A $500,000 hardship fund created for former Sears Canada employees is facing a possible $200,000 shortfall, according to court documents.
The problem appears to be with a Sears executive who pledged to donate the $200,000 from a retention bonus, but may now be hesitating to cough up the cash.
“There is uncertainty regarding the agreement of the [bonus payment] beneficiary who previously proposed to contribute such funds to now proceed to contribute those funds,” said the court-appointed monitor for Sears Canada in the latest report to Ontario Superior Court.
Sears agreed to the hardship fund, which received court approval in August. It’s supposed to supply up to $500,000 for laid-off employees who are financially strapped. None of the current 3,100 laid-off workers are receiving severance or continued benefits.
The funding is set to come from the $7.6 million in retention bonuses that the retailer pledged to pay 43 executives and senior managers at the company’s head office in Toronto.
Of that bonus money, $300,000 has already been donated to the hardship fund. However the remaining $200,000 now remains in question.
Laid-off Sears worker, Zobeida Maharaj, says she can’t imagine the employee hardship fund becoming any smaller. (CBC)
“I’m disgusted with that. People are very greedy,” says Zobeida Maharaj, a laid-off senior operations store manager who spent 28 years working for Sears in the Toronto area.
She plans to apply for the hardship fund because her husband will also soon be laid off from his job in the auto industry. She claims the fund already didn’t amount to much, so the prospect of it losing $200,000 is distressing.
“I’m just in awe. I didn’t think they would sink any lower, but they did,” says Maharaj, who has already lost a year’s salary in severance payments. “Do they have any kind of human heart? You’re affecting people’s lives.”
‘There may be a problem’
CBC News asked Sears Canada about the hardship fund situation. “It appears that there may be a problem with the second tranche of $200,000,” said spokesperson Joel Shaffer.
He couldn’t offer any details because Sears Canada didn’t announce the fund or confirm which execs were donating a portion of their bonus payments, he said.
The law firm representing current and former Sears’ employees fought for the fund for destitute workers. “Many have suffered significant hardships as a result of the Sears Canada Entities’ insolvency,” argued law firm Ursel Phillips Fellows Hopkinson in court documents.
Susan Ursel, a lawyer with the firm, confirmed that the hardship fund has so far only received $300,000. As far as she understands, Sears’ executive chairman Brandon Stranzl donated that entire amount from his own retention bonus payment.
Ursel said she couldn’t comment about the missing $200,000 because she doesn’t know all the details. “I read the monitor’s report and we’re looking into it,” she said.
Ursel told BNN in August that Stranzl was financing the entire $500,000 employee hardship fund through his retention bonus. He’s currently heading up a bid to buy the retailer but talks are reportedly not going well.
Wasted money?
For eligible employees, the hardship fund offers eight weeks’ wages up to a maximum of $1,200 per week, plus potential discretionary increases of up to $2,500.
The monitor’s report says that to date the fund has received 22 applications, 15 of which have been approved. So far, $35,000 has been paid out or committed to recipients.
The report also notes that hardship fund recipients also receiving employment insurance are losing out. That’s because the recipients must report the extra funding as earned income, which then reduces or eliminates their E.I. payments.
The employees’ law firm is speaking with Service Canada regarding this problem, said the report.
Sears Canada is closing 58 stores and laying off 3,100 workers as it struggles for survival in a court-supervised restructuring process.
On Wednesday, the cash-strapped retailer will seek court approval to shut down 11 more stores, which will result in 1,200 more layoffs.
Sears will also ask for permission to extend the court’s protection from creditors until Nov. 7 while it continues negotiations with Stranzl and his bid for the retailer.