Court Approves $5-Million Hardship Fund for Former Hudson's Bay Employees
A significant legal development has emerged for the thousands of former Hudson's Bay employees who lost their livelihoods when the historic department store chain ceased operations. Ontario Superior Court Justice Jessica Kimmel has granted approval for a plan to establish hardship funds exceeding $5-million. This initiative aims to partially compensate for the loss of long-term disability and other crucial benefits that were abruptly terminated following the company's insolvency.
Negotiated Relief for Vulnerable Former Staff
The court's endorsement, delivered during a hearing on Wednesday, culminates nine months of intensive negotiations between the insolvent retailer and legal representatives appointed to advocate for more than 9,300 individuals who were laid off. With this judicial green light, dedicated hardship funds will now be established to provide targeted support to the most vulnerable among these former employees.
Specifically, the plan includes lump-sum payments designed to cover a portion of the support that individuals on long-term disability would have received had Hudson's Bay remained operational. This addresses a critical gap exposed when the company, burdened with $1.1-billion in debt, entered court protection from creditors in March 2025 and subsequently closed all its stores nationwide by June.
The Disability Benefits Crisis
The precarious situation for disabled former employees came to light last April. It was revealed that their long-term disability benefits were paid through an "administrative services only" (ASO) arrangement, which lacked insurance protection. Consequently, these benefits were not safeguarded in the event of corporate failure. In May 2025, nearly 190 individuals receiving these benefits were notified of impending cutoffs, though payments were temporarily extended during negotiations.
These extended benefits were scheduled to expire on February 15. The newly approved plan provides a lifeline, offering lump-sum payments equivalent to the disability benefits employees would have received from Hudson's Bay until May 2028, or until they reach age 65—whichever comes first. Currently, nearly 160 people remain dependent on these disability benefits, with many considered permanently disabled and unable to work, as noted by lawyer Karen Ensslen of Ursel Phillips Fellows Hopkinson LLP during the court proceedings.
Broader Support for Hardship Cases
Beyond disability payments, the plan incorporates provisions for other former employees experiencing "extraordinary hardship." Eligible staff will have a six-month window to apply for one-time payments of up to $9,600 per person. An additional $2,500 in discretionary payments may be available for medical or other emergency situations, offering further relief to those in dire need.
Wider Impact of the Collapse
The downfall of Hudson's Bay, a company with 355 years of history, has had profound repercussions. Thousands of Canadians lost their jobs, and employees were not provided with severance pay upon layoff. They also forfeited health and dental benefits, as well as life insurance coverage. Former staff have been authorized to seek government assistance through the Wage Earner Protection Program (WEPP), which offers a maximum payment of $8,844.22 per person in cases of business failure.
Additionally, some former executives and managers faced pension payment suspensions last year. A separate, larger pension plan covering thousands of employees is now the focus of a class-action lawsuit, with retirees asserting their right to surplus funds within the plan.
Today, Hudson's Bay operates as a numbered company after selling its name and intellectual property to Canadian Tire Corp. Ltd. The once-nationwide retailer is in the process of winding down its operations, with only eight employees remaining from its former extensive workforce.
