Ex-HBC staff may get a hardship fund to help with bills. Here’s how they work

Shoppers browse a Hudson's Bay in Toronto on Monday, March 17, 2025. THE CANADIAN PRESS/Christopher Katsarov

TORONTO — Ontario’s Superior Court is scheduled to decide next week whether to approve a fund the insolvent company will set up to help former Hudson’s Bay workers with expenses.

The more than 9,300 workers who lost their jobs last year when the company collapsed weren’t paid severance and some lost access to long-term disability and post-retirement health, dental and life insurance benefits.

The proposed hardship fund would give former HBC workers and retirees having trouble covering rent, mortgages, utilities, car loans and medical expenses one-time payments of up to $9,600. Those with medical or other emergencies could be given up to $2,500 extra.

Here’s a look at what hardship funds are and how they work.

What are hardship funds?

Hardship funds are sometimes set up by companies folding under the Companies’ Creditors Arrangement Act to aid their most vulnerable workers, who tend to be low-income earners, seniors and employees with disabilities, said Martyn Siek, an associate at Workly Law in Toronto.

The funds are not meant to cover lost severance or benefits but are aimed at helping former staff who have mounting bills, little or no other income coming in and often, ailments that could stand in the way of them finding future employment.

“They’re meant to prevent negative outcomes in the social assistance space, specifically eviction, utility disconnection, food insecurity, and in bankruptcy proceedings in the past, the inability to pay for urgent medical needs,” Siek said.

When have they been used?

Hardship funds are rare. Brandon Smith, senior vice-president of Ira Smith Trustee & Receiver Inc. in Vaughan, Ont., has only seen them crop up when telecommunications giant Nortel Networks Corp. and retailer Sears Canada collapsed.

Sears Canada allocated $500,000 to its fund. Those who qualified for money were paid monthly instalments of up to eight weeks of regular wages or a maximum $1,200 per week. There was also leeway to grant up to $2,500 in additional cash to anyone with medical and other emergencies.

Employees seeking money had to be living in Canada with no source of income. They also had to either be unable to work due to illness and incurring costs in excess of 20 per cent of their disability or Employment Insurance payments, or not receiving EI because they were ineligible or had exhausted that form of support.

Nortel had a $2.3 million hardship fund. It offered former employees up to $1,200 per week. Those with medical or other emergencies could get an additional $5,000 per week. Pensioners and survivors were eligible for a maximum payment of $10,000.

To be eligible, staff had to be enrolled in one of Nortel’s defined-benefit pension plans and have their pension reduced or be a pensioner, survivor of a pensioner or receiving disability payments from Nortel.

How does a company figure out who can get money from a fund?

Under the proposal before the court, HBC employees wanting cash would have to fill out an application asking for details about any EI, social assistance or other income they are receiving, as well as the state of their health benefits and personal circumstances necessitating a payment.

The monitor, a court-appointed third-party meant to guide a company through creditor protection, will then assess applications. Anyone the monitor does not approve could have their application reassessed by a hardship committee made up of representatives for the company, employees and monitor.

If the employer is going out of business, how does it find money for the fund?

HBC’s hardship fund proposes using cash from three sources: a Zellers health and welfare trust valued at about $9.9 million, an HBC reserve fund worth about $1.6 million and $250,000 the department store currently has on hand.

Smith said sometimes companies generate the cash for a fund when they liquidate but would need permission from a court to give that money to ex-staff because it would divert money from creditors and lenders owed.

Keith Murray, a Vancouver-based partner at Mathews, Dinsdale & Clark LLP, says he’s also seen hardship funds formed with money that directors give “on a gratuitous basis outside of any bankruptcy process.” In the case of Sears Canada, the fund was made up of forgone money once allocated to pay bonuses to key employees who stuck around while the business wound down.

How long do the funds last?

Hardship funds usually involve a “modest” amount of money that doesn’t usually get replenished, said Murray. That means once the money runs out, employees have to look elsewhere for assistance.

The Sears Canada hardship fund lasted for about three years and wrapped up without all the available cash being used, HBC’s court applications shows. It said about 104 people applied for the money and collectively received $176,000.

What do lenders and creditors think of hardship funds?

While lenders or creditors might oppose hardship funds because it reduces the amount of cash they can recover, Smith said it looks “bad and greedy” for anyone to oppose the creation of such a program.

“A court’s going to take a dim view when they try to be obstructionist to something that will essentially provide a few hundred dollars a week to the most disadvantaged former employees,” he said.

This report by The Canadian Press was first published Feb. 5, 2026.

Tara Deschamps, The Canadian Press