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Severance trust fund for employees ‘unprecedented,’ experts say
Human resources and labor law experts say Target Canada’s $70 million severance package for the approximately 17,600 employees the retailer is about to lay off is “unprecedented” and “unusual.”
Target Canada announced Jan. 15, 2015, it will shut all 133 stores across the country as it exits the Canadian retail market during the first half of the year.
“This is a huge disaster for Canada’s workforce,” said Lisa Stam, a partner at Koldorf Stam LLP in Toronto. “The mass termination of 17,000-plus workers will flood an already weak Canadian job market.”
Target said it has set up a trust fund for employees to receive 16 weeks of pay, and this amount will be kept completely separate from the company’s restructuring process. Stam added that the amount of severance Target set aside is “unprecedented.”
“We do not take lightly the impact that our decision to discontinue operations in Canada will have on Target Canada’s team members who have worked tirelessly to make improvements to the guest experience,” said Brian Cornell, CEO and chairman of U.S. parent company Target Corp. in a statement. “That is why we took the unique step of establishing the employee trust.”
Anil Verma, Ph.D., director of the Centre for Industrial Relations and a professor of human resource management at the University of Toronto’s Rotman School of Management, said it is “unusual” for a company to protect its employees with a trust fund. “[Laid-off employees] will also accrue certain benefits, such as medical and life insurance,” he added. “This act demonstrates that Target is a good employer.”
Termination in Canada
Under Canadian employment law, employees cannot be terminated without notice unless employers have just cause. The right to notice differs in each province.
The Canada Labour Code outlines the procedures companies should follow when conducting a group termination, of which Target Canada is in the process. If an employer chooses to dismiss workers, they must:
Target Canada’s employees expressed shock that they were not notified internally before the news broke, according to a Reuters report on Jan. 16.
Stam said she is not surprised Target employees were not informed by HR about losing their jobs. “In Canada, HR does not have to notify employees,” she explained. “The 16 weeks of severance pay is in lieu of notice.”
Employment Insurance Eligibility
Canada’s Minister of Employment and Social Development Jason Kenney said in a statement that the government will help affected Target employees by offering information sessions on conducting a job search, training opportunities, and available benefits and services.
The federal government will also provide a special code to Target employees to expedite employment insurance (EI), or temporary financial assistance for unemployed Canadians.
Both Verma and Stam noted that Target Canada employees will only be eligible for EI benefits if they have worked a certain amount of hours per week, depending on the province where they worked and reside. The Target trust money is in addition to any EI payments, Stam said.
Labor experts say many Target Canada employees work part time, and may not meet the hour criteria set by the government.
Stam noted that Target does not have an outplacement service in place, as a majority of Target Canada team members are in its retail sector, and they will apply to other big-box stores.
The silver lining is that Target’s departure from Canada could serve as a boon to other retailers, Verma said. Sears Canada said it encourages former Target Canada employees to apply for positions through its career website. Sears will post information about job fairs across Canada for those seeking retail positions, and will host meet-and-greets with executives and HR experts in Toronto.
Catherine Skrzypinski is a freelance writer based in Vancouver.
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