What You Should Do If Your Employer Goes Out Of Business

Posted:  Sep 28, 2021

The COVID-19 pandemic has seriously impacted businesses across Canada and worldwide. Employees are worried now more than ever about job security and finances. The unfortunate reality is that many businesses will not survive the devastating financial effects of reduced hours, forced closures, in addition to having to implement reduced seating in some cases.


However, this doesn’t mean you have to simply accept a sudden job loss sitting down. Employees can equip themselves with important information to ensure they’re financially protected in case of a sudden job loss.


Here are essential facts to help you decide what to do if your employer goes out of business.



1.    Certain employees may be owed severance pay in the event of a company closure. As long as the company does not go bankrupt or into receivership, an employee is rightfully owed severance pay.


2.    Severance pay is based on the age of the employee, length of employment, the nature of his or her position, as well as his or her ability to obtain new employment. Make sure you recognize your individual circumstances.


3.    Every employee is justified in considering all options available. For example, Mary does not have to immediately accept a severance offer from her employer who is closing their doors in two weeks. Instead, she has a right to seek legal advice from an Employment Lawyer to verify that the severance package is fair and in her best interest.


4.    In the case of an employer giving an employee working notice, things get a bit more complex. To be sure, there are three typical methods a company may give notice to an employee

·      Pay in lieu of notice, otherwise known as severance pay. An employer can terminate employment effective immediately and offer a severance package.

·      Working notice is a period the employer provides to continue to work until a firm termination date.

·      Blend of both pay in lieu of notice and working notice. Working notice is a period where you continue to work for the company that counts toward your notice period. For example, if Grant is entitled to six weeks of notice upon termination, and the employer gives four weeks of working notice, he would only receive severance pay for the extra balance of two weeks.


5.    A federal program is available to eligible Canadians if his or her company declares bankruptcy or goes into receivership. The Wage Earner Protection Program (WEPP) is a valuable resource that pays eligible workers for unpaid wages, severance pay, termination pay, and vacation pay he or she is owed.


6.    Every company must meet the labour standards of the province they reside. This ensures employees needs are met in the event of a company closure. Employees are further entitled to a Record of Employment (ROE) which generally must be issued five calendar days after the end of a pay period when earnings where stopped.


7.    If an employer goes bankrupt, an employee can seek help via the Employment Standards Act (ESA). Not applicable for severance pay, employees can seek compensation for unpaid wages due to bankruptcy.

For further information on our legal services, including corporate law, estate law, First Nations law and more, contact us today by calling us at 250-248-8220 or emailing us at to arrange your appointment. 

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