When an Ontario company goes into receivership, a secured creditor takes over the business assets. Fortunately, Ontario employees are strongly protected: you can apply for the federal Wage Earner Protection Program (WEPP) to recover your lost wages, and you hold a legal “super-priority” claim over the company’s assets for up to $2,000 CAD.
📍 Arriving at your job in Mississauga, London, or Ottawa only to find a legal notice taped to the front door is incredibly confusing. Many employees assume the company has gone bankrupt, but the notice might actually state the company is in “Receivership.” While bankruptcy and receivership are different legal processes, the result for the workers is usually the same: unpaid wages, frozen bank accounts, and sudden unemployment.
⚠ In a receivership, a bank or secured creditor steps in to seize the company’s assets to pay off a massive debt. As an employee, you might feel like you are at the bottom of the food chain, but Canadian law actually grants workers special protections. This guide will explain how to assert your rights during a receivership and secure the money you worked for.
Step-by-Step Process for Employees During Receivership
📝 When a Receiver (usually a major accounting firm) takes control of an Ontario business, they are in charge of everything. Your old boss no longer has the power to write you a paycheque. To get paid, you must deal directly with the Receiver and the federal government. Here is the step-by-step process.
Step 1: Identify the Appointed Receiver
🔍 The first step is to figure out who is legally managing the business. The legal notice on the company door or the employer’s website will list the name of the Receiver (e.g., a Licensed Insolvency Trustee firm). Contact their office immediately and inform them that you are an employee who is owed wages.
Step 2: Understand Your Super-Priority Status
💬 Under Canadian insolvency laws, employees are granted a “super-priority” charge over the company’s current assets (like cash and inventory) for up to $2,000 CAD in unpaid wages. This means that for the first $2,000 you are owed, you actually get to stand in line ahead of the powerful banks and secured creditors. The Receiver is legally obligated to recognize this priority when dividing up the company’s cash.
Step 3: Submit Your Proof of Claim
🗂 Just like in a bankruptcy, the Receiver will not automatically hand you money. You must submit a formal “Proof of Claim.” Detail every single hour of unpaid work, your outstanding vacation pay, and your termination pay. Provide your past pay stubs and employment contract. The Receiver will review your claim against the company’s payroll records to validate the amount.
Step 4: Apply for WEPP (Wage Earner Protection Program)
🏛 If the company does not have enough liquid cash to pay your super-priority claim, or if you are owed much more than $2,000, you must turn to the federal government. A receivership triggers your eligibility for WEPP. The Receiver will provide you with the necessary forms, and you will apply online through Service Canada to receive up to approximately $9,000 CAD in compensation.
Step 5: Consider Pursuing Directors for Unpaid Wages
💼 If WEPP does not cover the full amount you are owed, Ontario law provides an additional backup plan. Under Section 81 of the Employment Standards Act (ESA), the corporate directors of a company are personally liable for up to six months of unpaid wages and up to 12 months of vacation pay. You can file a claim with the Ministry of Labour to go after the directors’ personal assets (like their houses or cars) if the corporation fails.
How Much Does it Cost in Ontario?
💵 You do not have to spend your own money to recover your wages during a receivership.
- Dealing with the Receiver: Submitting a Proof of Claim is free. The Receiver’s massive fees are paid by the secured creditors, not the employees.
- WEPP Application: Filing for the Wage Earner Protection Program costs $0 CAD.
- Ministry of Labour Claim against Directors: This is a free provincial service. Filing an ESA claim costs $0 CAD.
How Long Does the Process Take?
🕘 Corporate receiverships are notoriously slow. It can take the Receiver 1 to 3 years to fully liquidate the company’s assets and distribute funds. Because of this massive delay, your fastest route to cash is applying for WEPP. Once the Receiver gives you your WEPP paperwork, Service Canada usually deposits the funds into your bank account within 35 to 45 days.
Frequently Asked Questions (FAQ)
Do I keep working if the company is in receivership?
Sometimes. A Receiver may decide to keep the business running temporarily to sell it as a “going concern.” If the Receiver asks you to keep working, they are responsible for paying your ongoing wages for any new hours you work after they take control.
Is severance pay covered under the $2,000 super-priority?
No. The $2,000 super-priority only applies to unpaid wages, commissions, and vacation pay earned in the six months before the receivership. It does not apply to severance or termination pay. For severance, you must rely on WEPP.
What if the Receiver disputes the amount I am owed?
If the Receiver issues a Notice of Disallowance claiming you are owed less than you stated, you have 30 days to appeal their decision to the Ontario Superior Court of Justice. You should consult an employment lawyer immediately if this happens.
Can the company emerge from receivership and hire me back?
It is possible. Sometimes a company restructures successfully or is bought by a new owner. If the new owner hires you back, your previous years of service might be recognized for future severance calculations, but you must read the new employment contract carefully.
Does directors’ liability cover my severance pay?
No. In Ontario, corporate directors are personally liable for unpaid regular wages and vacation pay, but the ESA specifically exempts them from personal liability for termination pay and severance pay.
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