Hudson’s Bay Company (HBC), once a cornerstone of Canadian commerce, is facing a profound crisis. With deep historical roots stretching back to the 17th century, HBC has long been regarded as a symbol of national identity and retail stability. However, in a rapidly shifting economic landscape, the company’s legacy has proven insufficient to shield it from the commercial realities of the 21st century.

In a move that stunned the retail sector, HBC recently filed for protection under the Companies’ Creditors Arrangement Act (CCAA). The request was made as part of a larger plan to restructure its business operations and reduce liabilities, amid reports of widespread job cuts and pending store closures. The CCAA allows insolvent companies in Canada to avoid bankruptcy by developing a plan with creditors to restructure debt and operations. While this may preserve some business value, it also opens the door to sweeping layoffs and reduced compensation for employees.

According to court documents, HBC is seeking permission to implement a more flexible legal structure to facilitate layoffs and reduce severance obligations. This restructuring would allow the company to shed leases, renegotiate vendor agreements, and potentially wind down large segments of its operations without triggering the full scope of employee protections that typically apply under Ontario employment law.

Strategic Downsizing or Legal Loophole? Understanding the CCAA Implications

While using the CCAA is a common strategy for struggling businesses, its impact on employees can be severe. Under CCAA proceedings, the court may authorize the suspension of certain employment obligations, including severance and termination notice requirements. This raises troubling questions for HBC workers: Will they receive what they are owed? Can severance be reduced or avoided entirely through the courts? What recourse do employees have?

In its filings, HBC reportedly argued that existing employment obligations are unsustainable and incompatible with its restructuring goals. If the court grants the company’s request, HBC may be allowed to bypass or reduce statutory termination rights, especially for non-unionized staff. Unionized employees may fare slightly better, as collective agreements provide a layer of protection, but even these can be renegotiated or suspended during insolvency proceedings.

The outcome of this legal process will set a precedent for how Canadian employers, especially large corporations, can navigate financial distress while limiting employment-related liabilities.

Lessons from The Bay’s Downfall: What to Do When Your Employer Faces Insolvency

When a large employer enters CCAA protection or begins widespread layoffs, employees often find themselves confused and vulnerable. For many, their employment is more than just a paycheck: it represents stability, identity, and a sense of future. Here’s what Ontario workers should know and do if they find themselves in a similar situation.

Step 1: Understand Your Rights Under Ontario Employment Law

Regardless of the financial state of the employer, Ontario employment law offers employees certain minimum protections upon termination. Under the Employment Standards Act, most employees are entitled to:

• Notice of termination or pay in lieu of notice, based on length of service
• Severance pay (if applicable), which can be substantial for long-term employees
• Outstanding wages, vacation pay, and other accrued compensation

However, these statutory minimums are often far less than what is available under common law. Courts in Ontario may make larger awards to employees wrongfully dismissed or inadequately compensated upon termination. Factors such as the employee’s age, tenure, position, and likelihood of finding new employment are considered when determining appropriate severance.

Step 2: Don’t Rush to Sign Anything

During mass layoffs, employers often present termination packages with strict deadlines, pressuring employees to accept quickly. These packages may offer less than what you are legally entitled to, especially if the employer is trying to reduce severance obligations in anticipation of insolvency.

If you’re presented with a severance agreement, do not sign it immediately. Instead, seek legal advice before agreeing to any terms. Further, remember that you typically have up to two years to bring a legal claim for wrongful dismissal in Ontario.

It is often possible to negotiate a more favourable outcome, even during difficult financial times for the employer.

Step 3: Be Cautious About “Group Terminations”

In Ontario, when 50 or more employees are terminated at a single location within a four-week period, the employer must provide additional notice (up to 16 weeks) under the Employment Standards Act. This is known as a mass termination, triggering different rules and obligations.

However, some employers attempt to avoid these requirements by staggering layoffs or reclassifying workers. If you suspect your termination is part of a larger strategy to reduce legal obligations, it’s worth consulting a lawyer to assess whether your rights under the Employment Standards Act have been breached.

Step 4: Understand the Role of the Wage Earner Protection Program (WEPP)

If your employer becomes insolvent and cannot pay wages or termination entitlements, you may be eligible for compensation through the Wage Earner Protection Program (WEPP). This federal program provides limited compensation to employees owed money due to employer bankruptcy or receivership.

However, WEPP payments are capped ($8,844.22 as of 2025) and often fall short of what employees are legally owed. It should be viewed as a backstop, not a substitute for your full entitlements.

Step 5: Consider Your Options for Legal Action

In situations where an employer uses CCAA proceedings to reduce liabilities, affected employees may still have options:

• Join a class action: In some cases, terminated employees pursue legal action collectively.
• File a claim in the insolvency proceedings: Employees can file proofs of claim for unpaid wages or severance.
• Challenge the fairness of the employer’s restructuring plan, particularly if it appears to favour creditors at the expense of employees.

Legal action can be complex during insolvency, but it’s not impossible. Working with a lawyer experienced in employment and insolvency law is key to navigating this terrain effectively.

Navigating Uncertainty with Confidence in the Face of Employer Insolvency

The Hudson’s Bay Company case is a stark reminder that even the most iconic and historically rooted companies are not immune to economic headwinds and legal restructuring. While the company’s fate will ultimately be decided in the courts and through negotiations with creditors, employees should not be passive observers.

For Ontario workers impacted by layoffs, whether at HBC or any other employer, understanding your rights and seeking legal counsel can be the difference between financial hardship and fair compensation. Termination does not mean forfeiting your entitlements, and insolvency does not erase legal obligations.

Contact Haynes Law Firm for Exceptional Employment Law Services in Toronto

If you have been affected by a mass layoff, an uncertain severance offer, or a restructuring announcement, contact Haynes Law Firm for a confidential consultation. We are here to help you navigate the legal complexities with clarity and confidence. Our firm also provides multifaceted advice to employers facing financial distress and insolvency to ensure best practices are followed and avoid unnecessary risk and liability. To discuss your employment law matter with us, please call (416) 593-2731 or reach out online.