The 2,900 Sears Canada employees recently laid off will not be receiving severance packages and retirees who worked with the company for years may be losing all their benefits, according to court filings.
On June 22, the retailer announced it is seeking court protection from its creditors, planning to lay off 17 per cent of its 17,000 employees and closing 59 locations as a result of years of dwindling sales.
The company plans to continue operating while it restructures and said it intends to emerge as a leaner, more focused operation. Sears has secured $450 million to help re-brand, but employees who were let go won’t be seeing any of this money.
“They are not going to get much severance, if any,” employment lawyer David Vaughn told Global News.
Vaughn said under normal circumstances laid-off employees would receive severance based on age, years of service and position.
WATCH: Sears Canada cutting 2,900 jobs, closing 59 locations across country
“So the older they are, the longer they’ve been there, the more senior their job, the more they’d get,” he said. “If you’re there for 30 years and you’re in your 50s or 60s, you would normally get 24 months’ pay for severance.”
But the 2,900 employees will not be getting the severance. This is because the “normal rules” don’t apply when a company applies for protection, Vaughn said. The Companies’ Creditors Arrangement Act protects against that and relieves a company of having to pay severance.
Some employees may get a small amount under the Wage Earners Protection Program, which will be a couple of thousand dollars.
“So you could have people entitled to $50,000 or $100,000, getting a few thousands dollars unfortunately,” Vaughn said.
Sears also plans to file a motion with the courts to request permission to suspend monthly payments to the employees’ pension plan because the company is running low on cash, according to a court filing. The retailer also intends to stop payments to a post-retirement benefit plan that provides retirees with life insurance and medical and dental benefits, according to the filing.
WATCH: Why employers are getting away with breaking Canada’s labour laws
“It seems unfair because Sears is still operating some stores, so they’re still obviously making sales … but the creditors including the employees won’t be getting any of that. And you can’t go after any of that,” Vaughn said.
Global News reached out to Sears Canada for an interview, but the company did not want to comment.
— With files from Reuters