The WEPPA, Purposive Interpretation and Vulnerable Creditors
INSOL International Technical Series Issue No. 21, December 2011
17 Pages Posted: 30 Mar 2013
Date Written: December 1, 2011
This paper will consider the wage earner provisions and Ted Leroy Trucking Ltd. v. Century Services Inc. the only appellate case to consider the new amendments, and, in particular, the definition of “wages”. In Leroy Trucking, Ted Leroy Trucking Ltd. (“TLT”) made an assignment into bankruptcy when it failed to restructure its business. At issue in this case was the extent of the definition of “wages” in WEPPA and the BIA. The secured creditor argued that the definition was restricted to encompass amounts owing directly to the employee. The union representing the employees, however, took the position that the definition encompassed all liabilities arising from the collective agreement between the union and the TLT, “irrespective of whether the amount is payable directly to the employee or, on the employee's behalf, to a third party such as the union, a health and welfare trust, or a third party service provider”. Both the trial and appellate courts found that “the term ‘wages’ in the WEPPA includes not only amounts due to be paid directly to the employee but also other amounts that were earned by the employee and which were directed to be paid to a third party by the employee directly or pursuant to a contract such as a collective agreement covering the employee”.
The paper will also consider the position of employees before and after their employers’ bankruptcies and examine how “wages” has been interpreted in the past and how that influenced the Leroy Trucking decision. The broad interpretation the Court gave to the term “wages” in Leroy Trucking can be given one of two interpretations, either that the amounts payable to a third party would go directly to that third party upon an employer’s bankruptcy, or that the amounts payable would be included in the payments that go to the employees, thereby expanding “wages” for the benefit of the employees. Each interpretation has its advantages and drawbacks but the latter is more in tune with the purpose of the legislation and it avoids practical application problems that would arise on the former interpretation, since the legislation, on its face, does not appear to make allowances to payments for parties other than employees.
Keywords: WEPPA, employees, restructuring, CCAA, vulnerable creditors, Wage Earner Protection Program Act, wages, priority
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