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.

According to a court document, payments are intended “to facilitate and encourage participation of senior management and other key employees of (Sears) who are required to guide the business through restructuring and preserve value for stakeholders.

“These employees have significant experience and specialized expertise that cannot be easily replicated or replaced. Further, these key employees will likely have other, more certain employment opportunities and will be faced with a significantly increased workload during the restructuring process,” the document said.

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 to pay executives while not offering severance payments to laid off employees — and, for a brief period, opting to halt benefit and pension payments — 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 that long-serving employees who have worked at the company for 35-years would receive no notice and no severance, while 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.

David Lewis, an assistant professor of retail management at Ryerson University, said while people should feel compassion for the employees that were laid off in June, it’s crucial for the people still working at Sears that executives remain at the company through the restructuring process.

“If these key insiders with key corporate knowledge of the company’s history walk away, it would not only delay restructuring, but it may make it impossible. If you don’t have these people, you can’t restructure. If you lost them all, it could be the end for Sears,” Lewis said.

Speaking outside a downtown Toronto courthouse this week, Peter Myers, who worked at the company for more than 35 years until he was laid off in June, said he hopes that the restructuring process highlights what he sees as potential weaknesses in CCAA legislation.

“I hope that fairness can come of this, and that potentially the CCAA laws can be changed to recognize the severed employees a little bit more,” he said.

“That won’t help us, but it might help someone else. A precedent of CCAA being used to pay retention bonuses and sever employees at the same time doesn’t seem quite right.”