Metroland Media Group Ltd.
April 7, 2024
WEPP Applications are being processed by Service Canada
As we reported on December 22, 2023, we arranged with the Company to appoint Grant Thornton Limited (“GT”) as the Receiver over certain assets of Metroland on December 8, 2023, in addition to GT’s role as the Proposal Trustee. The receivership makes the Wage Earner Protection Program (“WEPP”) automatically available to the employees. Previously, WEPP was not available to Metroland employees.
For receiverships in 2023, WEPPA pays up to $8,278.83 to each terminated employee based on the employee claim amounts submitted by our firm and accepted by the Receiver. These are the same claims that were prepared and filed by our firm for payment under Metroland’s Proposal process. We calculated the total amount of all non-union employees’ claims to be approximately $22.3M (originally GT had estimated the employee claim to be $14M). The amount we calculated includes a priority claim for the amount of unpaid pension contributions owing to the employees during their severance notice period in the amount of approximately $1M which is to be paid in full, ahead of the claims of unsecured creditors. Following negotiations, GT accepted this important claim for the employees.
GT has filed the employee claim information with Service Canada in support of the employees’ applications for a payment under the WEPP. Service Canada is currently processing the applications and WEPP payments are being made to former employees. If you applied for WEPP and have not received a payment, please contact Service Canada for an update regarding your application: WEPP Information Line (1-866-683-6516).
Please note that WEPP payments are paid by Service Canada, not from the Proposal of Metroland and you will not be clawed back as a result of the dispute involving Service Canada’s “subrogation” claim that applies to the distributions that are payable to the employees from the Proposal funds (described below).
Dispute over the amount that Service Canada can claw back from distributions to employees: $800K or $2.8M?
As we previously reported on December 21, 2023, the Department of Justice wrote to the Proposal Trustee saying that Service Canada expects to be refunded from the Proposal funds payable to the employees the full amount of all WEPP payments made to former employees (approximately $2.8M) before employees receive any distribution in respect of their unsecured claim from the Proposal funds. With our support, on January 5, 2024, the Proposal Trustee responded disagreeing with Service Canada’s approach, however Service Canada held its position.
The position of Service Canada would reduce net recoveries to the terminated employees from their unsecured severance pay claims by approximately $2M out of a total $7.3M (including the amounts received from WEPP).
We wrote to the Department of Justice on January 17, 2024, stating our position that under the WEPP Act, Service Canada is only entitled to subrogate to the employee’s right to the amount of their unsecured distribution and recover a pro-rata share of distributions in the amount of the WEPP payment made (approx. $800K). As such, Service Canada is not entitled to a full refund of its WEPP payment and should only recover distributions from the estate at the same rate as former employees.
Despite our letters, the Department of Justice maintained Service Canada should receive the full amount of all WEPP payments made to former employees before employees receive any distribution in respect of their unsecured claim.
The Proposal Trustee has brought a motion for directions to decide this issue before the Ontario Superior Court of Justice on April 8, 2024. Given the amount at stake for former employees (approximately $2M), we also prepared submissions that Service Canada is only entitled to recover $800K in respect of its subrogation claim.
Our materials in respect of this motion are available here.
