Bankruptcy and changes in the enterprise

Business Bankruptcy

When a company declares bankruptcy, workers may take 3 steps at the same time to recover any sums they may be owed.

In the event of bankruptcy, pay equity work must be done. If the work results in wage adjustments, they must be paid to the workers concerned.

1. With the CNESST

The CNESST may sometimes take legal action against the directors of a company that has declared bankruptcy. The worker may file a complaint in order to collect wages, vacation or statutory holiday indemnities and amounts owed for family or parental leave and absences. To allow the CNESST to take legal action against the directors, the person must file a proof of claim with the insolvency trustee charged with liquidating the bankrupt company’s assets.

2. With the insolvency trustee

The CNESST may not claim sums owed for indemnities with respect to notices of termination of employment or collective dismissal from the directors. The worker must enter these amounts on the proof of claim form filed with the insolvency trustee if they want to recover the sums they are owed in this regard.

3. With Service Canada

The worker may be entitled to a payment under the Programme de protection des salariés (PPS). The worker must claim the payment within 56 days of the date of the company’s bankruptcy.

Sale or purchase of a company

When a company changes owner, the staff’s employment relationship is maintained, as if no change had occurred. For this principle to apply, continuity of the company’s operation by the new owner must be demonstrated.

Claims for amounts owed under the Act respecting labour standards that were not settled before the change are not cancelled. In this case, the former owner and the new owner are solidarily liable for payment of the amounts owed. The former owner may not be held liable for claims arising from events that occurred after the sale of the company.