The purpose of the second measure is to extend statutory priority for salary claims to claims for separation pay. Parliament has previously considered protection for salary claims but specifically excluded severance and separation pay under the BIA and preferred to protect severance pay through the WEPP.
Our concern is not over the principle of a priority for severance pay but rather for the uncertainty it generates. The bill would grant priority status for all amounts owed, without monetary limit. However, severance pay may vary greatly depending on circumstances. Amounts owed under labour standards legislation alone may vary from a maximum of six weeks in New Brunswick to 42 weeks in Ontario.
Lenders and creditors consider priority claims in making their credit decisions. The variability in criteria for calculating allowances will likely lead them to take a generous reserve, which will result in a significant contraction in credit for all businesses.