On July 7, 2008, the Wage Earner Protection Program
Act (the "WEPPA") was proclaimed into force,
along with complementary amendments to the Bankruptcy and
Insolvency Act (the "BIA") and other related
statutes. The new program protects a limited amount of the
unpaid wages of employees when an employer becomes bankrupt or
is placed into receivership, and the amendments to the BIA
provide for the priority of some un-remitted pension
The Wage Earner Protection Program (the
"WEPP") The WEPP provides compensation for
unpaid wages to employees who lose employment due to the
bankruptcy or receivership of their employer. The wages, which
include salary, commission, and vacation pay, must have been
earned in the 6 months preceding the bankruptcy or
receivership, and the amount is capped at approximately $3,000.
Termination and severance pay are not covered under the WEPP.
Officers and directors, employees who made binding financial
decisions for the employer, and related parties, are not
eligible for payment under the WEPP.
These monies are paid by the federal government from the
Consolidated Revenue Fund. To the extent of the payment made to
an eligible employee, the government is subrogated to the
rights that the employee had in respect of unpaid wages against
the employer. An employee has a super-priority claim, limited
to $2,000, against the current assets of the employer and, in
the case of a bankruptcy, a preferred claim against the
employer's remaining assets.
The BIA amendments relating to pensions provide that unpaid
pension plan contributions are granted a super-priority charge
over all of the assets of the employer where the employer is
bankrupt or in receivership proceedings. This super-priority
pension contribution amounts deducted from an
amounts required from the employer under a defined
contribution provision; and
"normal cost" amounts (the amounts required to
be paid in a given year to fund benefits) required to be paid
by the employer to the pension fund. This does not include
special payments, including those required to fund a solvency
deficiency, for example.
In terms of the ranking of the super-priority charge, it
ranks above every other claim, right, charge or security
against the employer's assets except for:
rights of unpaid suppliers;
rights of farmers, fishermen and aquaculturists;
in bankruptcy, employee source deductions (income tax,
CPP, EI) which were deemed to be held in trust by an
the super-priority now provided for unpaid wages in a
bankruptcy or receivership (as described above).
Other BIA amendments specify that contributions made to a
registered retirement savings plan (RRSP), registered
retirement income fund (RRIF) or a deferred profit sharing plan
(DPSP) are not seizable in a personal bankruptcy, unless made
in the 12-month period prior to the bankruptcy.
The Pension Group at Borden Ladner Gervais LLP would be
pleased to discuss this decision with you, and any other
pension issues you may have.
The Canadian Office of the Superintendent of Financial Institutions ("OSFI") recently ruled that a bank cannot promote comprehensive credit insurance ("CCI") within its Canadian branches under the Insurance Business (Banks and Bank Holdings Companies) Regulations (the "Regulations").
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