Can terminated employees participate in the Wage Earner Protection Program following a reverse vesting order?

In November, the Ontario Superior Court of Justice (Commercial List) is expected to rule on the availability of Wage Earner Protection Program (WEPP) payments for former employees of Synaptive Medical Inc., who were terminated as a result of Synaptive’s insolvency featuring a reverse vesting order (RVO). Employment and Social Development Canada (ESDC) asserts that Synaptive’s employees are not entitled to participate in WEPP because of the RVO structure. The court’s decision will have significant implications for the administration of the Companies’ Creditors Arrangement Act (CCAA) and other insolvent estates, as well as terminated employees of insolvent companies, who, absent WEPP payments, can have very limited or no recoveries on account of unpaid wages, vacation and severance pay.

What you need to know

• The introduction of RVOs to the Canadian insolvency landscape raises a fundamental question as to whether and when WEPP is available to terminated employees following an RVO transaction. The Ontario courts have not yet provided guidance on this issue.
• The Synaptive case is expected to result in the first decision in Ontario to address this issue when it comes out in November 2025.

Background

WEPP provides a “safety net” for employees who are terminated as a result of their employer’s insolvency. In certain circumstances, WEPP allows terminated employees to receive payments (up to $8,844.22 as of the date of this bulletin) from ESDC on account of eligible wages, severance pay and similar amounts that went unpaid because of their employer’s insolvency, with ESDC effectively subrogating by stepping into the employees’ shoes to assert a claim against the insolvent employer for WEPP amounts paid to employees.

The introduction into Canadian insolvency proceedings of RVO structures, whereby the insolvent company’s wanted assets are retained and unwanted liabilities are transferred out, raises a fundamental question: is WEPP available to terminated employees when their employer sells its business under an RVO transaction in a Canadian insolvency? This question is about to be decided in Synaptive Medical Inc.’s proceedings under the CCAA, in which Synaptive is bringing a motion—opposed by ESDC—for a declaration that its former employees are eligible for WEPP payments. Torys represents Synaptive in this matter.

Synaptive’s motion is scheduled to be heard before the Ontario Superior Court of Justice (Commercial List) on November 12, 2025. Stay tuned for further updates from us when the Court’s decision is released.