Explanatory note for the Order Extending a Period Established by the Wage Earner Protection Program Act (COVID-19)

(This note is not part of the Order)

Proposal

To order that the period during which unpaid wages are considered eligible wages under the Wage Earner Protection Program Act (WEPPA) be extended by up to 6 months.

Objective

To support workers during the COVID-19 pandemic by ensuring that unpaid eligible wages owed to workers by an employer that is bankrupt or subject to a receivership remain eligible for a Wage Earner Protection Program (WEPP) payment, even if the employer’s bankruptcy or receivership is delayed due to factors related to the COVID-19 crisis.

Background

The WEPP provides timely financial support for workers who lose their job and are owed eligible wages by an employer who is bankrupt or subject to a receivership.

Eligible wages, under the WEPPA, include wages, vacation pay, termination and severance pay. These wages must have been earned in the 6-month period leading up to a bankruptcy or receivership. If an employer attempted to restructure prior to their bankruptcy or receivership by filing a proposal under Division I of Part III of the Bankruptcy and Insolvency Act (BIA), or by entering into proceedings under the Companies’ Creditors Arrangement Act (CCAA), then the eligible wages period is extended to begin 6 months prior to the start of those proceedings.

The maximum WEPP payment that a worker can receive is equal to 7 times the maximum weekly insurable earnings under the Employment Insurance Act, which for 2020 is $7,296.

Once a WEPP payment is issued, the Government of Canada assumes the worker’s rights in respect of amounts owed, known as “subrogation.” The Government then attempts to recover amounts owed from the insolvent employer’s estate.

Since inception of the program in 2008 to March 31, 2020, WEPP has paid more than $392 million to over 140,000 workers.

Implications

There may be a delay in corporate insolvencies as a result of the current COVID-19 pandemic, caused by limited court access, reliance on temporary government support measures, and other factors relating to the crisis. These delays could push wages that would otherwise be included in a WEPP payment outside the 6-month eligibility period, meaning that workers would lose out on part or all of their WEPP payment at a time when many Canadians are financially vulnerable.

This Order extends the period for calculating eligible wages by up to 6 months. If the date of the bankruptcy or receivership falls in the period beginning on March 13, 2020 and ending on September 12, 2020, the eligible wages period will begin on September 13, 2019 and end on the date of the bankruptcy or the first day on which there was a receiver. If the date of the bankruptcy or receivership falls in the period beginning on September 13 and ending on December 30, 2020, the eligibility period will be extended by 6 months so that it includes the 12 months prior to the date of the bankruptcy or the first day on which there was a receiver.

Consultation

This Order is the result of internal analysis and consultations with the Canadian Association of Insolvency and Restructuring Professionals (CAIRP), the organization that represents insolvency professionals in Canada.

Departmental contact

Danijela Hong, Director
Labour Standards and Wage Earner Protection Program
Workplace Directorate
Labour Program
Employment and Social Development Canada
165 de l’Hôtel-de-Ville Street
Place du Portage, Phase II, 10th Floor
Gatineau, Quebec
K1A 0J2
Email: Danijela.hong@labour-travail.gc.ca

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