A shopper walks past an empty sales area at the flagship downtown Hudson's Bay store, in Vancouver, on March 24.DARRYL DYCK/The Canadian Press
A law firm representing some Hudson’s Bay Co. employees is raising the alarm about long-term disability payments, which are paid out of the company’s cash and are uninsured, leaving people at risk of losing their benefits as the retailer liquidates its operation.
“This is a ticking time bomb,” said Andrew Hatnay of Koskie Minsky LLP, which he says has been retained by more than 250 current and recently terminated Hudson’s Bay employees, as well as retirees, seeking representation as the retailer attempts to restructure or sell part of the business.
The issue, Mr. Hatnay said, is that Hudson’s Bay’s benefit policy provides long-term disability payments through an “administrative services only” [ASO] arrangement, which is not insured. That means, if the retailer is unable to come up with a plan to keep some of its stores afloat, or if a new owner steps in, those benefits could disappear.
One former employee said their repeated attempts to contact the company to find out what will happen to their benefits have gone without a response. The employee, whom The Globe and Mail is not naming because they are concerned about repercussions for speaking out about the issue, has been on disability for roughly 10 years because of acute arthritis that left them barely able to walk and unable to work. Uncertainty about the benefits has been a constant source of anxiety in recent weeks, they said.
A representative for Hudson’s Bay declined to comment.
ASO arrangements have led to severe financial consequences for Canadians in other high-profile bankruptcies, including Eaton’s and Nortel Networks, where employees lost their benefits or saw them cut significantly. In the wake of the Nortel case, the federal government made changes to the Canada Labour Code to require federally regulated private-sector employers to insure those plans. Those changes took effect in 2014. However, no such requirements apply to companies that are not federally regulated, including retailers.
As of 2022, uninsured plans provided disability income protection to 970,000 people, or approximately one in 13 Canadian employees, according to the Canadian Life and Health Insurance Association [CLHIA]. Approximately 25,000 people with disabilities currently receive wage replacement benefits under such plans. CLHIA has taken the position for many years “that long-term disability plans should be insured,” spokesperson Tom Hansen wrote in an e-mail to The Globe.
A Hudson’s Bay document from 2018 providing an overview of benefits for full-time and regular part-time staff, which was obtained by The Globe, specified that the company’s health, dental and long-term disability benefits “are not insured.” Instead, they are handled by an ASO agreement between Hudson’s Bay and an insurer, Manulife Financial. Manulife administers and processes claims, the document states, but Hudson’s Bay “has financial responsibility for these benefits.”
Facing mounting losses and debts, Hudson’s Bay was granted court protection from its creditors on Mar. 7 under the Companies’ Creditors Arrangement Act. The company is in the process of liquidating all but six of its stores – including 74 Hudson’s Bay locations, as well as two Saks Fifth Avenue and 13 Saks Off Fifth stores that the company operates in Canada. In the meantime, Hudson’s Bay is soliciting offers from bidders to acquire all or part of the company’s operations or assets, as well as from parties interested in taking over store leases.
Hudson’s Bay has developed a potential restructuring plan to keep six stores and its e-commerce business in operation, according to a confidential information memorandum distributed to potential bidders, which was obtained by The Globe. That plan would require an investment of $82-million in the first year, the memo says. But the company’s lawyers have stated that if a plan for the future cannot be found, the entire business will be wound up and those six stores will also begin liquidation.
The uncertainty has left thousands of Hudson’s Bay employees fearful for their own future. For those on long-term disability, who are unable to work, the uncertainty is compounded.
The former Hudson’s Bay employee who spoke with The Globe said the benefits have provided crucial financial support, allowing them to stay in their home, to buy food and to continue to access health benefits that pay for some very expensive medication. The employee does not think ASO plans should be allowed, explaining that benefits should be insured for people who are unable to seek other work to support themselves.
“If you cut off benefits they rely on, they can’t get other jobs,” Mr. Hatnay said. “They’re looking at personal bankruptcy, welfare, losing their homes.”
Last week, Mr. Hatnay said his firm received a letter from lawyers for Hudson’s Bay, saying the company is seeking proposals from other law firms to act as “representative counsel” for the employees in the CCAA proceedings. In a letter to the Hudson’s Bay lawyers last week, Mr. Hatnay wrote that it is up to the court to select the appropriate representative counsel, and that the company’s stated intention to do so would be a conflict of interest.
Mr. Hatnay said the firm has sought clarity about the disability benefits from those lawyers, but has received no response.