After nearly 25 years with Sears Canada, Kim Throop fell victim to company-wide layoffs when her Cobourg store closed in March. To make matters worse, just three months later she was told she’d no longer be getting the severance she was entitled to.
“It was always a really great place to work. We always supported Sears with positive attitudes,” she explained. ” But when the news of this came out, obviously we were reeling from it. It was like a slap in the face, really,”
Throop said the store closure was a shock that left several long-time employees suddenly out of work.
“Cobourg is a small town. It wasn’t like there were hundreds of us in there, but there were enough of us and a lot of us were full time,” she said. “There’s really not a lot of full-time work in this little town.”
In April, Throop began receiving her severance payments — which were to total approximately $16,000.
Throop said last week she was out having coffee with a group of former Sears employees and when they got home, each had received a letter from the company informing them the severance payment they’d received the week before would be their final payment.
“We’re all relying on that money, so that’s why it is like a slap in the face,” she said. “You’re relying on it to pay your rent or your mortgage or any of your expenses, and now there’s nothing and you feel so helpless.”
Throop calls severance loss a “tough pill to swallow” and is now wondering if the company offered severance payments because it knew trouble was on the horizon.
“They opted to do everybody with these severance payments. Did they see the writing on the wall? Yes, they probably did and that is probably why they did it that way,” she said.
After years of declining sales, Sears Canada sought creditor protection last month and began restructuring — which included closing 59 locations and cutting approximately 2,900 jobs.
In a statement released by the company, Sears said it couldn’t continue without restructuring and cash constraints meant it would be unable “to make payments to certain stakeholders.”
“Cash constraints at the Sears Canada Group have resulted in challenges for a number of valued stakeholders, including associates whose positions were recently eliminated or will be eliminated when a number of Sears Canada locations across the country close, retirees, suppliers and landlords,” the statement reads.
Howard Levitt, senior partner with Levitt LLP, said there’s absolutely nothing these workers can do to get their all of their money back.
“They’re not secured creditors. The bank may have a security on any debts so they would be ahead of them. If they were not paid their wages for working, as opposed to severance pay, they’d have priority … but for severance pay they don’t have any priority,” he explained.
“At the end of the day, secured creditors will take whatever there is and it will never get to the unsecured creditors. And if it does get to the unsecured creditors, then it’s going to be pennies on the dollar.”
Sears Canada says it will go to court next week to seek approval to suspend some benefits for its retired employees as well as special payments to its defined benefit pension plan.
The ailing retailer says it will also ask the Ontario Superior Court on July 13 to extend court protection from creditors to Oct. 4, giving it time to seek out potential investors and buyers and consult with its landlords, employees, suppliers and creditors.
Sears Canada had already indicated in its initial court filings on June 22 that it planned to suspend life insurance, health and dental benefits to certain employees during the restructuring.
Levitt said Sears is doing what it can to stay alive and if the courts thought it wasn’t right, they wouldn’t allow this action to continue.
“What they’re doing is fine. What they’re doing is probably the only thing they can do, which is cut off all payments except for the essentials to keep functioning so they can live to fight another day – maybe,” he said.
“If they continued like this, they’d have gone bankrupt. If they went bankrupt there’d be no money for anybody. So the court is looking at it and saying ‘what makes sense?’ ‘What is going to benefit the most Canadians?’ And what’s going to benefit the most Canadians is that some get nothing but others at least keep a job for a while and maybe things work out forever.”
Throop’s daughter Michelle McWalters has started a petition online to draw attention to the way these employees have been treated.
“A lot of these women and men have been there so long they haven’t had to worry about other employment,” she explained. “They don’t know the unemployment system; they don’t know severance packages. I feel like they’re getting taken advantage of.”
McWalters knows there’s not much of a chance these workers will see the severance they’re owed but she’s now hoping an online push can be made to change legislation to protect others.
“If they’re legally within their rights and there’s nothing we can do … we can’t bully them into paying all these people,” she said. “So lets get some notice on the petition. Let’s try to get it so that people are included in these bankruptcy protections. Let’s change the legislation to make sure that employees are considered as creditors owed.”
“I know the banks are very important too, but these are people who actually built this company up.”
Sears Canada expects to complete its sale and investment solicitation process by Oct. 25.
With files from The Canadian Press