Legislation will provide up to $3,000 in wage protection for employees of companies that go bankrupt
Ottawa (19 Dec. 2007) - A new national fund enabling workers to collect up to $3,000 in unpaid wages when employers go bankrupt is expected to be operating in about six months.
The program is part of a package of bankruptcy reforms passed by Parliament before it recessed for the holidays. Royal assent was given on Dec. 14. It has initial funding of $35 million.
Until now, workers have been given lower priority than other creditors – such as banks – when businesses declare bankruptcy. Workers typically recover only about 15 cents for each dollar owed in wages.
Labour Minister Jean-Pierre Blackburn says the new program will ensure that workers get paid in a timely fashion. About 20,000 employees a year are expected to benefit from the fund.
Most aspects of the new law were included in legislation first introduced in 2005 under the former Liberal government. That legislation passed but was not implemented because of a number of perceived flaws. Bill C-12 was introduced last summer to address these issues.
The fund is designed to pay claims equal to four weeks of maximum insurable earnings under the Employment Insurance Act, a rough maximum of $3,000 at existing EI rates. Anyone with claims exceeding this amount will be able to seek the balance through bankruptcy proceedings.
The government will have limited rights as a creditor under the new law to try and recover it losses from the employer after employees have been paid.
NUPGE
The National Union of Public and General Employees (NUPGE) is one of Canada's largest labour organizations with over 340,000 members. Our mission is to improve the lives of working families and to build a stronger Canada by ensuring that our common wealth is used for the common good. NUPGE
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