Sears Canada has struck a deal in court over benefit and pension payments with retirees.

The retailer has agreed to continue payments to retirees until September. Sears Canada had originally asked the court to allow it to suspend its obligations to employees because of a severe cash crunch.

Lawyers for the company and its employees were in Ontario Superior Court Thursday for an update on the company’s restructuring strategy under court protection from creditors.

The court granted Sears Canada temporary protection from creditors three weeks ago.

The employees' lawyers argue that their clients and retirees are the "most vulnerable" groups affected by the company's financial difficulties and its plan to close dozens of stores.

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Sears Canada Chief Financial Officer Billy Wong walks away from the Ontario Superior Court in Toronto on Thursday (Frank Gunn/The Canadian Press)

They also argue that the company is proposing excessive payments for about 43 head office employees who are being kept on.

The motion says $7.6 million in discretionary retention payments for key employees should have a lower priority than the claims by employees who have been laid off or given notice that they will lose their jobs without severance in the coming months.

About 400 employees from the Toronto head office were immediately let go on June 22 without notice and salary payments were immediately cut off for 1,000 employees who had received termination notices prior to June 22.

BNN's Paige Ellis is at the hearing. Read on for a collection of her tweets.