Friday, March 10, 2023

An Informed Gamble Pays Off

Sometimes, when a business goes bankrupt, employees are among the last to be compensated for losses they’ve suffered. This is a story where that didn’t happen.

Guide Magazine

Henk de Zoete, President, National Board

In the summer of 1993, I represented members at a nursing home in southcentral Ontario that was showing growing signs of serious financial problems. By the end of the year, members were calling me to complain about late or partial payment of wages and lack of supplies, which meant members couldn’t give residents the good care they needed.

Early in January ’94, I launched a complaint with the Ministry of Health, which immediately sent a team of inspectors to investigate. It didn’t take long before the home was placed under strict compliance, meaning one or more inspectors were on duty every day.

I had already filed frequent grievances on behalf of members covering almost every aspect of the collective agreement. By spring, the deteriorating financial situation resulted in the home being placed in bankruptcy. The receiver appointed a well-respected management company to run the facility’s day-to-day affairs, supervise the staff, and make sure residents were adequately cared for.

At this point, we made a crucial decision that directly affected the outcome of this story. Usually in bankruptcy cases, the union will force the receiver to be declared a successor employer by the labour board. This often results in legal wrangling and an adversarial relationship between the parties.

In this case, we were asked to consider not requesting such a declaration. In return, the receiver and the management company would recognize the union, respect and adhere to the collective agreement, and put employees’ losses at the top of the list of creditors to be made whole. After conferring with CLAC’s lawyers, we agreed to this proposal.

As the bankruptcy proceeded to conclusion, we were asked to document the losses suffered by each member in the bargaining unit. This covered the period when members had not been paid wages, vacation pay, overtime, holiday pay, pension contributions, and any other amounts they were entitled to, including $12,000 in late payment penalties.

CLAC had legal representation at the final court hearing which wrapped up the bankruptcy proceedings. Late that day, the receiver called me and excitedly recounted what had happened. It had been a bankruptcy wrap-up event such as he had never experienced before.

When the judge ruled that the home should be sold, the owner jumped up and launched into a tirade against the judge, receiver, lawyers, and CLAC. It carried on for some time, despite repeated gavellings for order by the judge.

The receiver then said, “And, by the way, your claim for members’ losses to be among the first to be paid was acknowledged and granted.”

We received a cheque for $160,000, which we distributed to each member according to the losses they had suffered. The members were greatly relieved and satisfied that their patience and trust had been rewarded, and I was relieved and pleased that our informed gamble had paid off.

A robust relationship continues to this day between the owners, members, and union, along with a top-rate collective agreement.

An Informed Gamble Pays Off

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