Super-Priorities: Update Regarding"Wages" Under the Wage Earner Protection Program Act
In May of 2010, we reported on the decision of the British Columbia Court of Appeal in Ted Leroy Trucking v. Century Services Inc. In that decision, the Court of Appeal upheld a decision of the B.C. Supreme Court which determined that employee “wages” recoverable under the Wage Earner Protection Program Act (Canada) ("WEPPA") include components from an employee's compensation package that are remitted by an employer to third parties on behalf of an employee. This would include payments for items such as union dues or extended health coverage provided by a third party service provider. The highest ranking secured creditor of the employer argued unsuccessfully that such protection only extends only to funds payable directly to employees.
This decision was important because it confirmed the scope of employee wage claims against a bankrupt employer that would benefit from a super-priority charge under the Bankruptcy and Insolvency Act (Canada).
The secured creditor sought leave to appeal to the Supreme Court of Canada. However, on December 9, 2010, the Supreme Court of Canada denied such leave.
As a result, lenders should continue to account for such indirect payments when structuring a loan transaction, including in the calculation of any borrowing base
