Laid-off Sears Workers land Hardship Fund Posted onAugust 17, 2017June 19, 2020/ Devry Smith Frank LLP By: Stuart Clark, Student-at-Law According to the Financial Post, Sears Canada has agreed to create a fund for former employees who were denied severance payments as the company restructures itself. The deal was hammered out by lawyers representing the company and workers, and will be funded to the tune of $500,000—coming directly from money earmarked for executive bonuses. While it will not make employees as a group whole, the fund will target those facing genuine hardship. Sears’ severance obligations were modified as a component of the court-controlled restructuring process under the Companies’ Creditors Arrangement Act (CCAA). Using the Act, Sears was able to shed roughly 2,900 jobs across the country without severance. Under the Act, a debtor company can seek an initial order from the court that grants them a ‘stay’ against its creditors while it renegotiates or restructures its debts. In simple terms, this means that creditors are prevented from exercising their rights to collect on a debt, agreements with suppliers cannot be terminated (from either party), and further transactions require court approval. For example, under a stay, a creditor with an outstanding secured debt would be prevented from repossessing the secured property (like a piece of equipment, etc.). The stay is not indefinite, however. The guiding purpose of the Act is to give companies who qualify time to restructure so they can meet their creditor obligations. Generally, a business may only qualify if the total claims against the company are more than $5,000,000 (s.1). The counterpart to the CCAA is the Bankruptcy and Insolvency Act (BIA), which applies to individuals, corporations, income trusts, and partnerships. The key difference is complexity, debtor companies apply for CCAA protection because of their size, while individuals and small businesses operate under the BIA. The processes are similar, however, and both offer debtors the tools to preserve their business, renegotiate with creditors, and, most importantly, avoid liquidation. Devry Smith Frank LLP is a full service law firm that has a very experienced group of lawyers within our bankruptcy and insolvency groups. If you are in need of representation, please contact one of our lawyers today or call us directly at 416-449-1400. Related Posts Posted onJanuary 8, 2018June 17, 2020/ Devry Smith Frank LLP Tim Hortons Franchises Reduce Employee Benefits The news has been filled with stories about certain Tim Hortons franchises reducing employee benefits and no longer paying employees for their breaks. What these franchises have done is a shock to many, especially so to their employees. Despite this media storm, what these franchises have done is completely legal and complies with the Ontario’s [...] Read more Posted onAugust 21, 2017June 19, 2020/ Devry Smith Frank LLP Update: Laid-off Sears Workers land hardship fund By: Stuart Clark, Student-at-Law In an earlier blog, we noted that Sears Canada had agreed to create a fund for former employees who were denied severance payments while the company restructured. Now, according to the Financial Post, Sears’ creditors say that they will seek a motion to lift the court-ordered stay which prevents them from [...] Read more