The rights of an employer’s employees are compromised when an employer goes bankrupt. Employees lose their jobs without likely receiving any reasonable notice per severance law and possibly not even the total amount of their earned salary up to that point.
Bankruptcy protection laws in Canada are designed to ensure that employees of a bankrupt company continue to receive regular wages and benefits, provided that they are not dismissed from their jobs or locked out by their employer or other companies involved in the bankruptcy process.
The Rules of Bankruptcy and Employment
The rules of bankruptcy and employment in Canada are governed by the Bankruptcy and Insolvency Act (BIA). The BIA sets out the rights and responsibilities of employers and employees when an employer becomes bankrupt.
The BIA provides that employees are entitled to be paid all wages and salaries earned up to the date of the bankruptcy, including vacation pay and any other amounts owing. Employees are also entitled to continue to receive health benefits, if they have them, for three months after the date of the bankruptcy.
Employees are entitled to severance if the employer has sufficient funds. The size of the severance package depends on the length of time the employee has been with the company, their position within the company, and their age.
If The Employee Is Owed Wages From A Bankrupt Company
If the employee is owed wages from a bankrupt company, the first step is to file a proof of claim with the trustee. The evidence of claim must be filed within six months of the date of the initial publication notice. The second step is to attend the first meeting of creditors, where the employee can object to the discharge of the debts if they believe they are entitled to priority payment.
If Your Employer Is Bankrupt Or In Receivership
If your employer goes bankrupt or into receivership. Here are some things you should know:
- You are entitled to receive notice of bankruptcy or receivership from your employer.
- You are entitled to continued health benefits coverage during the bankruptcy or receivership.
- Your wages and other compensation are protected under the law.
- You can file a claim with the bankruptcy trustee for unpaid wages or other compensation.
- You can keep your job if your employer reorganises during bankruptcy proceedings.
If you have questions about your rights during bankruptcy or receivership, you should speak to an experienced employment lawyer.
If Your Employer Is Insolvent
If your employer is insolvent, you are entitled to certain protections under Canadian bankruptcy and insolvency laws. These laws protect employees from being discriminated against by their employers during bankruptcy or insolvency.
If your employer is insolvent, you should:
- Contact your local employment standards office to determine if you are entitled to unpaid wages or vacation pay.
- Speak to an employment lawyer in Toronto to determine if you have legal claims against your employer, such as for wrongful dismissal.
- File a claim with the federal government’s Wage Earner Protection Program (WEPP) if you are owed wages or vacation pay.
- If you have been injured at work, file a claim with your provincial or territorial government’s workers’ compensation board.
Wage Earner Protection Program
The Wage Earner Protection Program (WEPP) is a federal government program that protects employees when their employer goes bankrupt. The program provides eligible employees up to four weeks of unpaid wages, vacation pay, and other amounts owing.
To be eligible for the WEPP, you must:
- Be an employee of a federally regulated business.
- Have lost your job because your employer declared bankruptcy or went into receivership.
- Not be entitled to severance pay or any other payments from your employer.
The WEPP does not cover self-employed individuals or contract workers. If you are an employee of a provincially regulated business, you may be covered by a similar program in your province or territory.
Steps to Filing a Claim
Employees are entitled to certain rights and protections when an employer goes bankrupt in Canada. Here are the steps to follow if you need to file a claim:
- Notify the trustee: As soon as you discover that your employer has gone bankrupt, you should notify the trustee handling the bankruptcy. The trustee will then determine what claims, if any, you may have against the estate.
- File a proof of claim: Once the trustee has determined that you have a valid claim, you need to file a proof of claim with the court. This document outlines your claim and lists any supporting documentation.
- Attend the creditors’ meeting: You are not required to attend the creditors’ meeting, but it can be helpful to do so. This is an opportunity to learn more about the bankruptcy process and ask questions of the trustee.
- Get paid: If the court approves your claim, you will be paid from the bankruptcy estate according to priority rules in the Bankruptcy and Insolvency Act.
In Canada, employees are protected by the federal Wage Earner Protection Program, which ensures that they are paid any wages owed to them by their employer. If your employer faces bankruptcy, it’s vital to seek legal counsel to ensure that you take all the necessary steps to protect your employment and wages.