Bill C-55 (Historical)

Wage Earner Protection Program Act

An Act to establish the Wage Earner Protection Program Act, to amend the Bankruptcy and Insolvency Act and the Companies' Creditors Arrangement Act and to make consequential amendments to other Acts

This enactment establishes the Wage Earner Protection Program Act. That Act provides for the payment of wages to individuals whose employment is terminated and who are owed wages by employers who are bankrupt or subject to receivership. It sets out the conditions of eligibility to receive payments, the maximum amount covered by the Program, the application, review and appeal process of the Program and the administrative arrangements for its implementation, including enforcement mechanisms. The Act provides regulation-making powers for carrying out the purposes of the Act and it provides for a review of the Act five years after its coming into force.
This enactment also contains amendments to the Bankruptcy and Insolvency Act. Those amendments include changes to the appointment and oversight functions of the Superintendent of Bankruptcy, as well as to the obligations and powers of trustees in bankruptcy, interim receivers and receivers. The amendments also expand the Act to cover income trusts. Also, new provisions regarding corporate proposals are created to address, among other things, the treatment of contracts, collective agreements, interim financing and governance arrangements. Changes are made to the priority of charges, including in respect of wages and pension contributions. The scope of application of consumer proposals is expanded. New provisions are introduced to deal with bankrupts with high income tax debts and those with surplus income, to exempt registered retirement savings plans from seizure, and to allow for the automatic discharge of second-time bankrupts. The period of eligibility of discharge of student debts is reduced. There are changes to the treatment of preferences as well as numerous technical changes. The amendments also provide for a review of the Act after five years.
This enactment also contains amendments to the Companies’ Creditors Arrangement Act. Many of the amendments parallel those made to provisions dealing with corporate proposals in the Bankruptcy and Insolvency Act. The amendments also expand the Act to cover income trusts. The scope of application of the initial stay is clarified, notably regarding regulatory measures. New provisions are introduced regarding the treatment of contracts, collective agreements, interim financing and governance arrangements. The appointment and role of the monitor are further clarified and made subject to the oversight of the Superintendent of Bankruptcy. A new Part on cross-border insolvencies is added. The amendments also provide for a review of the Act after five years.

Wage Earner Protection Program Act

[Carole Lavallée, Bloc, Saint-Bruno—Saint-Hubert, QC]

Madam Speaker, I will start by thanking my colleague from Manicouagan for his excellent question and its excellent link with POWA, the program for older worker adjustment.

Even if Bill C-55 provides a wage earner protection program, we do not yet know what will come of it. The minister has referred to precedents established in the United Kingdom and Australia. It will be necessary to go there and see for ourselves how it works in practice here, eventually, and whether workers do indeed get what they are owed.

There will still, however, be the problem of one segment of the working population: the ones aged 50 or 55 whose employer goes bankrupt and who will never get back what is owing to them and will never be able to bridge the time between their last pay cheque and their first pension cheque. These older workers need help. Some need retraining, but most need financial assistance to make it until pension age.

The connection made by my colleague from Manicouagan is a very interesting one. If it were possible, that could be part of Bill C-55. For the moment, this good bill needs complementing with POWA for older workers.

[Carole Lavallée, Bloc, Saint-Bruno—Saint-Hubert, QC]

Madam Speaker, the Bloc Québécois has been working together for a long time with the steelworkers' union, among others, on proposals to amend the Bankruptcy and Insolvency Act to ensure that employee wages and pension funds are the first debts in line to be reimbursed when companies go bankrupt. Why? Because the current situation is badly flawed.

Under the current legislation in Canada, employees who work all their lives for the same company can find themselves left with nothing if it goes bankrupt. Employees lose not only their wages for hours they actually worked but also all their contributions to the company pension plan. When the Bloc Québécois found this out, it decided to hound the government to ensure that the flaws in the current legislation were corrected and wages better protected.

In October 2003, for example, the Bloc Québécois voted in favour of a motion brought before the House by the NDP. This motion asked the government to amend the Bankruptcy and Insolvency Act to ensure that the wages and pension funds due to employees are the first debts in line to be repaid in case of bankruptcy. Unfortunately, the Liberal Party voted against this motion at that time and it was therefore defeated.

When on November 15, 2004 an NDP member introduced a bill to protect wages, which was similar to the government's current Bill C-55, the Bloc was an enthusiastic supporter. My colleague from Shefford even said in this House that if the NDP had not introduced such a bill, the Bloc would have. This is indicative of the Bloc's affinity for a bill like this, Bill C-55, which it finds satisfactory. I would not go so far as to say that it finds it fully satisfactory, but it considers it a step in the right direction. It is a little step, to be sure, but still in the right direction.

In our view, another milestone has been reached in the direction of respect for working people and their dignity. The social justice principles recognized and upheld here require employees to be paid for all the hours that they have worked. Workers' wages are the only income that they have, in contrast to big corporations and bankers, for example, who have mortgages with companies that go bankrupt. Workers' pension funds are sacred. People do not work their whole lives to be left as destitute as if they had not worked hard all that time. It does not make any sense.

The new wage protection mechanism is interesting, because, as we know, Bill C-55 creates the wage earner protection program. Under this program, the federal government assumes up to $3,000 of wages owed to workers if their employer goes bankrupt. Payments made under this program are taxable and are subject to any applicable deductions.This means that, regardless of what assets the employer has, workers will be able to receive most, if not all, of their unpaid wages.

The Minister of Industry feels that this amount of $3,000 would cover 97% of unpaid wage claims, but it remains to be seen what will happen with the remaining 3%. The same thing goes for the precedents the minister has referred to.

On the other hand, workers receiving payment under the WEPP will have to transfer to the federal government their right of claim under the Bankruptcy and Insolvency Act for an amount equivalent to the benefit they have received. The government will then seek to recover the amount paid out to the workers.

This appears to be an acceptable mechanism, and we are told there are precedents for it. We will need to see what those are. The minister was not very forthcoming about them just now. We need to see how this has worked in Australia and the United Kingdom, whether workers have indeed recovered what was owed to them, and whether indeed 97% of workers recovered all that was owed to them.

The government estimates the annual cost of the program at $32 million annually, a maximum of $50 million in particularly bad years with a lot of bankruptcies. This will mean more money paid out to workers, but since the federal government will be able to recover a portion of what it has paid out by virtue of having become the holder of the right of claim, it will be compensated in part for these payments.

With Bill C-55, the federal government would create a priority higher than guaranteed creditors for workers' claims of unpaid wages and vacation pay. Their claims would take precedence over current assets such as cash, up to the not insignificant amount of $2,000.

As was said earlier, the advantage is that workers will receive their money a lot faster than they would under the existing order in which creditors are paid. They would no longer have to wait for months and years; it would most likely be a matter of weeks. If this program does not run into the same kind of trouble as the gun control program, workers will be paid faster.

However, it seems that 3% of workers will not recover all the money owed to them. We will have to see to what extent this is indeed the case and what we can do to help these workers.

Members understand that since workers will have assigned their right to claim to the federal government, it will become the preferred creditor.

Let us look now at the pension protection scheme. Bill C-55 introduces a mechanism to protect the workers' pension plans.

Under Bill C-55, a court would be able to authorize a proposal for bankruptcy or for an arrangement only when proof has been made. This means that employee and employer contributions to the pension plan that had not been paid at the time of bankruptcy or receivership have been paid or that the court is satisfied that the contributions will be paid under the arrangement, or that the involved parties made an agreement.

In addition, regular pension contributions by employees and their employers that had not been not paid when bankruptcy or receivership was declared will have priority over secured creditors in cases where the employer could not avoid bankruptcy and liquidation of its assets.

This will not solve everything. Nonetheless, as mentioned earlier, it is small step in the right direction.

There also are retirees whose income will decrease, while others will lose almost all their income. Again, this will improve the situation slightly. What is more, it establishes the principle that workers must receive the benefits from the retirement fund they contributed to over the years.

I see that my time is running out. I want to speak specifically about student loan bankruptcy. Bill C-55 proposes amending the rules for student bankruptcy. Currently, the Bankruptcy Act stipulates that a person filing for bankruptcy cannot be discharged from a student loan if that person is still at school or finished school less than 10 years earlier.

Under Bill C-55, a person can be discharged from student loans, through bankruptcy, seven years after finishing school instead of ten. The bill also allows a court to discharge a bankrupt from student loans if that person stopped going to school five years prior and has excessive financial difficulties.

I must say that the Bloc Québécois has been long committed, but only formally in the 2004 election campaign, to abolishing the period during which a student cannot be discharged, through bankruptcy, of his or her student loans. To that end, the Bloc Québécois supported Bill C-236, introduced by the NDP, which proposed reducing the period to two years. Any change that leans toward abolishing this waiting period will get the Bloc's approval.

Allow us to say that this discrimination against former students is based on the prejudices some people have toward those who declare bankruptcy. Such prejudices includes thinking it is easy to declare bankruptcy, when it is common knowledge that a judge has to decide on the matter and deny any outrageous claims. Another prejudice suggests that students are more inclined than other social groups to try to get out of commitments like debt. However, there are no studies to prove that.

Basically, the change from ten to seven years is arbitrary. Why not six or two years, or nothing at all? You can expect the Bloc Québécois to propose an amendment to this section during study in committee.

Finally, this bill is far from perfect. In fact, as I said, it is a small step in the right direction. The Bloc Québécois is in favour of the principle of BIll C-55, even though it is fully aware that employees usually have no means of protecting themselves when the employer is in a precarious financial situation.

Employees do not have the same capacity as financial institutions to absorb a loss of income for hours worked. Their salary is their only source of income, unlike the banks and the mortgage creditors.

It is difficult for an employee to assess the risks of working for a given company. When an employer is in financial difficulty, its best staff members may decide to leave the firm to avoid losing income, thus further limiting the employer's ability to deal with the problem.

The Bloc Québécois is formally committed to correcting the current situation, which is inadequate. It is pleased to see the federal government recognizing that major changes to the Bankruptcy and Insolvency Act are necessary to ensure better protection for wages and pension funds.

However, while it shares workers' enthusiasm about the introduction of Bill C-55, the Bloc Québécois notes that many future improvements will be required to respond to the lack of protection for workers' salaries, severance pay, vacation pay and pension funds.

The bill also addresses a number of separate subjects, such as student bankruptcy. An amendment will be submitted in committee. The Bloc Québécois has committed to abolishing the waiting period during which students cannot be discharged from their debt by bankruptcy, and we will be reviewing this in committee.

And so, these are the topics Bloc Québécois intends to bring up for discussion when this bill is studied in committee.

[Robert Vincent, Bloc, Shefford, QC]

Madam Speaker, in my opinion, Bill C-55 is a good bill that the unions and the workers have been awaiting impatiently for years. However, there is a problem with this bill. There is something missing and it needs to be pointed out. The minister said that the workers had vehicles and mortgages and that they needed these funds to pay for all that. So allowing them restitution of $3,000 in the event their employer declares bankruptcy would be a good thing.

There is another important aspect, and the member mentioned it earlier. He said that business owners were being treated unfairly. But so are the workers. Let me explain.

Collective agreements always contain a clause on severance pay in the event a business closes. Workers pay for this directly through payroll deductions. A collective agreement is the result of bargaining. A percentage of the envelope that the employer could give the workers as wages and wage increases is transferred into a severance pay fund. As a result, workers receive one week's salary per year of service.

This is not fair to workers. My question is for the member. Why are workers not able to recover all their money if a company declares bankruptcy? Why should workers have to pay the price for the bankruptcy by losing the money set aside in the event the company closed?

A worker with 20 years' seniority is entitled to 20 weeks' salary from the employer. This 20-week period allows workers to pay their bills until they find another job. Under this bill, yes, workers can recover part of their salary. However, there is a two-week waiting period for EI and, quite often, older workers are the ones affected. I will come back to this point.

With this bill, we should consider unionized workers who are entitled to this severance pay. They paid for it with their own money, directly from the increases they would have earned if they had not agreed to wage deferrals.

Should we put something directly in Bill C-55 so that these workers can recover their investment?

[James Rajotte, Conservative, Edmonton—Leduc, AB]

Madam Speaker, my colleague's question gives me the opportunity to explain. I know it is not related specifically to Bill C-55, but it is related to income trusts.

The member mentioned that the United States does not have income trusts. That is true. However, it also do not have double taxation on dividends. If double taxation of dividends were not done in Canada, then we would not need income trusts. Income trusts allow the company to pass on the profits to their investors. People say that is evading taxes. What it does is pass on profits to the investors and thereby companies do not pay the double taxation to the government.

It is interesting, but it is a fundamental difference between the New Democratic Party and the Conservative Party. If we look at productivity and competitiveness, I do not believe the path to productivity and competitiveness is by double taxing those people who are taking their hard earned dollars and investing it in companies in Canada. That is what investors are doing.

By double taxing companies, we are not increasing our productivity and competitiveness. We are in fact lessening our productivity and competitiveness by giving more resources to the government, by double taxing those people who are taking their own hard earned capital to invest in our companies in Canada. That is exactly the wrong path to go down.

If the finance minister wants to come forward and say that the government will stop double taxing investors who take their hard earned money and put it into companies in Canada, we in the Conservative Party would probably say that we should look at that. That is what the United States does and maybe that would be even a better way to go than the income trust angle.

If we want jobs to be created, whether it is in northwestern British Columbia, on the east coast or anywhere else in Canada, we need Canadians to use their excess capital to invest in companies here.

Our biggest problem in Canada with productivity and competitiveness today is a lack of access to capital by small and medium size companies. If we go to any research institution in any field across the country, talk to the head of the NRC, the ARC or whomever else, they will say that our number one issue in Canada is productivity and competitiveness.

The forestry sector has been hit by unfair trade practices by our colleagues. It has had to put up $5 million in duties. This sector has actually made profits because it has responded by becoming more efficient and more competitive. The forestry sector has not done this by evading taxes. I think, frankly, it has been by trying not to pay double taxation to the government and passing on some gains to investors. The investors can then use the surplus money to reinvest back into the communities across the country.

[James Rajotte, Conservative, Edmonton—Leduc, AB]

Madam Speaker, it is my pleasure to address Bill C-55, an act to establish the wage earner protection program act and also to amend the Bankruptcy and Insolvency Act and the Companies' Creditors Arrangement Act and make consequential amendments to other acts.

This is very complicated but important legislation. I am pleased to say that my Conservative colleagues have shown a great interest in the bill. A number of them will be speaking to the various aspects of it and the amendments. We will be proposing amendments at committee stage on this bill which we think will improve the bill.

It is appropriate, and the minister mentioned this, that we should recognize the member for Winnipeg Centre who raised this issue in a private member's bill. It should be noted that he brought the issue to Parliament's attention. Our party certainly appreciated his efforts in this area. We did have some disagreements, but our response, I thought, was very responsible.

We formed an internal committee under the leadership of our labour critic to try to formulate our party position on the issue even prior to the government bill being introduced. We wanted to be ready as a party to debate this issue substantively. Today I would like to offer our party's position on this legislation, but obviously other Conservative members will expand the comments in other areas.

Our view is that Bill C-55 is a good first step. We recognize that both the Bankruptcy and Insolvency Act and the Companies' Creditors Arrangement Act need to be amended.

It is a sad fact that every week dozens of companies and individuals declare bankruptcy in this country. We need to make sure that we amend our bankruptcy legislation so that it is clear and workable. Some 11,000 businesses and 100,000 individuals use the Bankruptcy and Insolvency Act on an annual basis. Therefore, I support making changes to both acts.

One particular proposal I support is that bankrupt individuals with more than $200,000 in personal income tax debt representing 75% or more of their total unsecured liabilities will not be eligible for an automatic discharge.

I am also pleased that we are trying to bring our bankruptcy laws in line with international insolvency laws. That being said, there are some problems with Bill C-55 that we will be seeking to remedy at committee. I have made some efforts to be in touch with various associations, organizations, labour groups and people in the private sector who are anxious to make representations on the bill. Hopefully they will all be able to do so at committee.

We will seek to clarify some issues because the legislation is rather complicated, particularly on the bankruptcy side.

The first issue I want to touch upon is wage earner protection. I want to be clear that prior to this legislation our party fully supported, as we do now, the payment of unpaid wages in a quick manner.

Bill C-55 will compensate individuals for amounts earned but not paid during the six months preceding the bankruptcy or receivership of their employer. The wage earner protection program will be funded by the consolidated revenue fund, which is essentially the taxpayers of Canada. Payments of up to $3,000 will be made to employees. I support the expedited payments to workers who are caught in bankruptcy proceedings. It is an appropriate amount of income to be paid in these situations.

Our party does have some concerns with the proposed change in the rank of creditors. Though it may sound strange, good national and provincial bankruptcy and insolvency laws improve the investment environment. Investors gain confidence knowing that should something go wrong, a stable system is in place to protect what is left of their assets.

With that in mind, wages are currently paid fifth after secured creditors and other preferred creditors. I am concerned that elevating wages above secured creditors may lead to increased financing costs for small business owners and therefore fewer investments. While I support the wage earner protection program, I do not believe that the rank should be changed from fifth to third or to a limited superpriority status. I want to be clear on this. We are not opposing payments to the workers. That should be done and it is something that our party supports.

Our party is concerned that once the government pays the worker, the government then takes a position and its position as a creditor is what has changed from fifth to third. Our concern is that this may impact the investment climate, particularly for small and medium size businesses that are attempting to access capital. I believe my colleague from Edmonton addressed that in a question to the minister.

We look forward to input from the Canadian Federation for Independent Business. I know it is concerned about this specific issue. In an attempt to address an imbalance in a system for workers for a small amount of income, we should not in remedying that injustice cause an injustice to small business owners who are creating an awful lot of jobs across this country.

We think it could be left in fifth place where it is currently. To be clear, the worker would be paid but the government would take fifth place and therefore not upset the investment climate for small and medium size businesses. My colleague from Souris—Moose Mountain will be addressing the wage earner protection program in his speech in great detail.

What I want to touch on next is the whole issue of RRSPs. Under the current laws if people go bankrupt, the trustee will seize their RRSPs. Bill C-55 will make RRSPs exempt from seizure with a few exceptions. For instance, contributions made in the 12 months prior to bankruptcy will not be exempt.

RRSPs have become a contentious issue. For example, the province of Saskatchewan exempts RRSPs entirely in bankruptcy proceedings. One of the issues we will need to address at the committee stage is whether or not there should be a cap on the dollar value of the RRSP. While pension plans can safely accumulate, RRSPs are still partly vulnerable and self-employed individuals could lose their investments and security upon bankruptcy.

This is something that was called for by investors and self-employed people who use RRSPs to build up their nest egg for retirement. We think it is a reasonable change to make, such that if people in their 40s or 50s have to declare bankruptcy, their entire nest egg will not be taken from them at that stage. Obviously the exception of the 12 months prior is to prevent someone from loading up his or her RRSP in the last few months and then declaring bankruptcy. This is a good change, especially for entrepreneurs who rely very heavily on RRSPs for their retirement years.

In addition, the bill is silent on registered education savings plans. This is an issue on which the Senate committee on banking made a recommendation in 2003 in its comprehensive report regarding bankruptcy and insolvency. I was remiss in not complimenting the report and the senators who worked on it, as well as the member from Winnipeg. The report was certainly instrumental in bringing forward a lot of the changes to the bankruptcy laws. The Conservative senators who worked on it did an absolutely outstanding job, in my view.

In addition, Bill C-55 makes changes to the treatment of student loans. Currently student loans are not discharged in a bankruptcy unless 10 years has passed since the applicant was a student. Bill C-55 reduces the period from 10 years to 7 years. In other words, the student loans of a person who goes bankrupt after having ceased being a full time or part time student for seven years will be automatically discharged. The Senate banking committee report which I referred to earlier recommended that there only be a five year wait before the discharge of student loans. I know the New Democratic Party would prefer the time period of two years.

The second issue regarding student loans is hardship. There is a provision to allow for the discharge of a student loan due to hardship. Bill C-55 allows a bankrupt person to apply to the court to obtain a discharge on the grounds of hardship five years after the person has ceased to be a full time or part time student. Five years in this case may be too long if we add in the additional issue of hardship, but that is certainly something the industry committee can look at more closely. It is a reality that all post-secondary education costs have risen since the Liberals have been in office.

While many individuals successfully finance their education and repay all their student loans on time, some Canadians are burdened by student loans to the point where they have difficulty providing for the basic necessities of life. Therefore, I think the so-called hardship clause should be examined in detail at committee.

Another issue that Bill C-55 raises is that of income trusts. This has become a very topical issue recently with the Minister of Finance, quite frankly in my view, making an absolutely unprecedented interference in the marketplace, in our investment community. This is disrupting the retirement nest eggs of thousands and thousands of Canadians. It is affecting the investment climate in perhaps the most negative way in recent years. I just cannot believe a finance minister would act so imprudently. It is an absolute disgrace.

We in the Conservative Party under our finance critic, the member for Medicine Hat, have argued that we need certainty in our investment community. We should also realize, though, that it is mainly middle class Canadians who have a lot of their retirement funds tied up in the stock markets. To cause markets to decline precipitously overnight because of the imprudent actions of the finance minister is unconscionable. I hope that decision will be reversed, but unfortunately, I do not think it will be unless there is a change of government.

The whole issue of income trusts is raised in the bill. My colleague, the member for Kelowna—Lake Country, the vice-chair of the Standing Committee on Industry will be addressing the whole issue of income trusts in his speech, how they are affected by the bill and what should be done. I do not know whether the government is intending to change how it will address income trusts with the recent actions by the finance minister, but that is something the government should address.

I want to conclude by saying that consumer insolvency has increased on average by 12.8% per year since 1968. Business bankruptcies are decreasing, which is good news. We do like the parts of the bill particularly that amend the bankruptcy legislation, which encourage restructuring of viable but financially troubled companies. Obviously, we would like to see it worked out rather than going to bankruptcy, if it is at all possible. A lot of the recommendations made to address the Bankruptcy Act that were in the Senate report in our view would lead to less regulation, less interference and would make it more efficient. Those initiatives that address that part of the act we certainly support.

We also recognize that we need better protection for wages. We are fully prepared to support that, but we obviously want the issue of where the government ties in, in terms of the creditors issue to be addressed at committee.

We do support the principles in the bill. We will be supporting the bill at second reading. At committee we will be asking all sorts of witnesses to come forward with their thoughts on the bill. We will be proposing some amendments. We hope other parties will approach the bill in the same reasonable, prudent manner that we have, and in the end we can address all of these issues in a very responsible manner.

[Joe Fontana, Liberal, Minister of Labour and Housing]

Mr. Speaker, as I began my debate yesterday with regard to Bill C-55, the wage earner protection program, I indicated that I think this is a fundamental new bill that speaks to the aspirations of working men and women who get up each and every day to work and expect to be paid for the work and the time they have put in.

Bill C-55, a combined effort with my colleague, the Minister of Industry, is about helping working men and women, about the protection of workers whose employers are undergoing restructuring or become bankrupt. Under the current system, as I said yesterday, too many workers are vulnerable when employers enter into a restructuring or file for bankruptcy. Canadian workers suffer lost wages, reduced pension benefits and an uncertainty that the collective agreements in place may be unilaterally challenged by a court. That is unacceptable to this government and, I am sure, unacceptable to most members in the House.

Let me explain again what this program will mean for those unpaid workers. Under the current system in a bankruptcy, three-quarters of the workers receive nothing for their work even though they had gone to work for their employers. At the end of the day, three-quarters of them get absolutely nothing. Overall, the average payout is only about 13¢ on the dollar. That is why I believe this bill is important for working men and women.

The situation facing unpaid workers in Canada exposes a real gap in our system. Clearly, changes are needed. That is why this government is taking action to protect workers' wages. For example, we are now proposing new measures in this bill that will provide workers guaranteed payment for unpaid wages of up to $3,000. An estimated 10,000 to 15,000 workers in all sectors, in all provinces, in both jurisdictions, are left with unpaid wages or reduced pensions due to employer bankruptcies in Canada. We intend to rectify that situation.

The reforms will also amend the Bankruptcy and Insolvency Act to establish a limited superpriority for unpaid wage claims of up to $2,000. Under the new limited superpriority, a unpaid worker will be one of the first to be paid from the current assets of the bankrupt employer.

The limited superpriority for unpaid wages better balances the risk of bankruptcy between employees and other creditors of the bankrupt company. We believe that right now the burden weighs too heavily on the employees and that workers' wages, their time, their effort and their covenant to go to work each and every day must be respected. I believe this will also assist the government in recouping its costs in the wage earner protection program because it will be the government which will try to recoup this from the estate of the bankrupt company and the workers will not necessarily have to do that.

The payment of up to $3,000 will immediately be paid to those workers who are waiting for their wages to be paid for work they have already done. To provide a better balancing of risks, secured creditors whose security was comprised by the limited superpriority will be granted a preferred claim to the extent that their security was compromised. This will reduce the effects of the reforms on secured creditors.

The issue of pensions also concerns many Canadian workers. Currently when a company goes bankrupt, contributions taken from employees' paycheques may not be paid to the pension plan for them, and the contributions that employers should have made are only paid after almost every other creditor gets paid. I am sure we would all agree that this is unacceptable. People go to work each and every day, each and every week, each and every year, and surely at the end of their working career, through a choice of their own, perhaps, their pensions ought to be there. The proposed reforms would improve this situation.

In a bankruptcy, a receivership, a proposal or a CCAA filing, contributions that an employer should have made or that were deducted from an employee's paycheque would be required to be paid into the pension plan for the benefit of workers because most other creditors get paid.

When employers are trying to restructure under the Companies' Creditors Arrangement Act to avoid bankruptcy, this reform would provide a mechanism whereby employers and unions could try to renegotiate the collective agreements under the relevant labour legislation, and that is because this government believes in collective bargaining. It believes that the arrangements that have been made between an employer and its employees should be respected and not be allowed to be taken away, that contract that has been entered into should not be frivolously taken away from the parties. If there is no arrangement that can be made, then existing collective agreements remain in force. I believe that is an important principle to which we want to adhere.

If changes were agreed to, the union representing the employees would have a right to claim in the bankruptcy an equal amount to the concessions that they granted as damages and this amount would be as an unsecured creditor. Again, that speaks to a great principle. Above all it would guarantee workers' rights again under existing collective agreements.

The reforms would also clarify that the regulatory procedures available under any labour legislation would be allowed to continue when an employer is trying to restructure under the insolvency regime. This would ensure that the rights and the obligations of the employers, unions and employees in the areas of industrial relations, occupational health and safety and labour standards would continue to be enforced by the regulators. However regulators would continue to be stayed if they were acting as a creditor to the employer.

We have listened to the stakeholders and to our partners. We have listened to Mr. Georgetti at the CLC; to Mr. Hassan Yussuff, the secretary-treasurer; to Mr. Buzz Hargrove from the CAW; and to Mr. Ken Neumann from the United Steelworkers Union. We have consulted widely with the small business community to ensure that this is a balanced act that speaks to not only the needs and the requirements of small business but, more important, to the working men and women who in fact make businesses successful and make this economy so successful.

Therefore we have put forward an ambitious legislative agenda. I believe there is consensus in the House to support the bill. I would hope that the other parties support the bill. The day has come that we stand up for working men and women in this country, protect their wages, protect their pensions, protect their collective bargaining and the negotiations that have taken place. We believe this is a forward looking plan that speaks to our constituents, to the men and women who, each and every day, get up and go to work. All they expect is to be paid their wages, that their pensions are in place and that their collective agreements will stand.

We look forward to the support of all parties. This is too important of an issue for us to play politics with. We would hope that the committee would deal with it as quickly as possible so we can become law in the next number of weeks.

[Joe Fontana, Liberal, for the Minister of Industry]

moved that Bill C-55, An Act to establish the Wage Earner Protection Program Act, to amend the Bankruptcy and Insolvency Act and the Companies' Creditors Arrangement Act and to make consequential amendments to other Acts, be read the second time and referred to a committee.

Madam Speaker, in the time that is left today, I am pleased to speak to a very important bill, Bill C-55, which is a balanced and comprehensive reform package for insolvency legislation tabled by my hon. colleague, the Minister of Industry. The proposed changes will modernize our insolvency legislation, ensuring that the system better responds to the needs of the marketplace.

Just as important, I want to talk about how the reforms will improve the protection of workers whose employers undergo restructuring or become bankrupt. I am very passionate about this topic. Under our current system, too many workers are vulnerable when their employers enter into a restructuring or file for bankruptcy. Canadian workers suffer lost wages, reduced pension benefits and uncertainty that their collective agreements may be unilaterally changed by a court.

The government has heard from Canadian workers about the need to ensure that they are more fairly treated when their employers suffer economic hardship. The reforms introduced by my colleague will do just that.

For example, we are proposing new measures, including the wage earner protection program, for the first time in our history which will provide workers with a guaranteed payment for unpaid wages up to $3,000. An estimated 10,000 to 15,000 workers in every workplace across the country in both federal and provincial jurisdictions are left with unpaid wages or reduced pensions due to employer bankruptcies in Canada. These workers did not agree to become lenders to their employers when they were hired. They cannot afford to bear the risk of coming up empty-handed after they have done their hard work each and every day. They need to have their paycheques to buy groceries, to pay their mortgages and to pay their car payments.

Let me explain what the program will really mean for these workers. Under the current system three-quarters of unpaid workers in a bankruptcy receive nothing for their work, zero. The average payout overall is only 13¢ on the dollar. In Canada, existing federal and provincial labour laws protect the workers who perform work but are not paid by their employers. However, these labour laws cease to be in effect when a bankruptcy or receivership occurs, because currently, bankruptcy law supersedes labour laws in these cases.

The situation facing unpaid workers in Canada exposes a clear gap in our system. Clearly, changes are needed. That is why the government is acting on behalf of the workers of Canada. The wage earner protection program will apply when an employer goes bankrupt, or is put into receivership under the Bankruptcy and Insolvency Act. These are the employees who are unpaid. The employees can apply to the program to have their wages paid, up to $3,000, immediately upon that occurrence.

The wage earner protection program will operate efficiently. It will be delivered seamlessly, building on the existing relationships between trustees and receivers and the employment insurance system.

This type of program is not radical or new, but it is for our country. Many countries already have a similar program to protect their workers, such as the United Kingdom and Australia. The cost of the program is only going to be $30 million a year. In the event of a dramatic increase in the number of bankruptcies, it could go as high as $50 million. That is not a big investment from the Canadian government to protect the working men and women of this country.

The government expects to recover up to half of the program payouts as a creditor to the employer. Under the wage earner protection program, the government will assume the workers' claims against their bankrupt employer's estate. This means that the government will recover a portion of its costs by making claims against the employer's estate and therefore, the employee does not have to do it.

The reforms will also amend the Bankruptcy and Insolvency Act to establish a limited superpriority for unpaid wage claims up to $2,000. Under the new limited superpriority an unpaid worker will be one of the first to be paid from the current assets of the bankrupt employer.

The limited superpriority for unpaid wages balances the risk of bankruptcy between the employees and other creditors of the bankrupt company. Right now the burden weighs too heavily on the employees. It will assist the government in recouping its costs for the wage earner protection program by making more assets of bankrupt companies available for the employees and wage claims. That is putting the employees first.

I will have more to say about this tomorrow morning.

Extension of Sitting Period

[Pat Martin, NDP, Winnipeg Centre, MB]

Mr. Speaker, I thank my colleague from Yukon for his enlightening words. I must say that it is always a pleasure to listen to such a cultivated individual as my colleague from the Yukon as he shares his views in such an eloquent fashion.

I would like his views on one aspect of what is known as the NDP's better balanced budget deal, an aspect that is not raised as frequently as it should be. It is the element that I am perhaps most proud of and is something that is not found so much in Bill C-48 as it is in Bill C-55: the wage protection fund.

The workers' wage protection fund was part of the negotiations between the NDP and the Liberals. It is a special fund whereby in the event of bankruptcy workers would not have to wait their turn with the other unsecured creditors when the trustee is discharging the proceeds from the assets of the bankrupt company.

This is important because there are many commercial bankruptcies in Canada in which the employees are owed back wages, holiday pay or pension contributions. I think it was an incredibly compassionate move on the part of the two principal parties who negotiated this deal to include these unemployed workers who may be owed back wages, et cetera. This will find itself in Bill C-55.

I would ask my colleague from Yukon if he could enlighten me as to how a party that used to call itself the grassroots party could turn its back on unemployed, grassroots, individual workers who were victims of a bankruptcy and who would not get their back wages. Now they will. I wonder if he could enlighten me on how any party that professes to stand up for working people could vote against a wage protection fund on behalf of working people.

Business of the House

[Tony Valeri, Liberal, Leader of the Government in the House of Commons]

Mr. Speaker, our principal legislative objectives continue to be Bill C-43, the third reading vote of which will take place after question period, and Bill C-48. The government believes these bills reflect public interest and the enactment of both of these bills is required before the House adjourns for the summer. As the hon. member mentioned, if the House does not pass Bill C-48, we will be here in July and August. Consequently, we will continue to give these bills priority until they are disposed of.

We will then consider report stage of Bill C-38, the civil marriage bill; Bill C-25; Bill C-28; Bill C-52, the Fisheries Act; Bill C-47; Bill C-53; Bill C-55, the bankruptcy bill; and Bill C-37, the do not call legislation.

Wage Earner Protection Program Act

[Ken Dryden, Liberal, for the Minister of Industry]

moved for leave to introduce Bill C-55, an act to establish the Wage Earner Protection Program Act, to amend the Bankruptcy and Insolvency Act and the Companies' Creditors Arrangement Act and to make consequential amendments to other acts.

(Motions deemed adopted, bill read the first time and printed)