The Wage Earner Protection Program Act, 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. 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.
Background
The issue of fairness with respect to employees terminated as a result of business failures was addressed by the Parliament of Canada as early as 1949, when the Bankruptcy Act was amended to provide a limited preferred creditor status to such claims. From 1975, legislative proposals were actively considered for the establishment of a wage protection scheme in the event of the bankruptcy, liquidation or receivership of an employer. The various options discussed for how this could be achieved included: In November 2003, the Senate Committee on Banking, Trade and Commerce reviewed the history of these discussions and recommended that the option for super priority status be adopted. In 2005, the BIA was accordingly amended and the WEPPA enacted. These provisions did not immediately come into force, as several technical amendments needed to be passed in 2007. The Actcame into force on 7 July 2008.
Wage Earner Protection Program framework
The WEPP is administered by Employment and Social Development Canada, drawing on reports submitted by trustees and receivers of employers undergoing restructuring, bankruptcy or receivership. Under the Program, payouts are made to eligible employees who earned eligible wages during a specified eligibility period, and such payments constitute a "super-priority" upon the employer's current assets.
Eligible employees are those whose employer has declared bankruptcy or has been placed into receivership, except those who:
Eligible wages are:
The eligibility 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.
The maximum amount that an eligible individual may receive is equal to four weeks of insurable Employment Insurance earnings. In 2016, the maximum equals $3,807.68.
To the extent of the payments made, the WEPP is subrogated to any claims for wages an employee may have against:
Controversy over scope and effect of WEPPA
As the Act only covers wage claims that arise upon bankruptcy or receivership, it does not figure in proceedings conducted only under the Companies' Creditors Arrangement Act. 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. This ruling was upheld in 2010 by the British Columbia Court of Appeal. 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.
