Bad Boy Bankruptcy and Severance Pay

Bad Boy Furniture is officially bankrupt, according to KSV Restructuring, the bankruptcy trustee hired by the renowned furniture retailer.

In a document filed with the Office of the Superintendent of Bankruptcy Canada on Jan. 24, KSV said that “The debtor has failed to file a cash-flow statement or a proposal within the provided period following the filing of the notice of intention (NOI) or within any Court-granted extension and is thereupon deemed to have made an assignment.”

Bad Boy filed its NOI with Ontario Superior Court court on Nov. 9. Judge Herman Wilton-Siegel approved the company’s request to start the liquidation process under the Bankruptcy and Insolvency Act (BIA) on Nov. 17. The approval allowed Bad Boy to take advantage of Black Friday to try to clear out its $25 million in inventory.

LEARN MORE:
• Employee rights when their employer goes bankrupt

What’s next for Bad Boy?

The company, founded in 1955 by former Toronto mayor Mel Lastman and boasting “unbeatable prices”, failed to restructure.

• The furniture retailer must turn over its assets and property to a trustee in order to distribute them among its creditors.
• Bad Boy owes $13.7 million to unsecured creditors, including $2.3 million to Whirlpool Canada and $840,921 to Samsung Appliances.
• The company collected $4.5 million in deposits from customers for furniture that had not been delivered by the time Bad Boy declared insolvency.
• 20 of Bad Boy’s 275 employees were initially laid off from head office or warehouse roles at the outset of the company’s filing.
• Liquidation has taken place at its 12 stores in southern Ontario.
• Everything from sofas to bedroom sets, dining tables, and mattresses was discounted by 20 to 50 per cent, says Infinity Asset Solutions, who was overseeing the sale.

How did Bad Boy get here?

After opening the first Bad Boy store in the 1950s, Lastman sold the business in 1975. Following the sale, it expanded to 40 locations.

The company declared bankruptcy, before being revived by his son, Blayne, in the early 90s when it expanded to 40 locations.

Father and son were featured prominently in Bad Boy’s ads, where they shouted: “Who’s better than Bad Boy? Noooobody!”

• Bad Boy made the decision to restructure due to financial strains from “high interest rates, declining sales in the housing sector and a tight retail climate,” said KSV Restructuring, a licensed insolvency trustee involved in the proceedings.
• It has around $26 million in liabilities, owing significant amounts to unsecured creditors, including Whirlpool Canada, Samsung, LG Electronics, and RioCan.
• Bad Boy will not provide refunds to customers who placed deposits for deliveries of furniture or appliances. “Bad Boy is unable to refund those deposits or to complete those purchases,” said KSV.

Bad Boy Severance: Bankruptcy

When a company restructures or declares bankruptcy, it’s still responsible for paying its employees’ unpaid wages and severance packages.

Therefore, Bad Boy owes full Ontario severance pay to employees who lose their job.

However, because employees are classified as ‘unsecured creditors’ during restructuring or bankruptcy in Canada, the reality is that Bad Boy staff will likely receive little to no severance pay.

Why: Unsecured creditors are lower in priority for repayment, behind secured creditors like banks and government tax claims. Often, by the time secured creditors are paid, there are not enough funds left to fully pay the employees.

The difference between what Bad Boy employees are owed, and what little they might receive, could be tens of thousands of dollars.

LEARN MORE
• Wrongful dismissal claims in Ontario
• Rights for Ontario employees fired without cause

The Sears Act

Championed by Samfiru Tumarkin LLP, the Sears Act focuses on better protecting employees during a company’s bankruptcy.

It aims to make sure employees get treated as secured creditors, so they can be paid their severance and unpaid wages first, ahead of unsecured creditors.

When should I contact an employment lawyer?

You should contact the employment lawyers at Samfiru Tumarkin LLP immediately — but ONLY when you lose your job, your employer permanently closes the company and one of the following happens:

• Your employer doesn’t file for restructuring or bankruptcy.
• Your employer claims they will file for bankruptcy through the BIA or CCAA, but doesn’t actually follow through.

In these scenarios, non-unionized employees are still legally entitled to a full severance package, which can be as much as 24 months’ pay.

This is where an employment lawyer from Samfiru Tumarkin LLP can be invaluable. We can help you understand your rights and properly navigate the legal process to maximize your compensation.

Don’t do this alone. Contact Samfiru Tumarkin LLP for expert guidance and support in these unique situations.

Our employment lawyers in Ontario, Alberta, and B.C. have helped tens of thousands of individuals enforce their rights.

If you are a non-unionized worker who needs help with an employment issue, contact us or call 1-855-821-5900 to get the advice you need, and the compensation you deserve.