As has been widely reported in North American news outlets, Target Canada announced last week that it would be closing down its retail locations across the country, resulting in the loss of approximately 17,600 jobs in Canada. The retailer obtained creditor protection on January 15, 2015.
In a remarkable move, Target sought and obtained Court approval of a fund intended to provide Target Canada employees with their full statutory entitlements to notice of termination and severance even if the employees are not required to work for the full statutory notice period. The fund was set up as a trust held for the benefit of Target Canada employees with the goal of protecting the monies from other creditors of the Canadian corporation. The fund is intended to benefit active employees of Target Canada as well as employees on leaves of absence due to disability.
Notably, the trust is entirely funded by the U.S. parent corporation and not by Target Canada. In materials filed with the Court, Target stated that the company has always viewed its employees to be “integral” to its business and that it had a desire to provide Target Canada employees affected by the closure with some measure of financial security. Although not mentioned in the Court materials, it is also likely that the company was motivated to minimize the brand damage that could be caused by such a large scale departure from the Canadian market.
The Target Canada employee trust fund is not the only unusual consequence of this insolvency proceeding. Canada’s Minister of Employment and Social Development, Jason Kenney, has announced that the federal government will step in to provide “direct assistance” to affected workers, including informational sessions and job search support. We will continue to monitor this story as it develops and will be particularly interested to see how the administration of the employee trust fund is managed by the parties and overseen by the Court.