Canada Gazette, Part I, Volume 154, Number 48: Regulations Amending the Wage Earner Protection Program Regulations

November 28, 2020

Statutory authorities
Budget Implementation Act, 2018, No. 2
Wage Earner Protection Program Act

Sponsoring department
Department of Employment and Social Development

REGULATORY IMPACT ANALYSIS STATEMENT

(This statement is not part of the Regulations.)

Executive summary

Issues

The WEPP is a Government of Canada program that provides financial support for individuals’ owed eligible wages after they have lost their job and their employer has entered into bankruptcy or become subject to a receivership. This regulatory proposal focuses on improving access to the WEPP by addressing several issues:

1. Sometimes there are delays in accessing the WEPP when an employer engages in a “liquidating restructuring proceeding” before filing for bankruptcy or receivership. For example, Sears Canada began liquidating restructuring proceedings under the Companies’ Creditors Arrangement Act (CCAA) in June 2017, closed remaining Canadian stores in January 2018, but did not become subject to receivership until January 2019. It was only when that receivership occurred that former employees became eligible for the WEPP, even though many lost their jobs months earlier.
2. Canadian workers affected by foreign insolvency proceedings are not eligible for the WEPP. However, any worker who is legally working in Canada can be eligible for the WEPP if their employer is bankrupt or subject to a receivership in Canada. This represents a coverage gap for Canadian workers when their employer enters receivership in a foreign jurisdiction. For example, in October 2018, the parent company of ServiCom filed for bankruptcy protection in the United States and all operations at the Sydney, Nova Scotia, call centre ceased. More than 500 employees were laid off, many of whom were owed wages. As ServiCom did not file for Canadian bankruptcy or receivership, the former employees could not access the WEPP. In April 2019, the Nova Scotia government took the step of requesting the court to force ServiCom into Canadian bankruptcy. While this ensured a triggering of WEPP for impacted workers, it was complicated and time consuming.
3. For employees to be eligible for the WEPP, a trustee or receiver must agree to administer the insolvent estate of the former employer. However, when there are very few or no assets remaining in an estate, insolvency professionals are reluctant to assume the financial risks of taking on its administration for a bankruptcy proceeding. When no trustee or receiver agrees to administer an insolvent estate, impacted workers cannot access the WEPP.

Background

Through the WEPP, individuals whose employer is bankrupt or subject to a receivership can claim unpaid eligible wages (basic wages, disbursements, vacation pay, termination and severance pay) up to a maximum amount equivalent to seven weeks of employment insurance maximum insurable earnings ($7,296 for 2020) under the Employment Insurance Act.

The WEPP addresses a major gap that existed in Canada’s bankruptcy and insolvency system before the program was launched in 2008. Before the WEPP, Canada lacked an effective way to ensure payment of unpaid wages when employers became insolvent. As a result, many individuals remained unpaid for work they had performed before their employer’s bankruptcy or receivership.

To be eligible for a WEPP payment, an individual must meet three conditions:

• They were employed in Canada and their employment had been terminated;
• Their employer must be bankrupt or subject to a receivership in Canada; and
• Eligible wages must be owing to the individual.

When the WEPP was launched, amendments made to the Bankruptcy and Insolvency Act (BIA) elevated the ranking of unpaid wages and vacation pay to enjoy a limited “super-priority” status. This super-priority status means that claims for unpaid wages and vacation pay rank ahead of secured creditors in a bankruptcy process, up to a maximum of $2,000 per wage claim. The purpose of the limited super-priority is twofold:

• (1) It allows the Crown to recover up to $2,000 per WEPP claim from insolvent employer estates during the bankruptcy process. This helps reduce overall net program costs; and
• (2) It deters employers from avoiding paying workers amounts owed. This deterrence is due to the possibility that the Crown can ensure payment if it decides to purse the super-priority elements of a wage claim when the bankruptcy process later unfolds.

Since its creation, the WEPP has paid more than $411 million in eligible wages to more than 146 000 Canadians (as at June 30, 2020). In a typical year, about 12 000 people benefit from the WEPP, and over the life of the program have received an average WEPP payment of $2,710 per recipient. The Crown has recovered more than $55 million from bankrupt employer estates, of which almost $46 million was for the super-priority wage claims (as at March 31, 2020).

In Budget 2018, it was announced that the Government of Canada would introduce legislative amendments to the WEPP Act. These changes sought to increase the maximum WEPP payment, and make WEPP eligibility more equitable. These legislative amendments received royal assent on December 13, 2018, and

• increased the maximum payment from the equivalent of four weeks, to seven weeks of employment insurance maximum insurable earnings ($7,296 for 2020) under the Employment Insurance Act;^{footnote 1}
• ensured that individuals retained by a trustee or receiver to help wind down business operations remain eligible to receive termination and severance pay under the WEPP;
• granted WEPP recipients the right to request reviews and appeals regarding overpayment decisions; and
• strengthened the Government of Canada’s ability to recover monies from estates or properties of bankrupt employers, and from third parties such as directors.

However, other WEPP Act amendments require changes to the Wage Earner Protection Program Regulations (WEPP Regulations) before they can take effect. Specifically, the existing WEPP Regulations need to be amended to set the eligibility criteria for earlier WEPP payments in situations where an employer engages in liquidating restructuring proceedings, and for extending WEPP coverage for workers when the employer is subject to insolvency proceedings in another country.

Description

This proposal would amend the WEPP Regulations to allow the remaining amendments to the WEPP Act to come into force. These changes would broaden coverage of the WEPP, create incentives for bankruptcy professionals to undertake low-asset proceedings, and address various concerns raised by the SJCSR.

1. Allowing earlier WEPP payments when an employer engages in liquidating restructuring proceedings

Currently, an individual only becomes eligible for the WEPP when the individual’s employer enters bankruptcy or becomes subject to receivership. Changes to the WEPP Act would allow a court to determine that an individual may be eligible for earlier WEPP payments when the individual’s employer is subjected to a proceeding under the CCAA or a proposal under the BIA, if a trustee is appointed in respect of the employer, and particular criteria set out in regulation are met. The proposed Regulations would establish the following criteria:

• (a) the employer is to have ceased its principal business operations (e.g. all retail stores closed, manufacturing operations have ceased, services are no longer offered); and
• (b) the employer is to have terminated all of its employees, except for employees that have been retained to wind down its business operations.

2. Extending WEPP coverage to individuals if their employer is subject to insolvency proceedings in another country

Changes to the WEPP Act would allow a court to determine that individuals employed by an employer subject to an insolvency proceeding in another country may be eligible for WEPP if there is a trustee appointed in respect of the employer, and particular criteria set out in regulation is met. The proposed Regulations would establish the following criteria:

• (a) the employer subjected to a foreign proceeding has ceased its principal business operations in Canada (e.g. all retail stores closed, manufacturing operations have ceased, services are no longer offered); and
• (b) the employer subjected to the foreign proceeding has terminated all of its employees in Canada, except for employees that have been retained to wind down its business operations.

3. Updating the payment scheme for trustees’ and receivers’ fees and expenses when very few assets remain in an insolvent estate

For employees to be eligible for WEPP, a trustee or receiver must oversee the insolvent estate of the former employer. Trustees and receivers have a number of specific duties under the WEPP Act that allow for the operation of the program. Specifically, trustees and receivers are responsible for identifying current and past employees, determining wages owed, providing information about the WEPP to potential claimants, and submitting specific information via a Trustee Information Form (TIF) to Service Canada for each WEPP claimant to enable the processing of the WEPP claim.

Under the WEPP Act, proceeds from the estate must be used to pay for this work, when there are enough assets to do so. When there are not enough assets remaining in an estate, insolvency professionals have been reluctant to assume the financial risks associated with accepting estate administration, as they have no certainty of payment for their services.

In situations where there are insufficient assets, current WEPP Regulations allow the Minister to pay an insolvency professional for WEPP specific work and, in some cases, for broader estate administration duties. This payment scheme is to encourage insolvency professionals to accept the administration of low- or no-asset bankruptcies so that terminated employees can access the WEPP.

Current payment scheme

Under the existing payment scheme, section 18 of WEPP Regulations allows payment for the fees and expenses in relation to WEPP specific duties under the following conditions:

• (a) the estate is in deficit;
• (b) no guarantee of any amount has been provided by a creditor in respect of the fees and expenses; and
• (c) fees and expenses attributable to WEPP duties account for at least 10% of the total fees charged for the estate, based on the following formula:
  • $600 for the initial WEPP wage claim; plus
  • $35 for each subsequent claim.

If met, an insolvency professional can claim a payment of $600 for the first WEPP claim submitted, plus $35 for each subsequent claim, with the total amount payable capped at the value of the estate deficit.

Section 19 of current WEPP Regulations outlines conditions when an insolvency professional can claim payment for fees and expenses for broader estate administration duties. To qualify, the following conditions must exist:

• (a) the estate is in deficit;
• (b) the value of current assets realized is sufficient to pay the super-priority claims that are not wage related, but insufficient to pay all super-priority claims against the estate; and
• (c) wage super-priority amounts owed represent the entire value of the property.

When all three conditions occur, a complex formula is prescribed for calculation of payment as follows:

• the sum of a share of the value of each current asset realized (with a decreasing percent as assets are valued more); plus
• amounts for fees and expenses to cover taking possession of the estate, mail-outs to creditors, publishing of bankruptcy notice, etc.; minus
• any amount paid for WEPP-related duties under section 18 (described above), up to the value of any guarantee, or the total value of wage super priorities.

Insolvency professionals have often criticized the current payment scheme as overly stringent, too complicated, and inadequate in terms of allowable compensation. As a result, it is often deemed not financially viable to administer low-asset insolvencies under this current trustee payment scheme. Many low-asset estates therefore remain unadministered, and employees are unable to access the WEPP.

Proposed payment system

Proposed changes to the WEPP Regulations would amend the payment scheme by simplifying eligibility requirements, streamlining payment calculations, increasing maximum payment amounts, and introducing indexing.

Eligibility

To be eligible for payment of fees and expenses, the proposed Regulations would require insolvency professionals to

• submit a copy of the statement of receipts and disbursements for the estate;
• provide confirmation through that statement that the estate is in deficit; and
• confirm through that statement that the value of third-party deposits and guarantees are less than the deficit.^{footnote 2}

Calculation of payment

The amount for payment would be calculated as follows:

• For WEPP specific duties: a $720 set-up fee, plus
  • $120, for each of the first 10 wage claims;
  • $90, for each of the next 10 claims;
  • $75, for each additional claim; and
• For broader estate administration: up to $5,000 for the following fees and expenses, provided that total assets, net of higher-ranking claims, are less than $10,000:
  • for taking possession of the property, making inventory, and securing and insuring the property;
  • for mail-outs to creditors;
  • for the cost of publishing a newspaper notice of the bankruptcy;
  • of the official receiver and the registrar; and
  • for other items that may be allowed by the court, up to $1,000.

The total payable under this proposed payment scheme would be capped at the amount by which the estate deficit exceeds the value of third-party deposits or guarantees.

Annual indexation

The amount of payment would be indexed annually using the Consumer Price Index. Specifically, amounts would be rounded to the nearest dollar for the set-up fee and for each submission of a wage claim by the insolvency professional, and to the nearest $500 increment for the calculation and payment for broader estate administration.

4. Improve clarity of the WEPP Regulations and address concerns raised by the SJCSR

A number of proposed regulatory amendments would clarify language, adjust terminology to improve English-French consistency, and include text to clarify that a late applicant, or one who misses the deadline to request a review, must also provide an explanation if they wish their WEPP application or request to be considered. These changes would not result in additional costs as they seek to simplify wording and codify already existing practices.

5. Repeal sections of the WEPP Regulations pertaining to the administration of WEPP appeals

Sections 13 and 14 of the WEPP Regulations deal with timelines and the process for submission of appeals to an adjudicator appointed by the Minister. On July 29, 2019, amendments to the WEPP Act came into force to transfer all adjudicative functions related to the WEPP to the Canada Industrial Relations Board (CIRB). Under the amended WEPP Act, the Minister no longer has authority to make regulations regarding appeals as this now falls under the responsibility of the CIRB.

Regulatory development

Consultation

Consultations with key stakeholders including insolvency professionals, organized labour, and representatives from the legal community, occurred in May and June 2019. Overall, there was a general support for the objectives of the envisioned changes to the WEPP. Stakeholders

• Supported the concept of extending earlier WEPP payments to employees whose employment is terminated during a liquidating restructuring exercise that is expected to fail;
• Endorsed the idea of extending WEPP coverage to Canadian employees when their employer enters bankruptcy or receivership proceedings abroad; and
• Agreed that one approach to increasing the administration rates of low-asset insolvencies would be to improve the current payment scheme for trustee and receiver fees and expenses in situations where remaining estate assets are insufficient.

While there was general agreement on the purposes of envisioned changes, there were differing views on how to reach them.

• On the issue of liquidating restructurings, some stakeholders argued that the primary factors to trigger the WEPP should be permanent job loss and wages owed by an insolvent employer who is restructuring, irrespective of whether this is tied to an actual or expected bankruptcy or receivership. This suggestion was not pursued because the objective of the WEPP is to cover eligible wages that are owed when an employer enters bankruptcy or becomes subject to a receivership. The WEPP is not designed to cover all forms of business restructurings.
• On the issue of payment of fees and expenses of insolvency professionals, some argued that the Government of Canada should pay trustees and receivers for all work directly attributable to WEPP obligations, irrespective of whether there are adequate assets in an estate to do so. This suggestion was not pursued because the purpose of paying the fees and expenses of insolvency professionals is to encourage greater levels of estate administration for low-asset insolvencies so that individuals who are owed eligible wages can access the WEPP. Furthermore, section 22 of the WEPP Act requires that the fees and expenses of a trustee or receiver relating to WEPP duties must be paid from the estate or the property of the insolvent employer, when there are adequate assets to do so.
• It was also argued that in situations where no trustee or receiver is willing to administer a low-asset insolvency, the Government of Canada should directly perform the service. This suggestion was not pursued because it fell outside the scope of this regulatory initiative and establishing Government of Canada insolvency professionals to administer insolvent estates is not attainable through changes to the WEPP Regulations. Furthermore, trustees and receivers are specialized in the area of insolvency and already operate across the county.

Modern treaty obligations and Indigenous engagement and consultation

An Assessment of Modern Treaty Implications did not identify any direct modern treaty implications or obligations that could result from the proposed WEPP regulatory changes.

Consultation activities about the WEPP were conducted as part of a five-year review of WEPP Act in 2015, and additional consultations on amending WEPP Regulations took place in spring 2019. Indigenous representatives were provided a copy of the WEPP discussion paper and were invited to submit recommendations. No input was received from Indigenous representatives.

Instrument choice

Broadening WEPP eligibility for Canadians can only be accomplished by amending WEPP Regulations that prescribe eligibility for the program, pursuant to section 41 of the WEPP Act. In the event WEPP Regulations are not amended, the status quo would continue with some Canadians continuing to experience exclusion from WEPP coverage.

Regulatory analysis

Benefits and costs

The Government of Canada would incur all incremental costs resulting from the proposed Regulations, which would be covered by the existing fiscal allocation for the WEPP. Total additional costs are estimated to be $37,212,916 over the 10-year period (2020–2029) following the coming into force of the proposed Regulations. Total additional benefits to WEPP recipients are estimated to be $40,866,638 over the same 10-year period (2020–2029). The net present value is estimated to be $3,653,722. Unless noted otherwise, all costs are expressed in present value (PV, 7% discount rate) for the 10-year period.

Earlier WEPP payments when an employer engages in liquidating restructuring proceedings to wind down business operations

For CCAA proceedings, businesses who owe creditors more than $5 million can restructure under its protection. As a result, these employers tend to be medium- to large-sized workplaces, and when they restructure it can affect a large number of workers. WEPP payment data from 2009 to 2018 indicates that

• Among CCAA restructurings that ended in a bankruptcy or receivership, almost one in four of those restructurings took at least one year before insolvency, with the average time being just short of eight months.
• While employers involved in CCAA proceedings that ended in a receivership or bankruptcy represented less than 1% of employers whose employees received a WEPP payment, these employers accounted for 8% of all individuals who received a WEPP payment.

To accelerate access to the WEPP for terminated workers who are owed eligible wages, the proposed Regulations would allow for the WEPP to be triggered in certain situations prior to the employer filing for bankruptcy or entering into receivership.

Costs

Although the number of workers and amounts paid under the WEPP would not change, an opportunity cost would be incurred by the Government of Canada due to earlier WEPP payment in eligible situations of liquidating proceedings. Specifically, this cost would reflect the opportunity cost of paying WEPP earlier, at the expense of that amount being allocated to other potential public initiatives.

Based on WEPP payment data regarding CCAA proceedings, it is assumed that up to 10% of all WEPP recipients would, on average, receive their WEPP payment about six months earlier in eligible restructuring processes. Using the standardized 7% discount rate for public funds, the total opportunity cost to the Government of Canada would amount to $1,411,512 over 10 years.

Benefits

From the perspective of the WEPP recipient, an earlier WEPP payment would represent potential savings on foregone interest payments, had the amount needed to be borrowed for six months from a lender. An annual rate of 7%, calculated and compounded monthly is assumed. This 7% rate represents a hypothetical interest rate under which an average Canadian could reasonably access credit.^{footnote 3} Based on this monthly rate, the benefits of earlier WEPP payments to eligible recipients would amount to $1,411,512 over 10 years.

Updated payment scheme for trustees’ and receivers’ fees and expenses when remaining estate assets are extremely low

The current formula for eligibility and payment of fees and expenses has been widely criticized by the insolvency community as overly complicated and insufficient. Since 2008, the fees and expenses for only 59 insolvent estates where there were insufficient assets to pay the fees and expenses of the trustee have qualified for payment. This represents fewer than 3 300 WEPP recipients. Only $162,650 in total trustee fees and expenses have been paid to insolvency professionals since 2008.

To encourage greater take-up of low-asset insolvencies, an updated payment scheme would ease eligibility and create improved financial incentives for insolvency professionals to take on the administration of low-asset insolvencies. This will open up access to the WEPP for individuals owed eligible wages.

Costs

Updating the payment scheme is estimated to cost the Government $1,135,942 over a 10-year period. This estimate assumes that low-asset employer insolvencies will add 10% to the total number of estates that fall under the WEPP each year. This would represent an additional 54 employer estates annually.^{footnote 4} Each of these employer estates is assumed to require completion of 20 TIFs.^{footnote 5} Based on this, the average payment a trustee would receive per eligible estate under the proposed scheme would be $2,820. By comparison, under the existing payment scheme, the maximum a trustee or receiver could claim for submission of 20 TIFs would be $1,265, assuming they also meet the more restrictive eligibility requirements for payment under the current scheme.

Incremental increase of payments to employees of the new low-asset insolvent firms newly eligible (including incremental recoverable payments)

Costs

The increased administration rates of low-asset insolvencies resulting from the updated payment scheme are estimated to enable access to the WEPP for an additional 1 072 employees each year. It is assumed that each WEPP recipient would be paid the average WEPP payment of $4,300. An incremental increase in the volume of payments to WEPP recipients’ year-over-year is not expected.

The estimated additional number of WEPP recipients would result in $39,455,127 gross payments over the 10-year period. A portion of this gross payment would be recoverable from insolvent estates by the Crown through the bankruptcy process.

WEPP payments are comprised of two portions of money: super-priority payments of up to $2,000, which include the wage and vacation components of a WEPP payment, and the severance and termination components, which are unsecured. Their separate ranking means the super-priority and unsecured amounts are recovered at different success rates in a bankruptcy process.

Super-priority payments represent 27% of total WEPP payments made, while unsecured payments represent the remaining 73%. Of the total super-priority payments, the average recovery rate has been 43%, while only 3% has been recovered for unsecured amounts. Taken together the Crown recovers about 14% of total value of WEPP payments issued. This represents an anticipated recoverable amount of $4,812,912 over 10 years.

Taking into account these recoveries, the total estimated net costs to the Government of Canada would be $34,642,215 over the 10-year period.

Benefits

The estimated 1 072 additional WEPP recipients each year would result in a direct transfer of funds from the WEPP to the newly eligible recipients. Total estimated benefits from the WEPP to the new recipients are estimated to be $39,455,127 over the 10-year period.

Communication and website costs to update information

Costs

There are anticipated minor costs associated with the development and dissemination of communication products, including the administration of website updates, communication procedures and program information. The Government of Canada would incur these costs in the first year of implementation with an estimated total of $23,247 following introduction of the proposed Regulations.

WEPP coverage extended to individuals if their employer enters formal insolvency proceedings in another country

The WEPP Act was amended to broaden coverage to include terminated employees whose employer has entered insolvency proceedings in a foreign jurisdiction. Amendments to the WEPP Act extend coverage to terminated employees when a foreign proceeding is recognized by a Canadian court, a trustee is appointed under the BIA in respect of the foreign proceeding, and a Canadian court deems that the foreign proceeding meets criteria prescribed by regulation.

Benefits

This proposed change would clarify and simplify WEPP access for Canadian workers when their employer’s insolvency occurs in another country. Currently, indirect and occasionally time-consuming ways to trigger WEPP are pursued in situations where a foreign employer becomes insolvent but there is no Canadian bankruptcy or receivership event that takes place. This proposed change is not expected to substantially increase the number of Canadians who access WEPP.

Costs

Overall, no costs would be passed on to workers or consumers of employers that have filed bankruptcy or receivership under the proposed WEPP Regulations. There are no identifiable new costs to Canadian businesses, or likely impacts on trade or investment, that would result from the proposed amendments. The employer community will likely be indifferent to the proposed Regulations, as there will be no changes made to Canada’s broader insolvency regime.

Cost-benefit statement

• Number of years: 2020 to 2029
• Base year for costing: 2020
• Present value base year: 2020
• Discount rate: 7%

Table 1: Monetized costs

Impacted Stakeholder	Description of Costs	Base Year	Year 2024	Final Year: 2029	Total (Present Value)	Annualized Value
Government	Earlier payment to employees	$180,516	$143,307	$107,388	$1,411,512	$200,968
	New pay regime for trustees/receivers who administer low-asset insolvencies	$151,152	$115,313	$82,217	$1,135,942	$161,733
	Payments to new low-asset insolvent firm employees	$4,609,600	$3,516,642	$2,507,317	$34,642,215	$4,932,289
	Communication and website costs to update information	$23,247	$0	$0	$23,247	$3,310
All stakeholders	Total costs	$4,964,516	$3,775,262	$2,696,921	$37,212,916	$5,298,300

Table 2: Monetized benefits

Impacted Stakeholder	Description of Benefit	Base Year	Year 2024	Final Year: 2029	Total (Present Value)	Annualized Value
Employees	Earlier payment to employees	$180,516	$143,307	$107,388	$1,411,512	$200,968
	Payments to new low-asset insolvent firm employees and incremental recoverable payments	$5,250,021	$4,005,216	$2,855,664	$39,455,127	$5,617,542
All stakeholders	Total benefits	$5,430,537	$4,148,522	$2,963,051	$40,866,638	$5,818,510

Table 3: Summary of monetized costs and benefits

Impacts	Base Year	Year 2024	Final Year: 2029	Total (Present Value)	Annualized Value
Total costs	$4,964,516	$3,775,262	$2,696,921	$37,212,916	$5,298,300
Total benefits	$5,430,537	$4,148,522	$2,963,051	$40,866,638	$5,818,510
NET IMPACT	$466,021	$373,260	$266,130	$3,653,722	$520,210

Quantified (non-$) and qualitative impacts

Positive impacts: WEPP recipients

• Clarifying WEPP coverage to Canadian employees affected by insolvencies of their employer in a foreign country will clarify and simplify WEPP access.
• Potential small number of additional WEPP recipients due to simplified WEPP trigger.

Negative impact: Government of Canada

• Clarifying WEPP coverage to individuals employed by foreign companies operating in Canada, if their employer enters bankruptcy or becomes subject to receivership in a foreign jurisdiction, may result in a small number of additional WEPP claims for processing.

Small business lens

The small business lens does not apply, as the proposed Regulations would not impose costs on small businesses.

One-for-one rule

This regulatory proposal would not impose administrative costs on businesses and would not result in a new regulation.

Regulatory cooperation and alignment

This regulatory proposal has no links to international agreements or obligations.

Strategic environmental assessment

In accordance with the Cabinet Directive on the Environmental Assessment of Policy, Plan and Program Proposals, a preliminary scan concluded that a strategic environmental assessment is not required.

Gender-based analysis plus

No gender-based analysis plus (GBA+) impacts have been identified for this proposal. Information collected by the WEPP is limited to what is specifically required to administer the program. As a result, indicators are limited to program operations such as the number of payments made, average amounts paid per claimant, and payment timeliness. Personal information such as gender, age, disability, indigenous status, or socio-economic characteristics are not collected. Information to assess the potential impact that WEPP changes could have on different groups is therefore not readily available.

Implementation, compliance and enforcement, and service standards

Implementation

Communications and outreach will be conducted as needed with the insolvency community to ensure they are aware of the changes to WEPP Regulations. This will primarily be accomplished by working with the Canadian Association of Insolvency and Restructuring Professionals (CAIRP) through the existing WEPP Joint Liaison Committee, and on an ad hoc basis, as needed.

The proposed Regulations are anticipated to come into force in spring 2021.

Partner institutions

A number of federal departments and private sector stakeholders are instrumental in the operation of the WEPP. These partner institutions were all consulted during the development of these proposed WEPP Regulations.

• Service Canada processes WEPP applications, issues payments to eligible recipients, oversees the trustee and receiver payment scheme, and administers the review process.
• The Office of the Superintendent of Bankruptcy (OSB) provides advice and guidance with respect to the application of the BIA and the CCAA, both of which are linked to the WEPP Act. The federal insolvency policy, which includes the BIA and CCAA, falls under the mandate of the Minister of Innovation, Science and Economic Development (ISED). Although the WEPP is under the responsibility of the Minister of Labour, it is an important element of Canada’s broader insolvency framework.
• The Canada Revenue Agency (CRA) administers the recovery of WEPP overpayments and recovers dividends from insolvent estates. When payments are issued under the WEPP, the Government of Canada is subrogated to any rights the individual may have in respect of unpaid wages, up to the amount of the WEPP payment.
• The CAIRP represents close to 90% of Licensed Insolvency Trustees in Canada. Therefore, CAIRP is the main stakeholder representative for the trustee and receiver community in Canada. The Labour Program works closely with CAIRP to communicate WEPP-related information to the insolvency community, and address WEPP administrative and operational issues with a view to improving the delivery of the program.

Performance measurement

The following will be used to assess the effectiveness of the WEPP following the proposed regulatory changes:

• Improved financial support to workers (i.e. a larger number of employees with insolvent employers can access WEPP);
• Total number of workers that receive support under the WEPP (baseline of 12 000 annual); and
• Number of WEPP applicants under the new eligibility triggers (new baseline).

Service standards

Service standards to process WEPP claims will remain unchanged.

Contacts

Danijela Hong
Director
Labour Standards and Wage Earner Protection Program
Email: danijela.hong@labour-travail.gc.ca
Telephone: 613‑854‑4083

Alex Duff
Manager
Wage Earner Protection Program Policy and Oversight
Email: alex.duff@labour-travail.gc.ca
Telephone: 819‑576‑4461

PROPOSED REGULATORY TEXT

Notice is given that the Governor in Council, pursuant to section 41^{footnote a} of the Wage Earner Protection Program Act^{footnote b}, proposes to make the annexed Regulations Amending the Wage Earner Protection Program Regulations.

Interested persons may make representations concerning the proposed Regulations within 30 days after the date of publication of this notice. All such representations must cite the Canada Gazette, Part I, and the date of publication of this notice, and be addressed to Danijela Hong, Director, Labour Standards and Wage Earner Protection Program, Workplace Directorate, Labour Program, Employment and Social Development Canada, 165 de l’Hôtel-de-Ville Street, Phase II, Gatineau, Quebec J8X 3X2 (tel.: 819‑654‑1625; email: danijela.hong@labour-travail.gc.ca).

Ottawa, November 19, 2020

Julie Adair
Assistant Clerk of the Privy Council

Regulations Amending the Wage Earner Protection Program Regulations

Amendments

1 Paragraph 3(b) of the Wage Earner Protection Program Regulations^{footnote 6} is replaced by the following:

• (b) the individual’s employment has been terminated by the employer;
• (b.1) the individual’s employment has been terminated by a receiver or trustee; or

2 The Regulations are amended by adding the following after section 3:

Foreign Proceedings

3.1 For the purposes of subsection 5(2) of the Act, a court may determine whether the foreign proceeding meets the following criteria:

• (a) the foreign proceeding is to be in respect of a former employer that has ceased its principal business operations in Canada; and
• (b) the foreign proceeding is to be in respect of a former employer that has terminated all of its employees in Canada other than any retained to wind down its business operations.

Proceedings Under the Bankruptcy and Insolvency Act or the Companies’ Creditors Arrangement Act

3.2 For the purposes of subsection 5(5) of the Act, a court may determine whether a former employer meets the following criteria:

• (a) the former employer is to have ceased its principal business operations in Canada; and
• (b) the former employer is to have terminated all of its employees in Canada other than any retained to wind down its business operations.

3 Section 6 of the Regulations is replaced by the following:

6 The following amounts are provided for the purposes of subsection 7(1.1) of the Act:

• (a) any eligible wages that the individual has received after the date of the bankruptcy, the first day on which there was a receiver or the day on which a court determines that the former employer meets the criteria set out in section 3.2, as the case may be; and
• (b) an amount equal to 6.82% of the amount determined under subsection 7(1) of the Act.

4 Section 9 of the Regulations is replaced by the following:

9 (1) An application for payment shall be made within 56 days after the latest of the following days:

• (a) the date of the bankruptcy or receivership of the applicant’s former employer,
• (b) the day on which the applicant’s employment ends for any of the reasons referred to in section 3, and
• (c) the day on which a court determines that the former employer meets the criteria set out in section 3.2.

(2) The application may be submitted after the expiry of the 56-day period if circumstances beyond the control of the applicant prevented them from submitting the application during that period.

5 Section 11 of the Regulations is replaced by the following:

11 (1) An applicant shall request a review under section 11 or 32.1 of the Act in writing within 30 days after the day on which the applicant is informed under subsection 10(1) or 32(1) of the Act, as the case may be, of the Minister’s determination.

(2) The request may be submitted after the expiry of the 30-day period if circumstances beyond the control of the applicant prevented them from submitting the request during that period.

6 The heading before section 13 and sections 13 and 14 of the Regulations are repealed.

7 Paragraph 15(1)(a) of the Regulations is replaced by the following:

• (a) the date of bankruptcy or receivership or the day on which a court determines that the former employer meets the criteria set out in section 3.2, as the case may be;

8 Paragraph 16(1)(a) of the Regulations is replaced by the following:

• (a) the date of bankruptcy or receivership or the day on which a court determines that the former employer meets the criteria set out in section 3.2, as the case may be;

9 Sections 18 to 20 of the Regulations are replaced by the following:

18 (1) For the purpose of section 22.1 of the Act, the Minister shall, on application by the trustee or receiver, pay the fees and expenses if

• (a) the trustee or receiver provides a copy of their final statement of receipts and disbursements for the bankruptcy or receivership;
• (b) the final statement of receipts and disbursements for the bankruptcy or receivership shows a deficit; and
• (c) the amount of any third-party deposits and guarantees in respect of the fees and expenses is less than the deficit.

(2) The amount payable is equal to the lesser of

• (a) the amount by which the deficit exceeds the amount of any third-party deposits or guarantees, and
• (b) the amount determined by the formula

A + B

where

A

is the amount obtained by adding $720, as adjusted, to

• (i) $120, as adjusted, for each of the first 10 claims,
• (ii) $90, as adjusted, for each of the next 10 claims, and
• (iii) $75, as adjusted, for each additional claim, and

B

is, to a maximum of $5,000, as adjusted, the total of the fees and expenses incurred

• (i) for taking possession of the property, making an inventory and securing and insuring the property,
• (ii) for mail-outs to creditors to advise them of the meeting of creditors and the discharge hearing of the trustee,
• (iii) for publishing a newspaper notice of the bankruptcy,
• (iv) for the official receiver and the registrar, and
• (v) for other items that may be allowed by the court on the taxation of the statement of receipts and disbursements to a maximum of $1,000, as adjusted.

(3) Despite subsection (2), the amount determined for B in paragraph (2)(b) is equal to 0 if the amount determined in accordance with the following formula is more than $10,000, as adjusted:

X – Y

where

X

is equal to the total value of the former employer’s assets; and

Y

is the total value of the claims that have priority over the fees and expenses of the trustee or receiver.

19 (1) The amounts, as indicated in subsections 18(2) and (3), that are to be adjusted are to be done so on January 1 of each year in accordance with the percentage increase to the consumer price index for the year ending on September 30 of the previous year.

(2) The consumer price index is the annual average all-items consumer price index for Canada (not seasonally adjusted) published by Statistics Canada.

(3) The adjusted amounts are to be rounded

• (a) in the case of those set out in the description of A in paragraph 18(2)(b), to the nearest dollar;
• (b) subject to paragraph (c), in the case of those set out in the description of B in paragraph 18(2)(b) and in subsection 18(3), to the nearest $500 increment; and
• (c) in the case of those set out in subparagraph (v) of the description of B in paragraph 18(2)(b), to the nearest $100 increment.

(4) If, as a result of rounding, an amount set out in the description of B in subsection (2) remains the same as it was for the previous year, the unrounded adjusted amount is to be used for the purposes of the adjustment for the following year.

20 The notice referred to in subsections 36(1.1) and (1.2) of the Act is to be provided to the Minister within 30 days after the day on which the individual becomes aware of the action, proceeding, decision or order, as the case may be, and include

• (a) the name, address, telephone number and social insurance number of the individual;
• (b) in the case of a notice referred to in subsection 36(1.1),
  • (i) the date the action or proceeding was commenced,
  • (ii) the nature of the action or proceeding,
  • (iii) the name of the person who commenced the action or proceeding and their contact information; and
• (c) in the case of a notice referred to in subsection 36(1.2), the date the decision or order was made and, if a payment has been received as a result of the decision or order,
  • (i) the amount of the payment broken down by the components of wages to which it relates and by recipient,
  • (ii) the contact information of the recipients,
  • (iii) the time period for which the payment relates, and
  • (iv) the source of the payment.

Transitional Provision

10 The Wage Earner Protection Program Regulations, as they read immediately before the day on which these Regulations come into force, continue to apply where the date of the bankruptcy or the first day on which there was a receiver in relation to the former employer occurs before the day on which these Regulations come into force.

Coming into Force

11 These Regulations come into force on the day on which section 629 of the Budget Implementation Act, 2018, No. 2, chapter 27 of the Statutes of Canada 2018, comes into force, but if they are registered after that day, they come into force on the day on which they are registered.