Hudson’s Bay managers will get up to $3 million in bonuses, but workers get no severance

The beleaguered Hudson’s Bay Co., which plans to close most of its 96 stores by the end of June, will pay up to $3 million total in retention bonuses to 121 managers and executives — but will not pay severance to its more than 9,300 workers, most of whom will soon lose their jobs. 

The news is not going over well with some labour activists and workers. 

“That is incredibly egregious,” said Canadian Labour Congress president Bea Bruske. “They need to go back and actually make sure all of their workers get some of that $3 million.”

Kevin Grell, who works at a Bay online distribution site in Toronto, was dismayed when he learned about the bonus payments from CBC News.

“My emotions are taking over right now,” said Grell, who worries he may soon be out of a job. 

Asked for his reaction to the bonuses, he said, “If I was to answer that, I may get in trouble.”

After collecting his thoughts, Grell added, “It’s unbelievable. It’s a kick in the ass.”

Earlier this month, the iconic department store was granted creditor protection as it attempts to restructure to stay afloat. Liquidation sales started on Monday at all but six of its Bay and Saks-branded locations.

According to documents filed in the Ontario Superior Court of Justice, cash-strapped Hudson’s Bay will provide up to $3 million to 94 store managers, and 27 non-store staff. Ten non-store “senior leadership” staff stand to get the biggest bonuses, sharing up to $1,087,750 of the earmarked fund. 

(The court documents value the bonuses at $2.7 million but say the total is “not to exceed $3 million.”)

The bonuses will serve as incentives to the staff “whose continued service will be critical to the success of any wind-down or restructuring” of the company, say court documents. 

Employment lawyer Adrian Ishak says paying retention bonuses is common practice when indebted companies go bankrupt or restructure.

“In cold and unfeeling terms, it makes logical economic sense,” said Ishak, who is with the Piccolo Heath law firm in Toronto. 

“You need to be able to retain your top people who are going to be designing, and implementing the strategy, and the plan to reorganize the business.”

Currently, Hudson’s Bay is still trying to find a restructuring solution.

Financial assistance for workers

Hudson’s Bay did not answer a question about the retention bonuses. But spokesperson Tiffany Bourré confirmed to CBC News that the retailer won’t pay laid-off workers any severance. 

In bankruptcy and receivership cases, cash-strapped companies can opt not to pay severance, forcing laid-off workers to make claims as unsecured creditors — which will likely result in pennies on the dollar. 

Bourré says workers’ pensions should be safe, and that they may receive some financial support through Canada’s Wage Earner Protection Program, a federal program that provides financial assistance to workers when companies go bankrupt or are in receivership. 

But lawyer Andrew Hatnay, who represents a number of Hudson’s Bay employees, says workers won’t be able to apply for assistance until they have all been laid off, which could be months from now. 

He says the absence of severance payments — which serve as a safety net — has left workers distressed.

“They’re upset,” Hatnay said. “They don’t want to lose their jobs in a difficult economy.”

Grell, 61, has been a Bay employee for more than eight years. He says he has already started searching for another job, but has had no luck. 

“It’s overwhelming. I’ve even had nights where I wake up in the middle of the night with worry,” he said. 

Under normal circumstances, Ontario requires employers pay laid-off workers severance equalling at least one week’s pay for each year of employment, up to a maximum of 26 weeks. The rules can vary in other provinces. 

Grell says losing out on severance will make things more difficult for workers.

“That [money] would have gone a long way. That would have helped with the bills, the rent, the food,” he said. “A lot of people are living paycheque to paycheque.”

CBC News tried to interview several other Bay employees, but they declined. 

Grell says many workers are afraid to speak publicly, because they signed a non-disclosure agreement when they were hired.

Hudson’s Bay did not respond to a question about workers signing such agreements. 

Legislation to protect severance?

Sears Canada also faced criticism when CBC News revealed that company, which filed for bankruptcy protection in 2017, paid no severance to its 12,000 workers, but did pay big retention bonuses to 43 executives and senior managers. 

Many Sears employees also wound up with reduced pensions. 

The resulting backlash led to federal legislation in 2023 which improves protections for workers with defined benefit pension plans if their employer becomes insolvent. The legislation takes effect in 2027. 

According to House of Commons debate transcripts in 2022, some MPs pushed for severance protections to be included in the legislation, but they were unsuccessful. 

“It was incredibly disappointing and frustrating,” said Bruske, with the Canadian Labour Congress. “We need to also strengthen things like severance pay because when you are out of a job in the market that we have today, in an affordability crisis, in a housing crisis, workers have tough decisions to make.”

She says with what’s going on at Hudson’s Bay, workers’ rights need to be an election issue. 

“Now is the time for all workers to… ask the candidates who are coming to their door, ‘What are you doing on worker protections? What is your position on things like severance pay?'”

However, Ishak, the lawyer, argues protecting workers’ severance in bankruptcy cases comes at a price.

Currently in bankruptcy proceedings, secured creditors, like banks, are first in line to get paid the money they’re owed. He says if workers took priority over banks, it could discourage them from financing new ventures. 

“It will be a huge disincentive for those companies to advance loans. And without those loans, companies can’t flourish.”