My employer went bankrupt. Am I entitled to compensation?


My employer of five years just went bankrupt and now I’m out of a job. We were not given any notice. Am I entitled to severance pay from the company? What if I receive EI payments while trying to fight for compensation and eventually receive them a few weeks or months later? Would that affect the amount of EI I am receiving?


Dinah Mashayekhi, partner, Jewitt McLuckie & Associates LLP, Ottawa

Generally, when a business goes out of business, employees are owed severance and severance pay. The amount of severance pay is based on several factors. However, when it comes to bankruptcy, terminated employees can only claim severance pay as “unsecured creditors.” This means that an employee is entitled to his payment at the end of the liquidation of a business and the sale of assets; but only if funds remain after secured creditors are paid. Unfortunately, this puts former employees at the “end of the line” for money owed.

As a backup, when a business goes bankrupt or goes into receivership, an employee can apply through the Federal Employee Protection Program (WEPP), which compensates eligible workers for severance and severance payments, along with unpaid wages. paid or vacation, but only up to a maximum limit.

Receiving severance pay or WEPP affects EI as the money received is treated as “earnings” and you have a legal obligation to report it to EI. EI would then calculate the number of weeks or months your severance pay covers, and then your benefits would begin once the months covered by severance pay are considered terminated.

You may find yourself in an overpayment situation if you start receiving EI and later receive severance pay. Depending on your situation, you may need to repay EI for benefits you received before you received your award, but you should be able to regain access to benefits after your award period ends.


dear amiri, Attorney, Hummingbird Lawyers LLP, Toronto

If your employer has gone bankrupt, you can file a proof of claim against them for unpaid wages.

Additionally, “termination pay” under the Ontario Labor Standards Act of 2000 (ESA) is calculated based on the number of years of employment, being one week’s wages for each year worked for an employer up to eight years.

“Severance pay” under the provisions of the Ontario ESA is different from severance pay, it is an additional payment to which an employee is entitled if: (a) they have worked for the employer for more than five years; and (b) the employer has a payroll of at least $2.5 million or has laid off 50 or more employees in a six-month period because all or part of his business has recently closed.

If you were terminated before the company went bankrupt, you are entitled to claim severance pay (since no notice was provided) and, if applicable, severance pay.

If you are laid off after the company went bankrupt, you may be eligible for the Employee Protection Program. WEPP is a federally administered program that is limited to unpaid wages, vacation pay, severance pay, and severance pay you earned or were entitled to in the six months prior to bankruptcy.

In connection with EI, if your former employer provides you with an agreement after you have already started receiving EI benefits, you will be required to repay some or all of the EI benefits received. However, it is important to note that only “earnings” should be repaid. Therefore, if you receive settlement funds that are classified as “general damages,” they will not need to be repaid.

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