Employer owes me money: Introduction
People ask us what if my employer owes me money & goes bankrupt? We answer if your employer is bankrupt don’t despair; there is hope for you to recuperate monies that are owing to you. The Wage Earner Protection Program Act – WEPPA – with an amendment to the Bankruptcy and Insolvency Act (Canada) – BIA – created a mechanism for employees to be compensated for claims of unpaid wages, commissions and vacation pay accrued in the six months preceding the employer files for bankruptcy or being placed in receivership and have unpaid wages along with claims for unpaid termination and/or severance pay.
This amendment came into being as a result of the federal government’s previous concern that when you experienced “my company owes me money & went bankrupt” there was rarely an opportunity for you to get the wages you owing to you.
However, you are generally not eligible if, during the period for which eligible wages are unpaid, you:
- were an officer or a director of your former employer
- had a controlling interest in the business of your former employer
- were a manager whose responsibilities included making binding financial decisions impacting the business of your former employer, and/or making binding decisions on the payment or non-payment of wages by your former employer
Employer owes me money: Who is eligible for the WEPP?
So, if the employer went bankrupt did not pay employees:
You may apply if:
- your former employer has filed for bankruptcy or is subject to a receivership
- you have unpaid wages, vacation pay, termination or severance pay from your former employer
- amounts earned during the eligibility period or, in the case of termination or severance pay, your employment was terminated during the eligibility period ending on the date of bankruptcy or receivership
What is the eligibility period?
The eligibility period is defined as the period in which wages and vacation pay are earned to be compensated under the WEPP and in which your employment must have ended to be eligible for termination and severance pay. The eligibility period starts six months before a restructuring event and ends on the date of bankruptcy or receivership. Should your employer not have gone through restructuring, the eligibility period is the six-month period ending on the date of bankruptcy or receivership.
What are eligible wages under WEPP?
Each case is examined individually and I strongly suggest that you contact a Trustee for a correct answer to the question “my employer owes me money & went bankrupt”. There remains some confusion and a disconnect between WEPPA and the BIA. WEPPA includes severance and termination pay while the BIA excludes severance and termination pay from compensation in sections 81.3 and 81.4. Such claims have and continue to be recognized by the BIA as being ordinary unsecured claims.
How much can I expect to receive?
Regardless of the total amount owing to you, the most any employee can receive under WEPPA is the greater of $3,200 or four times the maximum weekly insurable earnings under the Employment Insurance Act (which is now greater than $3,200). Once employees file claims with both the Trustee and Service Canada, Service Canada pays their claims and Service Canada becomes the creditor. The amendment to the BIA has recognized WEPPA and created a priority charge that supersedes all secured charges except CRA’s deemed trust claim (and the reclaiming rights of farmers and suppliers) to a max of $2,000 per employee, secured against current assets.
Do you have too much debt?
Contact Ira Smith Trustee & Receiver for more information if you have the questions “my employer owes me money and has gone bankrupt” or on any and all matters related to corporate or personal bankruptcies. We are full-service insolvency and financial restructuring practice serving companies and people throughout the Greater Toronto Area (GTA) facing financial crisis or bankruptcy that need a plan for Starting Over, Starting Now.