'It's pretty clear that workers are not the priority in these kinds of cases'
The closure of Hudson’s Bay, Canada’s oldest retailer, has intensified calls from labour leaders, advocates, and lawyers for legislative reform to better protect workers when companies go under, according to a report.
“When you’re looking for these kinds of improvements, you will have ebbs and flows, but right now, we have an opportunity because the Bay situation is fresh in people’s minds,” said Lana Payne, president of Unifor, in a report from The Canadian Press (CP).
Hudson’s Bay filed for creditor protection in March, citing the COVID-19 pandemic, declining store traffic, and tariffs as contributing factors to its financial downfall. With no new investors secured, the retailer began liquidating assets to pay creditors. Employees, however, were left at the back of the line for repayment.
Hudson’s Bay filed for protection under the Companies’ Creditors Arrangement Act (CCAA) on March 7. The employer officially closed shop June 1. However, with the company’s closure, thousands were left unemployed and without severance compensation, according to a previous report.
Staff were told they would not receive termination or severance pay and lost health, dental, and life insurance benefits, according to the CP report posted in BNN Bloomberg.
‘Workers are not the priority in these kinds of cases’
Legal experts and advocates argue that employees are uniquely vulnerable in insolvency situations.
“I think it’s pretty clear that workers are not the priority in these kinds of cases,” said Payne, according to the report. “The legislation doesn’t make them the priority and workers right now are feeling the results of that.”
In the future, Unifor would like to see legislation changed so workers’ termination and severance claims are paid first, Payne said.
Susan Ursel, a lawyer representing Bay employees, agrees with Payne’s idea because “employees are affected in a personal way by their employer’s insolvency — losing their income and throwing their futures into uncertainty.”
“Unlike sophisticated lenders, they are not able to negotiate security for the contractual promises of their employers and therefore fall behind those secured lenders in recovering money owed to them,” she said, according to the CP report.
“A legislative priority for employees would provide more certain and effective protection for employees, which we would welcome.”
However, such change would scare away lenders long before creditor protection is on the horizon and when companies still have a shot at recovery, claimed Sunira Chaudhri, founding lawyer at Workly Law in Toronto.
“If employees were to be first in line ... any employer that hired a lot of employees would be a bad bet for the banks,” she told CP. “You’d want to lend money to them the least, because you’d never be able to recoup on a loan.”
In April, Unifor filed a grievance alleging that the Hudson’s Bay Company was “unilaterally slashing workers’ commission pay” as it proceeds with its liquidation.
Meanwhile, the Canadian Labour Congress (CLC) had earlier criticised the employer for awarding about $3 million in bonuses to executives amid the company’s liquidation process. The company made the decision to award the management bonuses as more than 9,300 workers are at risk of losing their job, according to the group.
