Another large fashion retailer has fallen out of style with consumers, closing its doors for good across Canada. Last Sunday, Bradley Sell, the Chief Financial Officer of the Canadian subsidiary Forever XXI ULC (“Forever 21 Canada”), announced that all 44 of its Canadian stores would be closing. Sell cited economic viability as the primary reason for the Canadian closures. Approximately 2,000 employees will lose their jobs as a result. The Ontario Superior Court has granted the company protection from its creditors under the Companies’ Creditors Arrangement Act (CCAA).
ESA Requirement Upon Mass-Termination
While filing for bankruptcy can offer an employer an opportunity to restructure its operations without the looming specter of insurmountable debt, bankruptcy is not a “get out of jail free card” for employers. In Ontario, under the Employment Standards Act (the “ESA”) employers must provide enhanced benefits to employees who have been terminated via a “mass termination.” Section 58(1) of the ESA defines a mass termination as a termination wherein more than 50 employees of an establishment are terminated within a four-week period. An establishment can include more than one retailer location and the four-week period is a window of time that begins the moment the establishment terminates 50 or more employees.
The employer must provide the Ministry of Labour (the “MOL”) with notice of the mass termination via a Form 1. The notice of termination period begins the moment the Director of Employment Standards of the MOL receives the Form 1, as such late filing of the Form 1 will have cost implications for the employer. The employer must post a copy of the Form 1 in a visible area of the workplace beginning on the first day of the notice period.
Notice entitlements will depend on the number of employees terminated. Section 74.11 4.3 of the ESA sets out the required notice period based on the number of employees terminated:
- 8 weeks’ notice if 50 to 199 employees are to be terminated;
- 12 weeks’ notice if 200 to 499 employees are to be terminated; and
- 16 weeks’ notice if 500 or more employees are to be terminated.
The notice provided can be in the form of working notice or it can be pay in lieu of notice, where the employees stop working but get paid for the notice period.
What about Severance?
Employees with more than 5 years of service with the employer will be entitled to severance pay, in addition to notice of termination, if they are terminated because of a “permanent discontinuance.” In mass termination situations, the severance entitlement is triggered even if an employer does not have a payroll of $2.5 million or more.
Even with the protections for employees provided by the ESA, it is undeniable that these mass-terminations have a considerable impact on workers in the retail industry. Many stores are disappearing from the retail landscape – Gymboree and Payless Shoe Source also filed for bankruptcy this year – and it is very likely that we will continue to see this trend of closures as consumer trends shift away from “fast fashion” and more people use online platforms to source goods.