Employer Bankruptcy and Employee Rights

[Baaarrden]

Apologies in advance if the formatting of this post is off in any way; the site is not loading properly for me for some reason today but I still wanted to make this post.

While it’s been a while since I have posted here, I do frequent the shadows of this site and often find myself scrolling and reading more than actively contributing as of late. With that being said, I know how far and wide the reach of this site is and how helpful the members have been in answering questions and providing assistance to people on wide array of topics in the past. My apologies if this topic has been addressed in the past; I am hoping someone might be able to help me out with some questions I have regarding an employment situation that I believe I may be heading towards in the not too distant future.

Background: The company I work for is a relatively small public company based here in Calgary. I have been working for them for just shy of 4 months and in the short period of time I have worked for them, we seem to be having growing cash flow issues that has resulted in late payment of wages in four of the six pay periods that I have been with the company for. While I was able to request and did receive my December 15th payroll, most people at the company have not been paid their wages since November 30th (meaning the company is currently one month behind for most individuals). We have been told that the Company is awaiting a significant financing transaction from overseas and that once received, the funds will be used to catch up on overdue payroll, expenses, etc., however I believe this is likely only a short-term band-aid and that the future of the Company is going to be a rocky one where similar cash flow issues are likely to persist.

I do have a general understanding of the employment rules in Alberta and that technically the Company is currently in violation of the Alberta Employment Standards that require employees be paid within 10 consecutive days after the end of a pay period. While I am not yet at the point where I feel it necessary to file a complaint, I am curious if anyone knows what the process looks like if a complaint were to be filed and where an employer is financially unable to make payroll for all of its employees? Perhaps also of importance to note is that the Company has employees based both in the United States and in a few different provinces in Canada.

Additionally, as it becomes increasingly apparent the direction this ship is headed, I was also curious to know what the laws are in Canada, and Alberta specifically, regarding where employees stand in the hierarchy of creditors should the company go bankrupt. The Company does have a fairly significant amount of debt, both secured and unsecured. Are employees entitled to a claim for all overdue wages or are you capped at a certain amount? Are you entitled to other aspects of your compensation such as unused vacation pay or other benefits that are offered by the Company as part of their policies (ie. allowances for which you have submitted the necessary documentation/receipts but have not yet been reimbursed for)? As an employee, do you fall above or below the other secured and unsecured creditors if the Company were to go bankrupt?

Clearly this is not a place or situation I want to find myself in if and when it does happen, particularly as the payroll liability grows. With that said, I obviously know the short answer from a ton of people will be to get out as soon as possible given the direction the Company is headed and so it’s probably important to note that I am already in the process of looking and applying elsewhere. In the situation where I do find alternative employment before the payroll liability can be settled and the Company is still unable to make payroll, is the best course of action to file a complaint with Alberta Employment Standards? How soon after filing a complaint can someone typically expect a resolution?

Any other advice that people have is greatly appreciated, including answers to questions that I may not have thought about.

Thanks in advance for all the answers and advice!

[activeStick]

I'm sorry you have to go through this. It's not fun or fair to have to deal with not receiving a pay cheque because of no fault of your own. I don't know the details around your questions and hopefully a lawyer in this realm chimes in with accurate info, but I have experience this before as an employee when I worked for Nortel and they went bankrupt. The good news is I received payment from the courts eventually. The bad news is, it took a lot of time (my last year working there was 2007, I think) and I received my last payment 2 years ago, 2020. I also am not sure if your situation and mine are the same, similar or completely different, but I thought I'd at least give you my experience in a situation where the company I worked for went bankrupt.

Edit to add: I didn't have to initiate anything on my own throughout the process. I was contacted by the firm handling it (E&Y) and then they would correspond with me throughout those years. Now that I'm typing this response out, I feel like I remember my case being different because I had moved addresses many times during those years and they had to "track me down" and finally found me to be able to issue me all my payments (I moved cities and provinces a few times). So, that might be why my payments were still happening so late?

[CorsiHockeyLeague]

Well, the first issue is that there are two separate bankruptcy regimes in Canada, the CCAA and the BIA. The priority and super-priority rules for creditors are different depending on which regime applies. My best recollection is that as an employee, you get super priority under the BIA for $2000 in wages, but you're still behind secured creditors, the fees of the trustee administering the bankruptcy and possibly the CRA (can't remember where they fall generally as far as unpaid taxes but in respect of unremitted GST they take that off the top because it's a deemed trust).

Again that's basically just my recall so don't hold me to that.

[afc wimbledon]

Bear in mind you wont get paid 'wages' you will wait in line for months, possibly years for your couple of grand, by the time you see the money it wont help with your mortgage or bills now

[Firebot]

When I got laid off by a company that was under credit protection at the time I was entitled to severance but unpaid wages are are the bottom of the list below secured creditors. You will get called by the firm managing the proceedings and make it sound like you will get paid eventually. When I looked at the papers, saw the figures and saw the list of creditors with employees being dead last it was painfully clear no money was ever trickling down that far down. The company came out of credit protection and continued to pay wages to employees that were kept onboard while those laid off in the process got zero.

This explains pretty well. You do have the WEPP which is a government program for employees stuck with unpaid wages after bankruptcy but it involves major hurdles, takes months to years and pays peanuts.

https://duttonlaw.ca/employee-rights...upt-in-canada/

Don't expect anything. If there is no money there is no money. Can't get blood from a stone so to speak. Working under a company that is going bankrupt has nothing but negatives and it can be an incredibly frustrating environment to work in only to get dumped when legally convenient and not have to be paid.

[RichieRich]

Sorry to hear this. Well written initial post. Definitely a concern and definitely move to something sooner rather than later.


Is there any way to move directly into receiving EI from such a position?

[iggy_oi]

Originally Posted by RichieRich

Is there any way to move directly into receiving EI from such a position?

If the employer were to agree to lay them off they should be eligible for EI. Since the OP isn’t getting paid right now, and it sounds like that might not change for the forceable future if ever, it might be something worth exploring. That way the OP can look for work while getting at least some money coming in. Personally I would be making a complaint to employment standards about not being paid, worse case scenario the employer doesn’t have the money to pay you and it changes very little but best case scenario they pay you the money to avoid the headache of dealing with the complaint.

As others have mentioned if the company goes bankrupt you’re going to be low on the list of who gets paid.

[Buff]

No real advice, but a story of a similar situation that I went through about 18 years ago.

I worked for a small business that struggled with cash flow. Two owners and usually around three staff. Pay cheques were often a week late, a lot of the time we would only get so much of our pay and then it would be topped off to be complete a week or two later. Sometimes the entire paycheque was a week late. It was a hard time, for the company and personally.

Things were starting to look good but one employee quit and took them to court and they had to pay him so much a month for x amount of months. That didn't help the rest of us out. If he didn't do that the company would have gone through a good period where we always got paid full amount.

I was looking for employment but at that time finding work in IT was hard for a recent grad, so I stuck to gaining experience and hoping for pay. Finally I got out, right around when pay was starting to dwindle again. I left in September of that year and got my final pay just before Christmas holidays.

They lasted for another two years after I left before merging with another company. The two guys I worked for stayed with the new company for a couple of years before getting bought out so they could go to new adventures. That company has been around for several years now and I even use them for an IT solution. I'm seeing signs of that company also struggling and I can't wait to find someone else to take my business...

I didn't take any legal action, I was patient and understanding. I also saw how that one employees actions to take the company to court negatively affected the rest of us and I didn't want to do the same. I've also built a good relationship with those owners and I'm still friends with them to this day. They certainly weren't the bad guys, just bad at growing a successful business.

[iggy_oi]

Originally Posted by Buff

Things were starting to look good but one employee quit and took them to court and they had to pay him so much a month for x amount of months. That didn't help the rest of us out. If he didn't do that the company would have gone through a good period where we always got paid full amount.

I didn't take any legal action, I was patient and understanding. I also saw how that one employees actions to take the company to court negatively affected the rest of us and I didn't want to do the same. I've also built a good relationship with those owners and I'm still friends with them to this day. They certainly weren't the bad guys, just bad at growing a successful business.

My guess is that the employer had to hire a lawyer to go defend itself in court, which means they probably had the ability to pay their staff at the time. As others have mentioned you can’t squeeze blood from a stone so if they managed to pay the employee who complained in addition to their legal bills and combine that with the fact that they only had 3 employees on payroll it leads me to believe that there was probably a little more money to go around than they were leading people to believe. Now obviously there’s probably a lot more details to the situation but I’m seeing a lot of red flags in their story.

[IamNotKenKing]

Short answer, and NOT LEGAL ADVICE, but Directors of a corporation can be liable for up to six months' wages to each employee for services performed while that person was a Director.

There are still hoops to go through, but sometimes this in and of itself can be sufficient to get a Director to step up, if the wages remain outstanding.

See Section 119 of the Alberta Business Corporations Act.

Also, Receivers sometimes wish to keep certain employees whole to continue to provide services, so will ensure they are paid.

[Baaarrden]

Thank you everyone for the responses so far, I really appreciate it. Aside from the obvious, part of the reason I was asking is because I'm trying to figure out if there is any value in me staying with the company as I continue to search for a new job and as their payroll liability to me grows - ie. if I will actually be entitled to all of the wages I am owed once I do leave the company.

Based on the information provided, it would seem that I am capped out at $2,000 unless there was anything left over after paying other secured creditors, which is both highly unlikely and even if there were anything left over, would take a significant amount of time before I saw anything. Assuming we are heading towards bankruptcy, I suppose one of the only benefits of continuing to remain with the company rather than outright quit before I am able to find another job is the fact that I would not be eligible for EI if I quit. Some solid advice also provided with respect to having a discussion with the company to see if they would consider laying me off.

In the end, it's a bit disappointing but not in the least bit surprising to know that the law favours big lenders over individual employees.

Overall, I'm not too concerned about the amount of time it will take for me to find another job as it does appear there are a fair number of positions open in my field and for someone with my level of experience.

[Cappy]

Originally Posted by IamNotKenKing

Short answer, and NOT LEGAL ADVICE, but Directors of a corporation can be liable for up to six months' wages to each employee for services performed while that person was a Director.

There are still hoops to go through, but sometimes this in and of itself can be sufficient to get a Director to step up, if the wages remain outstanding.

See Section 119 of the Alberta Business Corporations Act.

Also, Receivers sometimes wish to keep certain employees whole to continue to provide services, so will ensure they are paid.

This. Also, the directors like have D&O Liability insurance, which i believe is covered under this

[Shazam]

Back in 2002, I worked for a company that went bankrupt. Only the last pay period went unpaid. We all filed claims with Alberta Employment (or whatever they were called back then).

About four years later, I got a cheque in the mail with about 2/3 of the owed pay.