The news that your employer is facing financial problems can send a chill down your spine. The uncertainty of layoffs, coupled with worries about unpaid wages and benefits, adds stress to an already difficult situation. While it’s a challenging experience, taking proactive steps can help you navigate this period and protect your financial future.
Gather your documents now
As soon as it’s clear that your company is experiencing financial problems, gather all essential employment documentation. One of the unnerving things in these situations is that you might suddenly lose access to the company systems. The very systems you rely upon to retrieve your paycheque, assess vacation pay, or any other money owed. Having these documents in hand will allow you to establish with some confidence what your employer owes you. This information will also be vital for tax season or when applying for government assistance. Make sure to collect:
- Records of employment
- T4s
- Contracts or letters describing your pay, commission, and vacation entitlements
Understand your entitlements and review offers carefully
If your employment is terminated due to your employer’s financial problems, you will likely be presented with termination letters or severance packages. It’s critically important not to sign any paperwork accepting these payments immediately. Instead, take the time to review it thoroughly. Does it meet your employer’s obligations as outlined in provincial employer legislation, any collective agreements, and your individual employment contracts? Labour experts emphasize that there is often more money on the table. Often, the first offer is one that can be improved upon. The company might be hoping you take that deal, making due diligence essential.
If there’s a discrepancy between what you’re owed and what’s offered, seek out guidance. A lawyer, your union, or the court-appointed trustee or monitor will be able to help you explore paths forward. A lawyer can assess the merit of seeking a better package. Providing them with your documentation will speed up this process. However, be aware that even a strong case doesn’t mean you’re in for a cheque. A company that has been granted creditor protection can’t face immediate legal action. Businesses can also run out of money while court proceedings unfold.
Explore government support programs
Given the complexities of recovering funds directly from an insolvent employer, many labour experts strongly advise workers to explore available unemployment support programs. In Canada, two key programs can provide a crucial financial safety net: the Wage Earner Protection Program (WEPP) and Employment Insurance.
Wage Earner Protection Program
The WEPP is a federal government program established by the Wage Earner Protection Program Act, designed to provide for the payment of outstanding wages, capped at a specified amount, to individuals whose employment has been terminated as a result of their employer’s bankruptcy or receivership.
Eligibility
You may be eligible to receive a payment under WEPP if your employer has such severe financial problems that it has filed for bankruptcy, is subject to receivership, or other WEPP qualifying insolvency proceedings. Additionally, you must have lost your job and your employer must owe you wages, vacation pay, termination pay, or severance pay. The term ‘wages’ includes salary, commissions, compensation for services rendered, and vacation pay incurred any time in the six-month period immediately preceding the date of the bankruptcy or receivership, as well as severance and/or termination pay. People who qualify under the program can receive up to $8,844.22 this year (as of May 2025).
Making a claim
The process for making a WEPP claim is a two-step application. First, you will need to file a ‘Proof of Claim’ form with the trustee or receiver handling your former employer’s bankruptcy, receivership, or other WEPP-qualifying insolvency proceeding. The trustee or receiver is responsible for registering your employer’s bankruptcy with WEPP and determining the amount of eligible funds owed to you from the company records. This form helps establish your claim and will likely be part of a package of information you receive from the trustee or court-appointed receiver.
Once your Proof of Claim form is received from you, the trustee will register your information into the WEPP online system, and will confirm that you should now make your application directly to the WEPP. It’s important to follow the instructions given to you by the Trustee carefully, to ensure you receive any payments you are entitled to.
Employment Insurance (EI):
Employment Insurance is the main unemployment support program in Canada, providing money to eligible individuals who have gone without work and pay for at least seven consecutive days in the last 52 weeks.
Eligibility
To qualify for EI, workers must meet a range of criteria, including a minimum number of hours worked in the period leading up to the end of their job. While collecting EI, you must demonstrate that you are actively seeking employment. Most government programs, including EI, require people to apply once they’ve had their last day of work.
Provincial Claims
While bankruptcy law falls under federal jurisdiction, in some cases, you may also be able to file a claim provincially under the Employment Standards Act, 2000 (ESA). However, when individuals or corporations are in bankruptcy or insolvency, an employment standards officer’s actions are generally limited. Despite these limitations, an employment standards officer may still have the power to investigate if your employer is a corporation, as directors of a corporation may be found liable for certain unpaid wages if a proof of claim was filed in a bankruptcy/receivership and it has not been paid. They can also investigate if, under the ESA, a separate employer is what’s called a “related employer” to an insolvent business, which may have liability for unpaid wages. Due to the complicated areas of law involved, the specific actions an officer can take will depend on the individual case.
Connect with key contacts
Navigating an employer’s insolvency requires engaging with specific individuals and organizations:
Trustee or Receiver: These are the key contacts for filing your “Proof of Claim”. They are appointed to handle the bankruptcy or receivership file. You will likely receive an information package from them on how to file your proof of claim.
Service Canada: Your primary resource for all WEPP-related questions and general information about federal bankruptcy and insolvency laws.
Union: If you are part of a union, contact them immediately for assistance and information.
Lawyer: An employment lawyer can provide invaluable legal advice on your rights, review offers, and guide you through the complexities of your situation.
Supervisors and Colleagues: As company systems become inaccessible and official HR channels may disappear, it’s wise to proactively seek contact information from supervisors or colleagues who can vouch for you and provide references for your next job search. This information can be incredibly helpful when you’re on the cusp of your next job.
Financial preparedness and management tips
While your employer’s financial problems are not in your control, there are many other things in your control that you can do to navigate financial bumps smoothly.
- Create a new budget using conservative numbers that fit your new temporary income.
- Call all your lenders and ask for any assistance, such as deferral or an interest-free period, that they can offer. Only use these savings if absolutely necessary. Instead of spending these savings, set them aside so you can catch up on payments if you don’t need the extra money.
- Explore healthcare options. Many companies that offer healthcare plans give you the option to switch to an individual plan. Look into their offer and research other options to see if one will work for you.
- Research sources of income at your disposal, such as HELOCs. While you may not need them now, it’s good to be aware of what funds you can get access to if need be.
- Don’t forget to do things you enjoy. It’s important to keep your morale high. Get outside, visit friends, play games, or maybe take a class to gain valuable skills for your next job. Purposefully do something regularly that picks your spirits up.
Wrap up
Losing your job due to an employer’s financial problems is undoubtedly challenging, but proactive preparation is your strongest ally. By gathering crucial documents, carefully reviewing any offers, understanding your rights under federal and provincial laws, and knowing which government programs and contacts can assist you, you can significantly ease the transition and take control of your recovery. Remember, the goal is to recover from the job loss effectively and set yourself up for your next opportunity.
Having a lot of debt puts even more strain on an already difficult situation, like job loss. Talking with one of our Credit Counsellors during a free, no-obligation consultation. They will talk through your financial situation and then go over what debt relief options are available for your particular situation.
