 I have noted before that employees usually get screwed out of their severance pay when their employer goes bankrupt, because employees are ranked lower down the pecking order of creditors than banks and other secured creditors. This is especially significant during a recesssion, since large numbers of employers will likely go belly up.Â
The CAW is holding a rally at Queens Park today to pressure the Liberals to make changes to the provincial laws governing severance pay. Among the changes they want are:
- A new government fund that would guarantee the payment of severance pay up to $10,000 per person when employers won’t or can’t pay. The NDP had a program like this in the early 1990s (another bad economic period) called the Employee Wage Protection Program, but it was repealed by the Conservatives. The federal government has a plan called the Wage Earner Protection Program, which allows employees to claim up to $3,254 for unpaid amounts (including severance pay).
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- An end to the minimum 5 year qualification period for entitlement to severance pay and new look at the other eligibility requirements that require an employer to have an annual payroll of $2.5 million or to have terminated 50 employees or more in a 6 month period. Keep in mind that the requirement to pay severance only applies to employers who meet one of these two strict requirements.  For everyone else, there is no entitlement to severance pay at all, and many, many, employees in Ontario work for small employers who would never be required to pay severance pay under current restrictions.
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- An end to practice of suspending employment insurance benefits until severance payments have been used up (this would require a change to the Federal employment insurance legislation)
The full CAW submission is available here. Do you think that state should fund severance pay when employers won’t pay?  If you are interested in this issue, and in seeing a labour protest in action, head on down to Queens Park today at noon.