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Can I get paid if my employer goes out of business?

Trevor R. Thomas

Co-Founder + Partner
December 15, 2020

While COVID-19 continues to impact our personal lives, many small and medium sized business are experiencing a devastating reality: closing down, filing for bankruptcy or becoming subject to a receivership.

If you lost your job because your employer went out of business, and you are owed wages, vacation pay or termination pay, there are two options to recoup some or all of these payments: the Wage Earner Protection Program (“WEPP”) and section 96 of the Employment Standards Act (the “Act”).

 

Wage Earner Protection Program

The WEPP is available if your employer has filed for bankruptcy or is subject to receivership, and you are owed wages, vacation pay, or termination pay. In order to be eligible for the WEPP, you must meet the following criteria:

·         your employment has ended;

·         your former employer has filed for bankruptcy or is subject to a receivership;

·         you are owed wages, vacation pay, termination pay from the former employer; and

·         amounts owed were earned during the eligibility period or, in the case of termination pay, your employment was terminated either during the eligibility period or prior to the discharge of the trustee/receiver.

For the purposes of the WEPP, “wages” include salary, commissions, compensation for services rendered, gratuities accounted for by the former employer, production bonuses and shift premiums that were earned during the eligibility period. If you were a travelling salesperson, you can also seek reimbursement for disbursements properly incurred in and about the business of the former employer earned during the eligibility period. 

If the time period for the employer’s bankruptcy or receivership was on or after January 1, 2020, the maximum amount you can receive under the WEPP is $6,798.57.

 

Employment Standards Act

Section 96 of the Act provides that a corporate director or officer is personally responsible for up to a maximum of two (2) months’ unpaid wages for each employee.

The director or officer must have been a director or officer at the time the wages were earned or should have been paid. If more than two months’ wages are owed and there is more than one director or officer, the other director(s) and director(s) will be also held liable. 

In determining the amount owed by a director or officer, you will be entitled to your normal wages for two months, plus the applicable vacation pay amount. For example, if you earn $2,500 per month, the director or officer would be liable up to a maximum of $5,000 plus vacation pay. If your earnings typically fluctuate per month, the amount owed by a director or officer will be based on your average earnings.

If a director or officer is subject to personal liability, there are various methods under the Act to collect the amount owing, including third party demands, seizure of assets, collection by a Court Bailiff, or certificates of judgment.

It is important to note that directors and officers are not personally responsible for termination pay if the corporation is in receivership or if the corporation is subject to an insolvency proceeding.

For more information on the WEPP or the Act, including how to apply and navigate the process, please contact us!