Canada workers get new protection in bankruptcies

Mon Jul 7, 2008 2:28pm EDT
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OTTAWA (Reuters) - Employees of Canadian companies that have declared bankruptcy will get compensation for unpaid wages under a new government program that went into effect on Monday, Labor Minister Jean-Pierre Blackburn said.

The Wage Earner Protection Program will cost the federal government an estimated C$35 million ($34.3 million) a year. The cost could rise if the economy turns sour, and the payouts are indexed to inflation.

About 10,000 to 20,000 workers in companies that have declared bankruptcy file claims for unpaid wages each year. Three-quarters of them never receive any payment and those who do only get about 13 cents for every dollar owed, Blackburn told reporters.

"This placed an unfair burden on the workers. They had to go to the back of the line, behind a long line of secured creditors to claim their unpaid wages and vacation pay," he said.

The program would pay eligible workers an amount up to about C$3,162 over four weeks and then seek to recover the money from the employer.

The Canadian Labour Congress applauded the program, which had obtained unanimous approval in Parliament.

The program was part of a larger reform of the bankruptcy and insolvency law that also puts unpaid wage claims ahead of secured creditors over the current assets of the bankrupt firm.

($1=$1.02 Canadian)

(Reporting by Louise Egan; Editing Peter Galloway)