Wage Earner Protection Program for trustees or receivers: Eligibility

From: Employment and Social Development Canada

2. Eligibility

Obtaining payroll information

Trustees/receivers require access to payroll information to help identify individuals and calculate eligible wages. Payroll officer(s) or any person in possession of payroll records must provide assistance within 10 days of your request for information.

When payroll information is not available, use “due diligence” in locating for the information needed. You should call the WEPP information line at 1-866-683-6516 (TTY: 1-800-926-9105) if you encounter issues or have questions.

Types of eligible wages

The following amounts are considered eligible wages under the WEPP:

  • Wages (salaries, commissions, compensation for services rendered, gratuities accounted for by the former employer, production bonuses and shift premiums) that were earned during the eligibility period;
  • disbursements of a travelling salesperson properly incurred in and about the business of the former employer earned during the eligibility period;
  • vacation pay earned during the eligibility period;
  • termination pay and severance pay for employment that ended either during the eligibility period or prior to the discharge of the trustee or receiver.

WEPP eligibility period

The wages, other than termination pay and severance pay, owed to the individual must have been earned during the eligibility period. The WEPP eligibility period is the six-month period before the bankruptcy or receivership.

Example:
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Figure 1 - Text description

Timeline showing wages earned within the 6 months period prior to the date of bankruptcy/receivership are considered eligible wages. Any wages pay earned before this six month period are not eligible.

If the employer has attempted a business restructuring as defined in the WEPP Act, the eligibility period starts six months before the initial announcement of the restructuring event and ends on the date of the bankruptcy or receivership.

WEPP qualifying restructuring events are:

  • Notice of Intention to Make a Proposal (NOI), and/or
  • A proposal under Division I Part III of the Bankruptcy and Insolvency Act, and/or
  • The Companies Creditors Arrangement Act (CCAA).
Example:
description follows
Timeline showing wages earned within the 6 months prior to initial announcement of the restructuring event up to the date of bankruptcy/receivership are considered eligible wages. Any wages earned before to this six month period are not eligible.

Calculating eligible wages

Wages, vacation pay and disbursements of a travelling salesperson are restricted to amounts earned during the eligibility period. For example, if an employee is entitled to two weeks of vacation per year (in other words 10 days), the amount they could receive for vacation pay under the WEPP would be one week. This is because the eligibility period is for 6 months and not the full year.

To calculate termination pay and severance pay, refer to the applicable Federal, Provincial or Territorial Labour Standards legislation. Alternatively, these entitlements may also be set out in an employment contract or a collective agreement.

For each individual, you must determine eligible wages owed, inform them of the WEPP and submit a TIF in circumstances where:

  • an individual is on maternity, parental or sick leave at the time of the bankruptcy or receivership because the employment relationship does not generally end as a result of being on leave.
  • an individual worked for a sole proprietorship or partnership.
  • an individual was a manager, an officer or a director of their former employer.
  • an individual had a controlling interest in the business of their former employer payment or non-payment of wages by their former employer.
  • an individual was not dealing at arm's length with any person who would be ineligible according to any of the previous criteria.

Continued employment during a bankruptcy or a receivership

Employees sometimes continue to work after the date of the bankruptcy/receivership. These individuals are eligible for WEPP when their employment ends, as long as it is prior to the trustee’s/receiver’s being discharged.

For WEPP enquiries, call the WEPP information line at 1-866-683-6516 (TTY: 1-800-926-9105) or visit a Service Canada Centre.

Employee entitlements in the case of an employer subject to both a bankruptcy and a receivership

The Wage Earner Protection Program Act provides that when both a bankruptcy and a receivership occur, the amount to be paid is the greater amount.

The Trustee/Receiver is required to provide a Trustee Information Form for each employee under both the bankruptcy and the receivership proceedings. Service Canada will then determine the most beneficial payment.

Definition of "employee"

The term "employee" is not defined in the Wage Earner Protection Program Act. Where there is uncertainty as to whether an individual is an employee for the purposes of the legislation, trustees and receivers may contact the Labour and Employment Standards office in the relevant jurisdiction.

Definition of a “managerial position”

A “managerial position” is defined in the Wage Earner Protection Program Regulations as one where the individual's responsibilities included making binding financial decisions which affected the business or regarding the payment or non-payment of wages by the former employer.

However, simply because an employee is given the title of "manager", it does not mean that the individual is automatically excluded from WEPP. A trustee/receiver information form must be filed for the individual.

Income tax

Income tax is not deducted directly from WEPP payments. However, individuals will be informed by Service Canada that they are required to report their WEPP payment as taxable income on their annual tax return. Service Canada will issue to WEPP recipients, a T4A slip and a Relevé 1 for Quebec residents by February 28th of the year following the payment.

Statement of crown debt repaid

In the event of an overpayment, the amount reported on T4A/T4AQ would not change.

When the debt is re-paid in full, a separate document called a Statement of crown debt repaid will be issued.

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