Thousands laid off while select staff to get $9.2M in bonuses

Sears Canada plans on rewarding select employees with retention payments totalling up to $9.2 million while laying off thousands without severance, a move met with public outcry and criticism from some former employees.

The Key Employee Retention Plan (KERP) was approved by the Ontario Superior Court of Justice on June 22, when Sears initially filed for creditor protection and announced it would be closing 59 stores and laying off 2,900 workers.

Under the court-approved retention plan, 43 senior management and key employees will receive up to $7.6 million while Sears undergoes restructuring, and 116 employees of closing stores will receive up to $1.6 million. The payments to senior management would be made in several instalments over 180 days, and closing store employees would receive bonuses equal to 25 per cent of their base salary once the store is shuttered.

“These employees have significant experience and specialized expertise that cannot be easily replicated or replaced. Further, these key employees ... will be faced with a significantly increased workload during the restructuring process,” according to a court document.

Joel Shaffer, a spokesperson for Sears Canada, said the retention plan creates incentives for certain key employees while the company is under protection from creditors.

“The point of these types of plans that are common during a CCAA process is to support the best possible outcome for the business and various stakeholders,” Shaffer said in an emailed statement. “The lack of a KERP could contribute to worse outcomes.”

But the decision was criticized by many former workers.

Ken Eady, a former Sears employee and court-appointed representative of retired employees, called the move “unfair.”

“I’m sure that you could make a good business rationale for paying this bonus, but it seems so out of balance and so unfair ... executives that have, to a great extent, worked there for a short period of time, get millions set aside so they can stay,” Eady said.

Financial Post