Sears Canada to create fund for laid off employees who received no severance

Sears Canada store is seen in this undated file photo. (Ryan Remiorz / THE CANADIAN PRESS)

TORONTO -- Lawyers representing workers at Sears Canada and the company have reached a deal to create a hardship fund for former employees who were denied severance payments when they lost their jobs at the retailer.

The $500,000 for the fund will come from money set aside to pay bonuses under a key employee retention plan at the retailer, which is restructuring under court protection from creditors.

Susan Ursel, who represents the current and former employees, said Tuesday the creation of the fund has the support of the company and the court-appointed monitor in the restructuring.

"The fund is designed to assist people in situations of precarious hardship, which is to say they are without sufficient resources and are experiencing genuine hardship," she said.

Ursel noted the fund will not make employees whole in regards to severance payments they would have been entitled to if Sears Canada was not operating under the Companies' Creditors Arrangement Act, but it will help those in the most precarious financial situations.

"The money itself is coming from executive bonuses that are earned under the key employee retention program, but are being forgone in favour of putting the money into this hardship fund," she said.

The hardship fund requires approval by the court overseeing the retailer's restructuring at a hearing set for Friday.

"We share everyone's concerns about the plight faced by some of our former employees and we are glad to see a solution in place that can at least help those most in need," Sears spokesman Vince Power wrote in an email.

Former employees who would have otherwise been eligible for severance payments when they lost their jobs can apply to receive money from the fund provided that they meet certain hardship criteria.

Under the agreement, those who have been approved to receive a payment may receive up to eight weeks of wages, up to a maximum weekly amount of $1,200, payable in monthly instalments.

The committee overseeing the fund will also have the discretion to approve additional amounts in cases of medical and other emergencies up to $2,500.

Sears Canada was criticized last month when it received court approval to pay $9.2 million in retention bonuses to keep key employees on board while not paying severance to laid-off workers during its court-supervised restructuring.

The retailer announced a plan in June to close 59 locations across the country and cut approximately 2,900 jobs, without severance, while under the Companies' Creditors Arrangement Act.