Former McMillan employees still owed severance as Ottawa ad agency applies for creditor protection

mcmillan
McMillan's offices on Sussex Drive, via Google Street View.

Former employees of a major Ottawa advertising agency that recently applied for creditor protection say they “feel ignored” and are worried they will never receive all the severance pay they are owed after years of service to the company.

Once the city’s largest advertising agency, McMillan laid off nearly 40 employees ​– or about three-quarters of its workforce ​– on Nov. 14, a day before giving notice of intent to file a proposal to its creditors. 

Several employees who received pink slips told OBJ the laid-off workers have not received severance pay. In the case of some long-serving employees, the payouts could amount to tens of thousands of dollars.

One longtime ex-McMillan staffer, who spoke on the condition of anonymity, said he spent 15 years at the agency and is frustrated that he now has to wait in line with other unsecured creditors to find out how much – if any – termination pay he’ll receive. 

“We all were loyal to McMillan for a long time. Even when people were jumping ship, we stayed to the end. "

“We all were loyal to McMillan for a long time,” he said. “Even when people were jumping ship, we stayed to the end. Business is business – we all understand the risks and everything. But you … just hope to get treated fairly. It’s just very, very disappointing, to say the least.”

Several other former McMillan employees expressed similar sentiments and told OBJ that they too were owed severance, but declined to be interviewed.

Company executives say the recently laid-off workers received all back pay and vacation pay they were owed. The firm’s founder, Gord McMillan, said in an email to OBJ that he plans to present a proposal to creditors in “the coming few weeks” that will include a severance package for the former employees.

“I specifically went the restructuring route so employees become creditors and can therefore receive a proposal to compensate them,” he said.

Asked whether the ex-employees will receive severance pay, McMillan said “the amount in the proposal will be contingent in large measure to a receivable that is in dispute,” adding he’s “cautiously optimistic” the former staffers will be repaid.

BDO Canada partner Andre Bolduc is the trustee in the McMillan case and said he expects the company to file its proposal within the next month. Under Canadian law, companies have 10 days to file cash-flow projections once they apply for creditor protection. After that, they are generally given 30 days to file a proposal to creditors.

However, debtors are often given more time to file a proposal so they can restructure and try to get back on their feet, he added.

“Companies typically need time to put a plan in place, especially when they’ve had to make a lot of changes in their operations,” Bolduc said, adding it’s “premature to make any assumptions” about how many cents on the dollar creditors will receive.

As unsecured creditors, the former McMillan employees will be compensated out of any funds left after all the firm’s secured creditors have been repaid. 

“Generally speaking, former employees don’t have much protection,” said Ottawa-based employment lawyer Paul Champ. “I think they’re going to be in a situation where they’re going to be (waiting for severance pay) for a number of months at least.”

McMillan’s decision to seek creditor protection caps off a recent period of upheaval at the 23-year-old Sussex Drive firm, which had become known as a bit of an outlier in the Ottawa advertising scene for eschewing government contracts in favour of chasing private-sector clients from around the world.

The company brought in a new CEO ​last fall – Pierre Paul Samson, who joined the company as CEO from Montreal ad agency Sid Lee – and cut about 10 employees in an earlier round of layoffs this summer.

“There was definitely a sense of insecurity,” said the former McMillan employee, noting the firm had been losing accounts over the past 12 months and not replacing them. “We had a stable of three or four big American clients, and one by one they left.”

U.S. software maker Commvault’s recent decision to take its business to a rival firm was “the last straw,” he said, and he and his colleagues were dismissed just days later.  

“I know we were pitching on a lot of new business accounts and we weren’t really winning,” he added.

“To try to induce a client to work with an agency in Ottawa when they can go with a big Madison Avenue agency – it’s never easy. But this year in particular, it was very difficult.”

After spending much of his professional life at McMillan, he said the firm’s decline has been tough to swallow.

“Twelve months ago, we were planning a huge Christmas party at the Diefenbunker spending thousands on a big show and everything,” he said. “Twelve months later, pretty much everyone’s let go without any severance.”

He said many of his former colleagues are equally frustrated.

“They’re mad and they feel ignored,” he said. “And they’re sad because we were a big family, right? People are scrambling. It’s not an easy time to be looking for a job. Everyone’s just kind of supporting each other and there’s been a lot of great support in the community, other companies reaching out.”

Shopify held a meet-and-greet for the laid-off workers, and some of them have already landed interviews at other shops in town. 

“That’s encouraging to see the support that people are giving the McMillan people who were let go,” the former employee added. “But most of them are still trying to find jobs.

“Everyone’s like, ‘Yeah, I’ll think of you when something comes up.’ You’re just making connections with people and hoping they think of you when an opportunity comes up.”

Creditor protection explained

Once a debtor proposes a repayment plan, creditors must vote on whether to accept it, a process that usually takes place within three weeks after a proposal is filed, explained Andrew Bolduc, a trustee at BDO Canada’s Ottawa office. 

Typically, proposals require the approval of a majority of creditors, who must also represent at least two-thirds of the total dollar amount owing. A provincial court must also sign off on the agreement, which usually takes another four to six weeks, Bolduc said. 

He said secured creditors such as banks are not always part of such proposals, especially if the debtor seeking protection has adequate security ​– such as accounts receivable, inventory and other fixed assets ​– to repay those creditors. Secured creditors generally only take part in the process if there’s a shortfall, Bolduc added.