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Wage Earner Protection Program Act

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The Wage Earner Protection Program Act (S.C. 2005, c. 47, s.1)[1],is an Act of the Parliament of Canada. It was part of a package of reforms to the insolvency law of Canada that were brought into force in 2008 and 2009 to compensate employees of companies made bankrupt or placed into receivership under the Bankruptcy and Insolvency Act.[2] It was subsequently expanded in 2011 to cover employees who lose their jobs when their employer's attempt at restructuring subsequently ends in bankruptcy or receivership.[3]

Wage Earner Protection Program framework

The WEPP is administered by Human Resources and Skills Development Canada, drawing on reports submitted by trustees and receivers of employers undergoing restructuring, bankruptcy or receivership.[4] Under the Program, payouts are made to eligible employees who earned eligible wages during a specified eligibility period, and such payments constitute (in part) a "super-priority" upon the employer's estate.[5][6]

  • Eligible employees are those whose employer has declared bankruptcy or has been placed into receivership, except those who:
  • were an officer or a director of the former employer
  • had a controlling interest in the business of the former employer
  • were a manager whose responsibilities included making binding financial decisions impacting the business of the former employer, and/or making binding decisions on the payment or non payment of wages by the former employer, or
  • were not dealing at arm's length with any of these persons[7]
  • Eligible wages are:
  • Salaries, commissions, compensation for services rendered, vacation pay, gratuities accounted for by the employer, disbursements of a travelling salesperson properly incurred in and about the business of the former employer, production bonuses and shift premiums that were earned during the eligibility period preceding the bankruptcy or receivership, and
  • Severance pay and termination pay for employment that ended in the eligibility period preceding the bankruptcy or receivership.[8]
  • The eligiblity period starts six months before a restructuring event and ends on the date of bankruptcy or receivership. If the employer did not go through restructuring, the eligibility period is the six-month period ending on the date of bankruptcy or receivership.[8]
  • The maximum amount that an eligible individual may receive is equal to four weeks of insurable Employment Insurance (EI) earnings. In 2012, the maximum equals $3,531.[9]
  • To the extent of the payments made, the WEPP is subrogated to any claims for wages an employee may have against:
  • the bankrupt or insolvent employer, and
  • where the employer is a corporation, any of its directors[10]

Controversy over scope and effect of WEPPA

The phrase "compensation for services rendered" in the definition for "eligible wages" was held by the British Columbia Supreme Court in 2009 to include other amounts that were earned by the employee and which were directed to be paid to a third party pursuant to a contract covering the employee.[11][12][13] This ruling was upheld in 2010 by the British Columbia Court of Appeal.[14]

It has also been argued that the WEPPA may also have the counterintuitive effect of reducing manufacturing employment in Canada through automation and offshoring of processes, as well as restricting financing that could be available to manufacturers, because of the super-priority nature of the program. [15]


references

  1. ^ "Wage Earner Protection Program Act". Retrieved 2012-05-15.
  2. ^ "Summary of Key Legislative Changes in Chapter 47 of the Statutes of Canada, 2005, and Chapter 36 of the Statutes of Canada, 2007". Retrieved 2012-05-15.
  3. ^ "Recent legislative changes to the WEPP". Retrieved 2012-05-15.
  4. ^ "Wage Earner Protection Program". Retrieved 2012-05-15.
  5. ^ Bankruptcy and Insolvency Act, s. 81.3
  6. ^ Bankruptcy and Insolvency Act, s. 81.4
  7. ^ "Am I eligible for the WEPP?". Retrieved 2012-05-15.
  8. ^ a b "What are eligible wages under the WEPP?". Retrieved 2012-05-15.
  9. ^ "How much will I receive?". Retrieved 2012-05-15.
  10. ^ WEPPA, s. 36
  11. ^ Ted Leroy Trucking Ltd. and 383838 B.C. Ltd. (Re.), 2009 BCSC 41 (CanLII)
  12. ^ "Ted LeRoy Trucking Ltd. and 383838 B.C. Ltd. - Monitor's Ninth report to Court and Receiver's Second report to Court" (PDF). PriceWaterhouse Coopers. Retrieved 2012-05-15.
  13. ^ Mary I.A. Buttery, Cindy Cheuk. "EMPLOYEE SUPER-PRIORITY UNDER THE WEPPA AND THE BIA: Comments on Ted LeRoy Trucking Ltd. and 383838 B.C. Ltd. (Re)" (PDF). Fraser Milner Casgrain. Retrieved 2012-05-15.
  14. ^ Ted Leroy Trucking Ltd. v. Century Services Inc., 2010 BCCA 223 (CanLII)
  15. ^ Matthew Lem. "WEPPA: Wage Protection for Employees, Credit Constriction for Employers". BDO Dunwoody. Retrieved 2012-05-15.
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