FALSIFIED EMPLOYMENT RECORDS: The Penalties
Can be Large

Posted on March 18th, 2022 in Domestic Tax

With numerous COVID-19 benefits being based on employment and remuneration levels, the federal government has likely become increasingly concerned with falsified employment records. However, this is not a new issue. In particular, the government already has experience dealing with false records used to increase access to employment insurance (EI) benefits.

Employers can face penalties of up to the greater of $12,000 and the total of all claimants’ penalties in relation to the offences. In addition, false claims by the applicant would result in an increased number of required hours to qualify for EI benefits in the future, with the specific number dependent on the value of the EI overpayment.

A September14, 2021, Federal Court case addressed a $15,277 penalty that was assessed for a single employee’s records. In respect of COVID-19 subsidies, employers may be subject to penalties including the following:

loss of all CEWS, CERS, and CRHP benefits for the period plus a 25% penalty for manipulations of revenue;
loss of all CRHP benefits for the period plus a 25% penalty for manipulations of remuneration;
gross negligence penalties of 50% of any applicable disallowed claims;
third-party penalties to advisors equal to their compensation from the employer plus as much as $100,000 in situations of culpable conduct; and/or
in the extreme, criminal liability for false statements, attracting penalties of up to 200% of the excessive claim and potential imprisonment for upwards of five years.

ACTION ITEM: Maintain supporting employment activity documentation as the government will be looking for situations in which employment records were falsified.

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Article originally published in: Tax Tips & Traps 2022 First Quarter – Issue 137