Law to protect workers' wages now in effect

Workers now guaranteed $3,000 when employer goes bankrupt

A long-waited law that would put unpaid workers ahead of other creditors in a bankruptcy proceeding is now in force, the federal minister of labour announced early this week.

“Hard working men and women will no longer be last in line to receive their unpaid wages,” said Minister of Labour Jean-Pierre Blackburn. “Through the Wage Earner Protection Program, workers in Canada will have their salaries protected and their rights safeguarded.”

The Wage Earner Protection Program guarantees workers timely payment of their wages and vacation pay when their employer declares bankruptcy.

The amount protected equals four weeks of maximum insurable earnings under the Employment Insurance Act, or about $3,000.

Between 10,000 and 20,000 Canadians make claims on unpaid wages every year. Before this law came into effect, workers’ claims for unpaid wages took a backseat to claims by many other creditors, including secured creditors and government claims.

It is estimated that only one in four were successful in getting paid, and even then, they received on average only 13 cents on the dollar.

What’s more, when back wages were paid out, it was typically at the end of lengthy bankruptcy proceedings that could take up to three years.

“This is a real step forward for all workers. Too often we saw employees suffer lost wages, benefits and even their pension savings because banks and other creditors were given priority,” said Ken Georgetti, President of the Canadian Labour Congress, in a statement.

“With a new law that puts government on their side and offers the security of a guaranteed last paycheque and pension contributions, working Canadians will be better off.”

The wage protection law came into force more than half a year after it received royal assent on Dec. 14.

Just as protracted was its passage into law. It was first tabled in 2005 by the NDP as the Workers First Bill and was among the concessions Paul Martin’s Liberal government made to the NDP for supporting the government’s budget in the spring of 2005.

Martin’s government then rushed the bill through the parliamentary approval process in November 2005 but delayed its proclamation.

When the Conservatives took power, it introduced a version of the legislation as Bill C-62 in December 2006, but it wasn’t until the legislation was introduced again as Bill C-12 that it was passed.

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