Bankrupt B.C. catering giant's former employees win right to seek unpaid wages

Dozens of former employees of a B.C. catering giant put out of business by COVID-19 have won the right to apply to the company's bankruptcy trustee for unpaid wages.

The latest development in the collapse of Culinary Capers follows a ruling from an administrative tribunalcancelling an order by the province's Employment Standards Branch that barred about 80 of the company's former employees from seeking severance pay.

The employees had been told they couldn't get length of service pay under B.C.'s Employment StandardsAct because of rules that kick in when an "unforeseeableevent or circumstance" like a global pandemic makes it impossible for a company to meet obligations to employees.

In a decision issued this week, Employment Standards Tribunal member Kenneth Thornicroftcancelled that order, saying a bankruptcy trustee shouldweigh the claims, which includeamounts of up to $75,000.

'If only cents on the dollar'

The decision shines a light on a cateringindustry that has been devastated by COVID-19.

It comes after an appeal by Molly Stevens, an event planner who had worked for Culinary Capers for nearly 18 years when she was given a temporary layoff notice in March 2020.

According to the decision, Stevens said she expected to return to work once the pandemic subsided.

But instead, on May 11, 2020, she was told abankruptcy trustee hadtaken control of the company's business assets and operations and that her employment was "terminated effective that day."

Stevens declined to comment on the decision.

According to tribunal documents, shefought the original decision "so that all of the cleaners and dishwashers, cooks and kitchen staff, drivers and event planners that sacrificed and worked so hard to make [the employer] a success can share in whatever amounts are available to the unsecured creditors, even if only cents on the dollar."

'The difficult decision'

Culinary Capers was one of the largest catering companies in Western Canada, with annual revenues of more than $12 million and more than 100 employees.

Bankruptcy documents saythe companyfiled for bankruptcy on May 11, 2020 with $191,000 cash in hand after more than three decades in business. The business had $60,558.09 in accounts receivable a third of which was called "doubtful" and a third "uncollectible."

The bankruptcy documents cite about $270,000 in a life insurance policy and investments along with "intangible assets" like a website, domain name and customer list.

As of May 26, 2020, there were more than $2.3 million in claims from 212 unsecured and six secured creditors.

The company's owners "could not reasonably see a path through the COVID-19 crisis that did not involve the owners spending significant time and risking substantial additional capital," the trustee's report reads.

"Management advises that they were unable to find a prospective purchaser for Culinary Capers Cateringor its assets on a going concern basis, and accordingly made the difficult decision to permanently cease operations."

Today, the company's website is still online, with a message at the bottom of the page saying the "loved and respected brand will be carried on by new ownerSavoury Chef Foods."

'All pivoted and survived'

The Employment Standards Tribunal acts as a kind of appeal courtfor people who are not happy with decisions made by the Employment Standards Branch the body tasked with administering B.C.'s Employment Standards Act.

Eight former Culinary Capers employees filed complaints with the Employment Standards Branch in April 2021.

The bankruptcy trustee claimed former employees had been paid outstanding wages, vacation and overtime.

A delegate for the Employment Standards Branch set about investigating whetherthey were entitled to pay for length of service in lieu of noticeor group termination pay.

That probe led to the order that the workers weren't entitled to individual or group compensation because COVID-19 had forced the company into insolvency.

In her appeal, Stevens disputed the notion that it was "impossible" for Culinary Capers to "remain a going concern."

"Instead of soldiering on with a skeletal crew and finding innovative ways of adapting its service offerings during the pandemic, the directors simply shut down and bankrupted the [employer]," Stevens wrote.

"I am not aware of any catering company in direct competition with the [employer] that also declared bankruptcy due to the effects of the pandemic. It is simply conjecture to say that the [employer] would or would not have survived."

Stevens identified 10catering companies which she claimed had "all pivoted and survived the pandemic."

Bankruptcy law trumps Employment Standards

Thornicroft's decision is a dense and complicated readthat dives deep into the various laws surrounding employment and bankruptcy.

He rejected Stevens' arguments with regards to the catering company's decision to file for bankruptcy, sayingher evidence about other firms avoidinginsolvency amounted to hearsay.

But he faulted the Employment Standards Branch for issuing a decision in the first place.

He said the the workers should have been considered creditors as defined by the federal Bankruptcy and Insolvency Act.

"The former employees' wage claims crystallized when the employees were either formally terminated prior to the date of the bankruptcy, or on the date of the bankruptcy filing," Thornicroft wrote.

Ultimately, he said the bankruptcy laws trump the Employment Standard Branchin this situation, meaning the former employees have the right to put their claims for severance pay to the trustee no matter what the circumstances were that resulted in bankruptcy.