Law Times

PAGE 12 FOCUS March 19, 2012 • Law TiMes WEPP changes may disadvantage workers Firm warns about inadvertent effects of parliamentary amendments BY JULIUS MELNITZER For Law Times A mendments to the Wage Earner Protection Program Act on Dec. 15, 2011, aimed at broad- ening the rights of employees may have narrowed them inadvertently. "In its current form, the amend- ed definition of eligible wages in the English version of the legisla- tion appears to have eliminated the wage-earner eligibility for the six- month period ending on the date of bankruptcy unless the former employer had filed a [Bankruptcy and Insolvency Act] proposal or commenced [Companies' Creditors Arrangement Act] pro- ceedings," says Eleonore Morris of Cassels Brock & Blackwell LLP. The original definition allowed claims under the Wage Earner Protection Program for wages earned in the six months preced- ing the date of bankruptcy or the six months ending on the first day of a receiver's appointment. "The original definition did not deal with CCAA or BIA restruc- turing," Morris notes. "But the recent amendments intended to fill this gap by changing the def- inition of eligible wages to include wages owed where the employer attempted a CCAA or BIA restruc- turing that was not successful but ultimately ended in a bankruptcy or receivership." As Morris explains it, when a company files for CCAA protec- tion with unpaid wages owing to its employees but the restructur- ing culminates in a bankruptcy or receivership, the amendments would end the six-month period at the point where the CCAA proceedings commenced and not on the date of the bankruptcy or receivership. "But a strict reading of the new language suggests that employees of companies that do not restruc- ture and simply file for bankrupt- cy may no longer be eligible to claim for unpaid wages incurred in the six-month period prior to the bankruptcy of their employer," Morris says. To be sure, such employees would still have a super-priority claim under s. 81.3 of the bank- ruptcy act for unpaid wages to a maximum of $2,000 in the six months preceding a bankruptcy. "The difficulty is that the super- priority claim does not provide the same level of benefits as WEPP," Morris says. "Most importantly, the WEPP claim can include sever- ance and termination pay and the minister of labour, rather than a bankrupt employer who may have no assets, is responsible for paying the claim." Also affected are trustees in bankruptcy, who are subject to a rigorous reporting regime under the program. "The Ministry of Labour does not appear to have changed its guidelines and requirements for reporting in light of this amendment and the upshot is that the amendments as writ- ten may have relieved trustees of companies who did not file under the CCAA or BIA from the obligation to report, although this almost certainly was not Parliament's intent," Morris says. "Rather, Hansard transcripts and the legislative summary of the amendments indicate that Parliament's intention was to broaden employees' rights by extending WEPP to employers who attempted to restructure by way of the CCAA or a BIA pro- posal." As well, the French language version of the amendment clearly carries forward what appears to be Parliament's intention. "Right after we sent out a notice highlighting the problem, Service Canada issued a directive instructing trustees to adhere to the French-language version of the amendments," Morris says. Just how important the program can be to employees is evident in the British Columbia Court of Appeal's decision in Ted Leroy Trucking Ltd. v. Century Services Inc. In that case, the court held that the legislation extended to monies withheld or payments made by an employer to third parties pursu- ant to a contract of employment. The court ruled that such monies, although not payable directly to an employee, were subject to the program. The act establishing the pro- gram defines wages as including "salaries, commissions, compensa- tion for services rendered, vaca- tion pay, severance pay, termina- tion pay, and any other amounts prescribed by regulation." Leroy arose when, on the com- CANADIAN LAW LIST 2012 YOUR INSTANT CONNECTION TO CANADA'S LEGAL NETWORK Inside you will find: • an up-to-date alphabetical listing of more than 58,000 barristers, solicitors and Quebec notaries, corporate counsel, law firms and judges in Canada; • • contact information for the Supreme Court of Canada, the Federal Court of Canada, Federal Cabinet Ministers, departments, boards, commissions and Crown corporations; legal and government contact information related to each province for the Courts of Appeal, Supreme Courts, County and District Courts, Provincial Courts, law societies, law schools, Legal Aid, and other law- related offices of importance. MORE THAN A PHONE BOOK Hardbound • Published February each year On subscription $149 • L88804-571-26084 One-time purchase $165 • L88804-571 • ISSN 0084-8573 Prices subject to change without notice, to applicable taxes and shipping & handling. Visit carswell.com or call 1.800.387.5164 for a 30-day no-risk evaluation CANADIAN LAW LIST pany's bankruptcy, the employees' union argued that third-party pay- ments, such as union dues, con- tributions to a health or welfare trust or an extended health-care service provider, were subject to the legislation. Century Services, the secured creditor with the high- est-ranking priority, took the pos- ition that the protection extended only to funds directly payable to employees. Counsel for Century Services cited provisions of legisla- tion establishing the program and sections of the bankruptcy act that referred to payments as being "to an eligible individual." But the chambers judge ruled in favour of the union and the Court of Appeal agreed. "I see no principled basis for concluding that benefits, whether contained in a collective agree- ment or personal employment contract, are not part of the com- pensation of employees entitled to protection under the legislation," the court concluded. Insofar as payments to third parties occurred by way of assign- ment or direction, they were a transfer of the employee's money. Insofar as payments were made jointly by employers and employ- ees or solely by the employer, they were part of its compensa- tion obligation and the workers' entitlement. "In any event, they are for the benefit of the employee, not the third party," the court concluded. It also didn't matter that the benefits listed by the union may not have been from money that otherwise would be payable to employees. "Some, like union dues and the humanity fund, are funded by payroll deductions; others, like health plans, involve employer and employee contributions; some, like the education trust fund, are con- tributed by the employer alone; but I am satisfied that all of the listed benefits are part of the employees' compensation," the court wrote. Such an interpretation was "consistent with the plain lan- guage of the legislation, with the legislative intent of Parliament as expressed in Hansard, and with the reality of the workplace." The Supreme Court of Canada subsequently dismissed Century Services' application for leave to appeal. LT www.lawtimesnews.com CLL - 1-2 pg - 4X.indd 1 3/15/12 3:33 PM

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