Bankruptcies

Federal bankruptcy legislation sets out the rights and obligations of the various parties involved in bankruptcy or other insolvency proceedings.

Employment Standards has no jurisdiction to act on behalf of an employee when an employer is in bankruptcy.  Therefore, complaints are not accepted by Employment Standards once an employer is in bankruptcy.

What Can An Employee Do When the Employer Goes into Bankruptcy?

An employee should contact Industry Canada, Office of the Superintendent of Bankruptcy (OSB)

Industry Canada
Office of the Superintendent of Bankruptcy (OSB)

Edmonton
Phone: (780) 495-2476
Fax: (780) 495-2466

Calgary
Phone: (403) 292-5607
Fax: (403) 292-5188

to determine:

• whether a company has been placed into bankruptcy;
• the date of the bankruptcy; and
• the name of the appointed Trustee.

To register a claim, employees must contact the Trustee to obtain, complete and return a 'Proof of Claim' form.

It is important that employees of the bankrupt act quickly to ensure the Trustee is aware of their claims, as there are time limits imposed on creditors for proving their claims for outstanding monies.

Although an employee may have a ‘preferred status’ under the Bankruptcy and Insolvency Act, this does not mean they will receive funds. In most instances, employees do not collect their earnings. This is because there are insufficient funds to cover even the secured creditors who have first priority.

An employer may enter bankruptcy during an Employment Standards complaint investigation. When this occurs and Employment Standards has received 'Proof of Claim' forms from the Trustee, Employment Standards will forward a form to every employee who has filed a complaint. If possible, Employment Standards will inform each complainant of the amount owed, and provide the employee with the name, address and telephone number of the Trustee.

Where the bankruptcy of an employer occurs after Employment Standards has completed an investigation and filed a judgement(s) against that employer, Employment Standards will forward copies of the outstanding judgements to the Trustee for consideration.

If no ‘Proof of Claim’ forms have been received from the Trustee, Employment Standards will notify each complainant that it has lost jurisdiction and provide information as to the amount owed to that complainant, if that amount has been determined.

Where a bankrupt employer hires new employees after the date of bankruptcy, Employment Standards will accept a complaint for investigation. This is because the liability for earnings arises after the bankruptcy. Therefore, the matter is outside the jurisdiction of the Trustee and the Trustee has no authority to consider the employee’s claim.