On July 7th, the Wage Earner Protection Program (hereinafter the "WEPP") came into force, as instituted by the Wage Earner Protection Program Act[1].

The WEPP applies to workers whose employers have been declared bankrupt or were placed under receivership as of July 7, 2008.

The beneficiaries of the WEPP are employees who have a claim against their employer for wages earned in the six-month period prior to the date of bankruptcy or placement under receivership. Employees are eligible when they have stopped working for a period of at least seven consecutive days without receiving any wages.

The program is intended to pay wages and vacation pay, not severance pay, or any other compensation an employee may be entitled to.

The program does not apply to:

  • officers or directors of the enterprise;
  • persons who had a controlling interest in the affairs of the enterprise;
  • executives whose responsibilities included making enforceable financial decisions having an impact on the enterprise or the making of enforceable decisions regarding payment or non-payment of wages;
  • employees not at arm’s length with the foregoing persons.

The maximum amount to be paid under the WEPP corresponds to the maximum insurable wages for four weeks (currently about $3,000). From the amount paid under the WEPP there are deductions for amounts previously paid out of the bankruptcy or insolvency of the enterprise, a 6.82% reduction prescribed by regulation, and income tax once the Income Tax Act is amended to include the WEPP.

Meanwhile, the Bankruptcy and Insolvency Act[2] has been amended to give employees top first-ranking priority, even before taxes and bank security. The maximum amount payable in connection with such top priority is $2,000.

The WEPP and the said top priority do not provide any right to cumulative benefits. It is only to the extent a person is not eligible for payment under the WEPP that he may ask to receive his wages based on his top priority.