Legal News

Wage earner protection legislation passes Third Reading

Bill C-55, the Wage Earner Protection Program Act, recently passed Third Reading in the House of Commons. The Act establishes a program to provide payments to workers who are owed wages by bankrupt employers or companies in receivership.

Under previous insolvency laws, unpaid workers were in a vulnerable position, as their wage claims were paid from the proceeds of a bankrupt employer’s estate only after other claims such as: unpaid suppliers of goods; certain Crown claims; claims of secured creditors; funeral expenses of a deceased debtor; and the legal and administrative costs of the bankruptcy. According to Industry Canada, workers recovered an average of only 13 cents on the dollar under this system. Also, wage claims were only paid at the conclusion of bankruptcy proceedings, which could take up to three years.

The new Wage Earner Protection Program addresses these issues by providing for prompt payment of up to $3,000 for unpaid wages and earned but unused vacation time. The program is administered by the federal Minister of Labour and Housing, and will be funded from general revenues. In effect, the government guarantees the payment of these amounts, and then assumes wage earners’ claims against the employer’s estate.

The Act is not yet in force. Certain provisions will come into effect on receiving Royal Assent, others on the passing of regulations by the federal cabinet.