Employer bankruptcy and the Employee Protection Program (LPPS)
When an employer goes bankrupt, employees are often left with weeks of unpaid wages, unpaid vacation and no severance pay. The good news: there’s a federal program for just that – the Wage Earner Protection Program (WEPP). Here’s how it works, and the concrete steps to follow, in plain language.
Losing your job is hard enough. But when your employer disappears overnight – doors locked, last paycheck never deposited – it’s an added layer of anxiety. The first question that comes to mind: “Will I ever get back the money I’m owed? In the vast majority of cases, the answer is yes – in part or in full – thanks to the PPS.
A quick clarification, because acronyms can get confusing: the WEPP (Wage Earner Protection Program Act) is the federal law that creates the program. The WEPP is the program itself, administered by Service Canada. This is what most people are looking for when they hear the term “Wage Earner Protection Act”.
What exactly is PPS?
The WEPP quickly pays employees owed wages by an insolvent employer. The program is funded by the federal government and administered by Service Canada, for the Labour Program.
There is, however, one essential prerequisite: the WEPP can only be triggered if your employer is officially bankrupt, in receivership (when someone takes possession of the company’s assets), or subject to another eligible insolvency proceeding. In practical terms, this means that a licensed insolvency trustee or receiver must have been appointed. Without this, the PPS cannot be applied.
💡Good to know
These are two separate programs. WEPP covers unpaid wages owed to you by your employer; EI replaces a portion of your income while you look for a new job. You may be entitled to both at the same time.
What PPS covers – and how much you can receive
The program covers more than just your base salary. The following are eligible, when they are due to you:
- Your salary, commissions, performance bonuses, shift premiums and tips as declared by your employer.
- Your accumulated vacation pay.
- Your compensation in lieu of notice (pay in lieu of notice of termination).
- Your severance package.
- Regular expenses incurred by commercial travellers on behalf of the employer.
The amount you can receive is a single payment, capped at the equivalent of 7 times weekly EI insurable earnings. In 2026, the maximum is $9,275. This ceiling is reviewed annually.
âš Caution
Do you qualify?
You may be eligible for the PPS if all these conditions are met:
- Your employment has come to an end.
- Your former employer has declared bankruptcy, is in receivership, or is the subject of another qualifying insolvency proceeding (certain proposals under the Bankruptcy and Insolvency Act, certain proceedings under the Companies’ Creditors Arrangement Act, and certain foreign proceedings).
- This employer owes you wages, vacation pay, severance pay or compensation in lieu of notice.
- These sums were earned during the qualifying period – i.e. the 6 months preceding the insolvency proceedings.
Conversely, you are not eligible if, during the period in question, you were :
- Company manager or director.
- Holder of a majority interest in the company.
- An executive whose responsibilities included binding financial decisions for the company, or decisions on whether or not to pay salaries.
- A person who does not deal at arm’s length with any of these persons.
The central role of the building manager – why he is indispensable
This is the point that many people don’t realize: the WEPP doesn’t work without a trustee or receiver. The licensed insolvency trustee is the linchpin of the entire process. It is the trustee who :
A-Calculate what you’re owed
The trustee examines the employer’s books and establishes, for each employee, the amounts due – salary, vacation pay, notice, severance pay.
B-Avise Service Canada
It transmits this information directly to Service Canada, using the appropriate forms. It is this transmission that opens the door to your application.
C-Voice gives you your figures
You will receive a statement of the amounts due to you. This is the key document in your PPS application – keep it safe.
D-Guide you on time
The managing agent will explain the procedure and, above all, the deadline – a detail that makes all the difference (see below).
Steps to follow – for the employee
In order, here’s what to do if your employer has gone bankrupt and you’re owed money.
1-Confirm your employer’s situation
Make sure there is a bankruptcy, receivership or qualifying insolvency proceeding – and that a trustee or receiver has been appointed. In most cases, the trustee will contact you. If not, ask your employer, colleagues or the authorities who is administering the file.
2-Get your figures from the building manager
The trustee calculates the amounts owing to you and forwards them to Service Canada. You’ll receive a statement of these amounts. Read it carefully and keep it: it’s at the heart of your claim.
3-Gather your documents
Have your social insurance number, updated contact information, record of employment, most recent pay stubs and the statement provided by the trustee ready. Having everything on hand will speed up your application.
4-File your proof of claim with the building manager
This step formalizes, in the insolvency file, what the employer owes you. The trustee will tell you which form to use.
5-Make your PPS request to Service Canada
The quickest and easiest way is to apply online. You can also visit a Service Canada Centre. Sign up for direct deposit to receive your payment faster.
6-Receive your payment – and understand what happens next
The PPS makes a single payment. Keep your T4A slip (box 132) for tax purposes. Note: Once the government has paid you, it takes your place as a creditor with the employer to recover the amount (this is called subrogation). You don’t have to do anything more on your side.
âš The 56-day deadline – not to be missed!
You must generally apply to the WEPP within 56 days of the date of bankruptcy or receivership – or the end of your employment, whichever is later. That’s a short time. As soon as the trustee sends you your figures, apply right away. Your trustee can confirm the exact date that applies to your file.
Any questions?
Visit the Service Canada portal for employees and the HPPA for details and information on the program.
