Ontario court gives retailer until June 30 to distribute disability benefits and emergency relief, complete asset sales
An Ontario court has given Hudson’s Bay Company (HBC) more time under creditor protection, extending a legal shield that pauses most claims from former employees and other creditors while the retailer winds down and prepares to distribute hardship funds to former employees.
Justice Jessica Kimmel of the Ontario Superior Court of Justice has prolonged the stay of proceedings to June 30, beyond the previous March 31 expiry, in a brief hearing that focused on how the collapsed retailer will complete asset sales and carry out court‑approved relief programs for workers, the Canadian Press reported.
The extension means new lawsuits and collection efforts remain on hold while the process continues under the federal Companies’ Creditors Arrangement Act (CCAA).
Hardship programs for former employees
The decision follows a separate ruling in February that approved a package of hardship programs funded from legacy trust and reserve accounts originally set up to support employee benefits. According to court documents, that order confirms that roughly $9.9 million from an old Zellers trust and about $1.6 million in reserves held by Manulife will be marshalled to support long‑term disability recipients and other eligible former staff and retirees.
HBC, which sought CCAA protection in March 2025 with about $1.1 billion in debt, has spent the past year closing or selling stores, exiting leases, and auctioning thousands of pieces of art and artifacts. HBC counsel Ashley Taylor told the court the longer stay will allow the company to assist with ongoing auctions, manage hardship fund distribution, and prepare for an eventual hearing concerning a surplus in at least one pension plan, according to the Canadian Press.
For HR leaders, the developments highlight how much discretion courts and monitors can exercise over employee‑related claims once a company enters CCAA protection. While employment standards, pension, and benefits obligations still exist in law, the timing and amount of any recovery are filtered through the insolvency process and subject to competing claims from secured lenders and other creditors.
The hardship term sheet approved on Feb. 11 sets out three streams of support. A trust program channels remaining Zellers trust assets and certain reimbursements back to extended long‑term disability recipients. A replacement insurance policy is being funded to cover one legacy disability claimant. An employee hardship program is designed to help former employees and retirees who can show “extraordinary hardship,” with payments of up to eight weeks of regular wages, capped at $1,200 per week, and the possibility of an additional $2,500 in limited medical or emergency cases.
Reduced litigation risk
Those programs will be financed from the trust, the Manulife reserve and, in the case of the employee hardship fund, a $250,000 contribution that represents foregone payments otherwise owed to secured lenders. The monitor will administer the application process and appeals will be heard by a three‑person hardship committee drawn from the company, an employee representative group and the monitor.
For HBC, the structure of the hardship funding mitigates some legal risk by addressing particularly vulnerable groups — disabled former employees, retirees and ex‑workers experiencing severe financial strain — through a court‑supervised mechanism. By negotiating a deal with secured lenders over access to the trust and reserve funds, and by having the court bless releases tied to the program, the company and its directors reduce the likelihood of future litigation over how those specific assets were used.
However, the hardship programs don’t erase all potential exposure. Former employees who lost their jobs as part of the liquidation may still assert claims for unpaid severance, benefits and damages, which will rank alongside other unsecured claims in the insolvency. The extended stay means those disputes will largely be managed through the CCAA claims process rather than individual lawsuits.
Court protection extended
For HR executives in other organizations, the case is a reminder to stress‑test their own benefit and trust structures, particularly where long‑term disability, supplemental health benefits or surplus pension assets are involved.
The employee hardship fund is also temporary — applications will be accepted only for six months after its launch, or until the money runs out.
HBC remains under court protection, with its next major milestone expected to centre on the pension surplus hearing and the completion of asset sales. The case underlines that once CCAA proceedings begin, decisions about who bears the costs of a collapse — and who receives limited hardship relief — are shaped inside the courtroom as much as in the boardroom.
