Sears Canada shouldn't be allowed to dole out big bonuses to managerial staff while laid-off workers won't even get severance, argues a legal motion filed on behalf of current and former Sears employees.
Law firm Ursel Phillips Fellows Hopkinson filed the motion in Ontario Superior Court requesting that Sears' retention payment plan be amended to exclude the payout of $7.6 million in bonuses to 43 head office staff. The motion claims there's no proof the payouts will help the retailer restructure.
A court date for the matter has not yet been set.
Cash-strapped Sears Canada plans to close 59 stores and eliminate 2,900 jobs as part of a court-supervised restructuring process.
The laid-off workers won't receive severance, but the court has approved Sears' plan to pay up to $9.2 million in retention bonuses to keep key staff while it restructures.
About $1.6 million will go to 116 senior employees in the closing stores.
The lion's share — $7.6 million — is earmarked for 43 executives and senior managers at Sears head office in Toronto. That works out to an average of $176,744 each, although it's unlikely the money will be divided up so evenly.
The law firm representing Sears' more than 17,000 non-unionized current and former employees said in court documents that it has no objection to Sears' plan to pay bonuses to store employees to ensure "a smooth liquidation of the closing stores."
But Ursel Phillips argues the payouts to executives and managers don't make much sense and should be nixed.
Sears Canada told CBC News that employee retention bonuses are common in restructuring situations. The long-standing retailer said the payouts will incentivize senior staff to stay and help Sears achieve the best possible outcome: a revamped and stable business.
But the employees argue in their motion that head office staff bonuses are "excessive" considering the short time frame.
Most will get their money in quarterly instalments, receiving 75 per cent of their payments within 180 days. The final 25 per cent won't be paid out until a successful restructuring is complete.
The motion claims that given the state of the retail industry and the current employment market, it's unreasonable to assume that key staff would leave their jobs within 180 days.
"No evidence has been provided that any, never mind all, of these 43 employees are a flight risk in the immediate short term," it says.
The motion adds that most of the $7.6 million to go to top brass is not even contingent on a successful restructuring. That's because they'll receive 75 per cent of their bonuses regardless of whether or not Sears manages to reinvent itself.
It also argues that there's no proof the big payouts will even go to the right staff. "No evidence has been provided to ensure that only key employees are covered by the plan," it says.
What about the other workers?
The motion also states the head office bonuses are problematic because, at the same time, Sears is asking the remaining 2,400 employees at its closing stores to continue working without any termination or severance pay.
"Effectively, [Sears is] suggesting that thousands of employees who are working to preserve value in the company through the liquidation of closing stores go without even their minimum statutory entitlements," it says.
Sears Canada declined to comment on the motion, telling CBC News it's currently not pending.
Ursel Phillips said although the motion was filed, it is temporarily on hold while the parties involved discuss the matter plus other issues, including a possible hardship fund for laid-off Sears workers not receiving severance.
If employees and Sears Canada can't come to an agreement on the retention bonus issue, it could become a court matter, says Toronto labour lawyer Lior Samfiru who's closely watching the Sears case.
He believes that if it does go to court, the ruling will likely side with Sears because the retailer will argue the 43 chosen staff are necessary to keep the company afloat so it can pay its debts.
"These are people whose function, whose role, Sears has deemed to be key in allowing it to restructure and liquidate and maximize that amount that it hopes to recoup for its creditors," says Samfiru. "It's going to be very difficult for a court to question that judgment."
He adds that Sears can't impose too many restrictions on the bonuses — such as tying them entirely to a successful restructuring — because employees will no longer see them as an incentive to stay with a troubled company.
"We don't know if an employee is going to be able to find another job within 180 days, but it's safe to assume that an employee is going to try to do so," says Samfiru.
Regardless of the rationale behind paying bonuses to head office staff, laid-off Sears workers see it as an injustice as they struggle without any severance pay.
"It's very upsetting," former Toronto-based sales manager Rosa Dalessandro told CBC News earlier this month. "It's almost like, what they took from us, they're giving to the executives downtown."
Sears Canada told CBC News that deep financial troubles left it with no choice but to seek court protection from its creditors while it restructures.
As part of the court proceedings, the company said it's not able to make payments to a number of stakeholders, including laid-off workers owed severance.