (819) 994-4455
FAX: (819) 953-8479