Jenny Craig bankruptcy leaves former Alta. employee out thousands: 'I feel traumatized'

Former Jenny Craig employee out thousands An Edmonton woman says she's out tens of thousands of dollars after the company went bankrupt. Amanda Anderson reports.

A former Jenny Craig employee in Edmonton expects to lose tens of thousands of dollars due to the company filing for bankruptcy.

When news broke in early May of Jenny Craig's bankruptcy filing in the U.S., Claudia Miranda was a little more than one month into a six-month sabbatical.

Years earlier, she had enrolled in a program available to centre directors like her: Over five years, directors could agree to let a total of $25,000 from their annual bonuses be set aside for a sabbatical. The company would match their contributions for total compensation of $50,000 during the leave.

On sabbatical, Miranda was being paid twice a month. When the bankruptcy news broke, she had nearly five full months of sabbatical left.

"I wasn't sure what that meant for my money or what to expect," Miranda recalled during a recent interview.

An insolvency trustee found she was owed a total of $51,249.07, including termination pay and other compensation she was entitled to.

She expects to recover only about $8,200 through a program provided by the Canadian government.

"There's been a lot of emails back and forth with the bankruptcy trustee and in the end, I was pretty much told there wasn't any money, so I wouldn't be getting the majority of what I was owed," Miranda told CTV News Edmonton.

$250M IN DEBT

Miranda's sabbatical starting April 1 was confirmed in January 2023.

The notification letter simultaneously informed her that the company had decided to "sunset the sabbatical program effective immediately" after "thorough review and consideration of Jenny Craig's benefit offerings, and to ensure consistency across the brand."

Before the end of the first month of Miranda's sabbatical, the California-based weight-loss giant notified workers it was "winding down physical operations" and hunting for a buyer, then on May 3 that it would close "due to its inability to secure additional financing," NBC News reported.

Jenny C Holdings LLC and affiliates filed for Chapter 7 bankruptcy by the end of that week, according to BNN Bloomberg, 40 years after the first brick-and-mortar Jenny Craig locations were opened. It held about $250 million of debt.

In the weeks that followed, the Jenny Craig website teased a return. In early July, competitor Willful Inc. – which owns Nutrisystem – confirmed it had bought Jenny Craig's brand assets out of bankruptcy and acquired its intellectual property from private equity firm HIG Capital. The intellectual property was valued at US$10 million, according to court documents.

Reading that news amplified Miranda's anger, the Jenny Craig employee of nine years told CTV News Edmonton.

"Where does that money go?" she asked. "How does that not get sent to the employees that were screwed over in this process? Not to mention clients."

THE EMPLOYEE EXPERIENCE

Speaking generally about situations like Miranda's, a University of Alberta associate professor specializing in bankruptcy, insolvency, and debtor creditor law said workers may have two options: they could either claim the outstanding amount as their property or a debt.

In the former strategy, an employee would claim the amount as property that the company was holding in trust.

"Imagine that a dry-cleaning company goes bankrupt and your suit is at the dry cleaners. They don't get to sell off your suit and pay their creditors. That's your property," Anna Lund said.

"The key language is 'in trust for me. That was always going to be mine.'"

The success of the claim would depend on how and where the company held the money, she added.

In the latter strategy, the employee would be subject to the stay issued on the bankrupt company and an insolvency trustee would determine where they fell in the pay-out order. Canada attempts to protect employees by prioritizing them higher on the list of creditors, improving their chances of receiving reparations.

"If there's any property left in the bankrupt company," Lund noted.

JC Weight Loss Centers Canada Ltd. listed $1 in cash assets, according to documents on the insolvency trustee's website.

Of the some $51,000 the insolvency trustee found Miranda was owed, she could claim $14,583.07 through Canada's Wage Earner Protection Program. However, compensation in 2023 is capped at $8,278.83.

"It doesn't cover anywhere near of what the company did owe me," Miranda commented.

'TRAUMATIZED'

"I feel traumatized feeling secure that you can earn wages and they will come to you," Miranda added.

"I had no idea this was a risk and I feel like other companies should be careful when putting trust in their employers."

Although Lund pointed out Canadian workers are protected somewhat by the federal government, she acknowledged they are disadvantaged by the power imbalance.

"You could say to the employer, 'You can hold back five grand every year and put it into the sabbatical fund, but I want it held in a separate fund and I want there to be some sort of control so I know you're not taking that money that is my money and using it to pay bills you can't pay.'

"Realistically, though, if an employee says that to their employer, what's their employer going to say?" she asked.

Lund advises employees to contact the insolvency trustee for help if their employer declares bankruptcy.

"They're regulated professionals. People often view them as being the debtor's helper, but they're supposed to be even handed as between the debtors and creditors. So they're a real source of information about how to proceed."

With files from CTV News Edmonton's Katie Chamberlain and Amanda Anderson