The Canadian Bar Association
Employment & Labour

Situation for former Sears employees 'pretty bleak:' O’Donnell

Canadian Press THE CANADIAN PRESS

TORONTO — An Ontario judge has given Sears Canada the green light to immediately proceed with reaching out to potential buyers while it's under creditor protection.

Ontario Superior Court Justice Glenn Hainey approved the motion for the sale and investor solicitation process Thursday, following hours of discussions between lawyers representing the company, its lenders and retirees and laid-off employees.

According to the decision, the national retailer and its court-ordered monitor, FTI Consulting Inc., can select one or more successful bids by Oct. 25.

In separate documents filed by Sears Canada's lawyers prior to Thursday's hearing, the retailer's chief financial officer said it's ``crucial'' to begin liquidation sales of inventory no later than July 21 and to complete them by Oct. 12. Hainey is expected to hear that motion Tuesday.

Sears Canada announced in June that it planned on closing 59 locations across the country and cutting approximately 2,900 jobs as part of a restructuring under the Companies' Creditors Arrangement Act.

The department store owner wants to shutter dozens of stores in the coming weeks while it negotiates with potential buyers who might acquire some or all of the company's remaining assets, pending court approvals.

``I'm in total shock this happened,'' said Zobedida Maharaj, who was one of dozens of former employees who packed an overflowing Toronto courtroom to hear Thursday's proceedings.

Maharaj, 53, said she had worked at Sears Canada for 28 years before she was laid off at the end of March when her store was closed.

The senior manager of operations and merchandise said she was initially told she would get eight weeks of severance and benefits, but was cut off June 22 when the company secured temporary court protection from creditors.

``It's like getting slapped in the face,'' Maharaj said.

Earlier in the day, Sears Canada struck a deal over benefit and pension payments to retired employees. The retailer had initially asked the court for permission to immediately halt payments for pension, health and dental benefits for laid-off employees, retirees and surviving spouses due to a severe cash crunch, but later agreed to continue payments to retirees until Sept. 30.

In an interview with AdvocateDaily.com, Toronto employment lawyer Sean O’Donnell says the situation is “pretty bleak” for terminated Sears employees.

The company has obtained protection under the Companies’ Creditors Arrangement Act (CCAA) to allow it to continue operating “as a going concern” while it restructures.

“In this scenario, the court's emphasis is on protecting the employer not the terminated employees,” explains O’Donnell, principal of SJO Legal Professional Corporation.

Many employees were upset over not receiving the severance they were expecting.

“This is particularly galling for long-term employees who have spent decades with Sears and are being told that, while they may have otherwise expected significant severance packages, a large portion of their claims will now rank alongside those of other unsecured creditors, with terminated employees left fighting over a carcass,” says O’Donnell.

If Sears declares bankruptcy, employees' unpaid wages and other benefits will be given priority through the federal Wage Earner Protection Program (WEPP). O’Donnell says the maximum an employee can expect to recover through this process is approximately $3,500.

“The sad reality is that terminated employees are a low priority in the restructuring/insolvency process and employees will most likely not receive their full severance entitlement, which may include salary, benefits, pension contributions, etc.,” he says.

“This is a particularly bitter pill to swallow for the rank and file given that the courts have approved millions in bonus payments to senior management involved in the restructuring,” adds O’Donnell.

Many former employees said the company's compromise on temporarily paying retiree benefits and pension compensation has them cautiously hopeful.

Pina Rupa, 58, from Vaughan, Ont., said outside the courthouse that she hoped Sears Canada, where she worked for nearly 40 years, would reinstate her benefits and severance which she said were worth tens of thousands of dollars.

``I was such a loyal employee,'' said Rupa, who was laid off from the company's head office.

Employment lawyer Susan Ursel, whose firm represents more than 17,000 non-unionized former and current employees, said her law office is filing motions to ask the court to reinstate benefit, severance and pension payments to the workers who were laid off. It is also asking to set up a temporary hardship fund for those who are in dire need of cash and health benefits.

Ontario Premier Kathleen Wynne said her government is paying close attention to the situation but there isn't a role it can play at this point.

– With files from AdvocateDaily.com

© 2017 The Canadian Press

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