BUSINESS

Sears Canada Laid-Off Employees Won't Receive Severance Packages

It filed for creditor protection last week.

06/27/2017 12:25 EDT | Updated 06/27/2017 20:09 EDT

Sears Canada's move to file for creditor protection means that 2,900 employees will not be receiving severance.

Creditor protection blocks the retailer from potential legal action as it works on reversing its rapidly declining fortunes.

Part of the company's court-supervised restructuring involves letting go of 17 per cent of its staff, or 2,900 employees, and closing 59 stores.

In addition to no severance for laid-off workers, retirees may be cut off from medical, dental and life-insurance benefits if an Ontario court grants a request from Sears, according to The Globe and Mail. The retailer has also asked to stop paying into pension plans for both current and retired workers.

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The Globe reports that Sears's pension plan is running a $267 million deficit and the company would need to add $3.7 million every month to make up for it.

As long as court protection exists, no Sears Canada employee can pursue termination entitlements, said law firm Samfiru Tumarkin. If the company refuses to honour agreements for severance or salary continuances, "there is no recourse for those now left empty-handed."

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Under normal circumstances, laid-off employees would receive severance based on age, years of service and position. "So the older they are, the longer they've been there, the more senior their job, the more they'd get," explained employment lawyer David Vaughn to Global News.

The Wage Earner Protection Program could offer employees of a bankrupt company a small amount, said Vaughn, but people who would be entitled to $50,000-$100,000 would see a few thousand at most.

Last week, the Ontario Superior Court also authorized Sears Canada to obtain up to $450 million in financing to maintain operations, but that money does not apply to payouts for laid-off workers.

"It seems unfair because Sears is still operating some stores, so they're still obviously making sales and whatnot but the creditors including the employees will not be won't be getting any of that. And you can't go after any of that," said Vaughn.

Many doubt the company's ability to turn its luck around. It has worked on rebranding and modernizing its image in recent months but some analysts believe it's too late to save the Canadian company. Sears simply hasn't kept up with evolving market trends and the rise of online shopping.

"When the ship hits an iceberg and is sinking, rearranging the menu in the dining room is not the [solution]," John Williams, a retail analyst in Toronto, told CBC News. "It's too little, too late."

Sears Canada is currently at a dismal $0.62 a share on the Toronto Stock Exchange, down from the almost $20 a share it was trading for at the end of 2013. Its shares on the American Nasdaq stock exchange will also be suspended on July 3, reported The Financial Post.

Of the 59 stores the company is closing, 16 are in Ontario, 12 are in Alberta, 11 are in Quebec, and 5 are in B.C. The full list of locations is available here.

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