The Short Answer: Rights When a Company Closes
If your company closes down in Alberta, you have been terminated without cause and are legally entitled to full severance pay.
Even if the business is insolvent or filing for bankruptcy, you are still owed your wages, vacation pay, and severance — though it is extremely difficult to recover. You may also be eligible for the federal Wage Earner Protection Program (WEPP) to recover lost earnings.
Is your employer claiming they have “no money” for severance?
Do not take their word for it. Our Alberta team can help you determine the company’s legal obligations and identify the best path to recovering your money.
On This Page:
Severance Pay When a Company Closes
In Alberta, a business closure is legally considered a termination without cause. This means employee rights when a company closes down include the right to “reasonable notice” or pay in lieu of notice (severance).
While the Employment Standards Code (ESC) provides for minimum notice periods, most non-unionized employees are entitled to much more under common law — potentially up to 24 months of severance pay in Alberta depending on your age, length of service, and position.
Unpaid Wages, Vacation Pay, and Priority
If a company is closing due to financial distress, there is often a “line” of creditors waiting to be paid. Under the law, employees are considered “unsecured creditors” — falling behind “secured creditors” like banks — and are not a high priority for compensation. You are entitled to be paid for:
- Regular wages earned up to the last day of work.
- All earned but unpaid vacation pay.
- Any banked overtime.
The Wage Earner Protection Program (WEPP)
If your employer has officially filed for bankruptcy or is in receivership, you may be eligible for the federal Wage Earner Protection Program (WEPP). This program provides financial assistance to workers to cover:
- Unpaid wages and vacation pay
- Severance and termination pay
WEPP is a potential safety net when a business closes and has no remaining assets to pay its staff. However, there are strict deadlines for applying — usually within 56 days of the bankruptcy or the end of your employment.
Can I Sue a Closing Company for Wrongful Dismissal?
Yes, you can still file a claim for wrongful dismissal against a company that is closing. However, if the company is entering formal bankruptcy, all legal actions are “stayed” (paused).
In these cases, you must file a “Proof of Claim” with the trustee in bankruptcy to ensure your right to severance is recognized in the distribution of assets. However, receiving payment is not guaranteed, and for many unsecured creditors, it is rarely successful due to low recovery rates, administrative hurdles, or missed deadlines.
Contact an Alberta Business Closure Lawyer
Navigating a company closure is incredibly stressful. At Samfiru Tumarkin LLP, we specialize in helping employees recover their hard-earned money when businesses shut down. We can help you navigate the process and secure the severance pay you are owed.