This story has been modified to clarify the difference between termination and severance pay.
Creditors of what was once Ottawa’s largest advertising agency – including dozens of former employees who were laid off late last year with no severance – have agreed to a settlement that will pay them 50 cents on the dollar, OBJ has learned.
The proposal from ad agency McMillan was unanimously approved last Friday by all creditors who voted, trustee Andre Bolduc of BDO Canada’s Ottawa office said in an email.
The deal still requires court approval, which is expected to happen in late March, Bolduc said. Under the proposed agreement, McMillan’s creditors will receive their payments in two instalments no later than May and December of this year.
McMillan, which once employed nearly 60 people and boasted a client list that included major U.S. and European companies, laid off nearly 40 workers in November after a year that saw its revenues plummet 40 per cent.
The company filed for creditor protection shortly afterward, and some ex-employees said they feared they would never receive the severance and termination pay they were entitled to.
Under Ontario law, workers with less than five years of service are not eligible for severance pay but typically must receive termination pay if they've been let go without a specific amount of advance notice – the situation facing about two-thirds of the former McMillan employees. The remainder of the laid-off workers have been with the firm for more than five years and are entitled to both termination and severance pay.
According to the federal Office of the Superintendent of Bankruptcy, McMillan had total liabilities of $2.04 million and assets of $718,000 when it officially filed its proposal to creditors on Jan. 9.
The agency’s founder, Gord McMillan, said this week the settlement was a “huge relief.” But he also acknowledged that many ex-employees still feel angry and frustrated that they won’t receive the full compensation they were entitled to.
“Even if we could have gotten to 100 per cent (severance and termination pay), it’s still painful to be out of a job,” he said. “There’s no easy way to sugar-coat it. They lost their job at a terrible time of the year.”
A number of former McMillan employees who were contacted by OBJ did not reply to emails or refused to comment on the proposal.
“There’s no easy way to sugar-coat it. They lost their job at a terrible time of the year.”
McMillan, who said he opted not to make a personal claim on about a million dollars in retained earnings he’s owed by the company, stepped away from the agency’s day-to-day operations in November 2018.
By then, the 23-year-old firm had become known as a bit of an outlier in the Ottawa advertising industry for eschewing government contracts in favour of chasing private-sector clients from around the world.
McMillan brought in a new CEO, veteran Montreal ad exec Pierre Paul Samson, in late 2018 in an effort to ramp up that global push. Instead, the company’s revenues shrank, and the firm began laying workers off or losing them to competitors when projects started drying up.
“I really didn’t know how to take (the business) any further,” McMillan said. “Essentially, the vision was to make it grow further and even to have a U.S. office. I don’t know what to tell you – it just didn’t work out.”
He blamed part of the agency’s decline on its failure to adapt to a changing industry. Many of McMillan’s longtime clients had begun bringing marketing projects such as social media campaigns in-house, a trend he conceded the Ottawa company didn’t pick up on quickly enough.
“You might have an account that’s very pleased with you, but they’re just not spending as much,” he said. “I think here we took too long to make an adjustment to the new reality.”
U.S. software maker Commvault’s decision in November to take most of its business to a rival firm was “the straw that broke the camel's back,” McMillan added. The New Jersey tech company had accounted for about a quarter of the agency’s revenues in the last few years, and McMillan hadn’t lured any other blue-chip clients to make up for its loss.
“None of the initiatives were ultimately paying off,” said McMillan, who has retaken the reins of management. “If I had stuck around, would it have been any different? I can’t answer that. What I can say is that the efforts weren’t paying off in terms of revenue. We really didn’t have a lot of choices by the time November came around.”
McMillan said the agency – which has moved out of its former office on Sussex Drive and now shares space on nearby George Street with tech firm PageCloud – is looking to regroup with a leaner team and a more agile business model.
The company now has 10 full-time employees and one part-timer assisted by about half a dozen freelancers. It still has a “solid base of clients” and plans to hire a senior designer, senior writer and a production artist in the near future, McMillan said, though he added it will likely never reach its former heights.
The longtime executive said that as the firm’s founder and major shareholder, he’s the person who was most responsible for its declining financial performance.
“When you start a business, when you’re an owner, whether you’ve stepped away from it or not, you’re ultimately accountable,” he said.