WEPP – How outstanding wages are handled during bankruptcy

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In 2008, the federal government established the Wage Earner Protection Program (WEPP). The provision was designed to protect the rights of workers whose employers have gone into bankruptcy or receivership. The program allows eligible workers to make a claim for outstanding amounts of pay, which are charged against the debtor company’s assets or bankruptcy estate

What and how much can employees claim?

The WEPP caps the amount that employees can claim at the equivalent of four weeks of the maximum weekly insurable earnings under the Employment Insurance Act. The claim may include amounts for:

  • Unpaid wages or salary
  • Commissions and gratuities
  • Disbursements of travelling sales people
  • Production bonuses and shift premiums
  • Vacation pay
  • Severance and termination pay

Which types of workers are eligible?

Although the WEPP does not contain a definition for “employee”, workers who are legally entitled to work in Canada may make a claim provided that their employer is bankrupt or in receivership, the worker was terminated and is owed wages earned during the eligibility period.

Certain workers are excluded – including officers and directors, certain types of managers, those with controlling interests in the business and anyone not dealing with the business at arm’s length.

Where the employer attempted to restructure, the eligibility begins six months before that event and ends on the date of the bankruptcy or receivership. If the employer is assigned directly into bankruptcy or receivership, the eligibility period encompasses the six preceding months.

Payment is not automatic. In order to claim unpaid wages, eligible employees must submit a claim within the 56-day limitation period – either from the date of the bankruptcy or receivership or from the worker’s termination date. The licensed trustee or receiver has the responsibility to identify and inform eligible workers and to determine the amounts owed.

The WEPP creates a priority regime in which workers’ wages fall into fourth place after a number of other claims are satisfied first. Read about creditor priority here from one of our previous posts.

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