Evidence of meeting #45 for Industry, Science and Technology in the 40th Parliament, 3rd Session. (The original version is on Parliament’s site, as are the minutes.) The winning word was bankruptcy.
A recording is available from Parliament.
11:55 a.m.
Conservative
Mike Lake Conservative Edmonton—Mill Woods—Beaumont, AB
In fairness, I would say there might be just a little bit of political positioning on your part as well.
11:55 a.m.
Pension Policy Advisor to the President, Canadian Labour Congress
There always is.
11:55 a.m.
Pension Policy Advisor to the President, Canadian Labour Congress
There always is, but I'm saying that the vast majority of players I speak with want to fund their pension plans well. Unfortunately, we have to build the back end of the system and the front end of the system to deal with the AbitibiBowaters, the Nortels, and the pulp and paper mill I mentioned in Nackawic, New Brunswick. We have to deal with people who will look at the pension law and the bankruptcy law, try to game it for their own interests, and put retirees and workers at risk in doing so.
It's highway traffic act planning. You have to deal with the worst drivers, despite the fact that most drivers are fine. If we don't do that, the risk will ultimately be borne by the good employers, who will have their industries' images tarnished, and also by workers and retirees, which I think is unfortunate.
11:55 a.m.
Conservative
The Chair Conservative David Sweet
Thank you, Mr. Harden. I'm sorry; your time has run out.
Mr. Desnoyers, we have another panel coming. Take three minutes if possible, and then we'll have to excuse these witnesses.
11:55 a.m.
Bloc
Luc Desnoyers Bloc Rivière-des-Mille-Îles, QC
Thank you, Mr. Chair.
Nortel is sort of the standard-bearer of the social drama that is currently playing out in Canada and Quebec. It isn't only Nortel; there are a number of others, such as Atlas Steel. I could give you a list of companies where, unfortunately, the workers had to pay from their pension plan. It was their money that they had invested, that they had put in out of their own pockets. It belongs to them. Unfortunately, the only solutions that we're finding around this table seem to be that the workers have to pay.
I feel that there are other solutions. Look at the forestry sector. We are asking for loan guarantees, which facilitates credit. The Conservative government has helped the automotive industry enormously. Why not do the same thing for the forestry sector? You'll be able to respond to that.
In the case of Nortel workers, let's keep in mind that the company no longer exists. All its assets are being sold, and revenue from those sales is being given to the shareholders.
So why wouldn't we help the workers? The representatives from the Canadian Chamber of Commerce could answer that question. We want to impoverish communities and we are impoverishing workers at the same time.
Mr. Harden, you can speak first.
11:55 a.m.
Pension Policy Advisor to the President, Canadian Labour Congress
We're singing from the same hymn book.
The fact of the matter is that we are a laggard jurisdiction in the world. We do have a choice. The Government of Quebec has taken the first step in creating bankruptcy procedures to allow orphaned pension plans a home in the case of a Nortel situation or in other situations. There are many ways to deal with this. However, you're absolutely right: those are the risks.
11:55 a.m.
Senior Vice-President, Policy, Canadian Chamber of Commerce
Well, I know that no member would want to suggest that nothing is being done on this issue. Pensions are an extremely active area. Your Parliament has passed a series of reforms--
11:55 a.m.
Bloc
Luc Desnoyers Bloc Rivière-des-Mille-Îles, QC
What I want to know is if you support putting assets into the pension plan of workers when a company goes bankrupt, rather than have workers pay out of their pension plan and find themselves with nothing in the end.
With that, you will end up causing the economic death of communities. The chambers of commerce will disappear.
Noon
Senior Vice-President, Policy, Canadian Chamber of Commerce
Undoubtedly, but I also think it is disingenuous to suggest that workers are not investors and don't have an interest in the success of their companies. The biggest investor in our country is probably the teachers of Ontario. It's not true that pensioners have no other assets. They usually have--as everyone does--some kinds of investments--
Noon
Senior Vice-President, Policy, Canadian Chamber of Commerce
I think Parliament makes a mistake to suggest--
Noon
Bloc
Luc Desnoyers Bloc Rivière-des-Mille-Îles, QC
Let's look at the forestry sector now. Would loan guarantees have helped? In Quebec, the forestry companies demanded loan guarantees.
Noon
Vice-President, Public Affairs and International Trade, Forest Products Association of Canada
I will answer you in English because I want to be very clear.
First of all, in our view the government has been extremely supportive of the industry. Throughout this entire crisis, they've gone to great lengths to find ways to support the industry, and we are very grateful for that. Loan guarantees are not an answer, and I don't think we have enough time to get into the softwood lumber dispute--
Noon
Bloc
Luc Desnoyers Bloc Rivière-des-Mille-Îles, QC
In Quebec, everyone was in favour of it. I don't know where in Canada you're from, but…
Noon
Vice-President, Public Affairs and International Trade, Forest Products Association of Canada
--but what I will say is that our goal is to make sure we continue to--
Noon
Conservative
The Chair Conservative David Sweet
Mr. Desnoyers, actually, we've run out of time. Thank you very much.
Go ahead, Mr. Lake, on a point of order.
Noon
Conservative
Mike Lake Conservative Edmonton—Mill Woods—Beaumont, AB
Mr. Harden referred in his opening comments to 35 jurisdictions that have legislation that deals with this. Could we get his research on that tabled, if that's okay for the committee?
Noon
Conservative
The Chair Conservative David Sweet
Mr. Harden, could you supply that to the committee clerk, please?
Noon
Pension Policy Advisor to the President, Canadian Labour Congress
Diane Urquhart's research has done it, actually. You've already had her before, but we could get it to you.
Noon
Conservative
The Chair Conservative David Sweet
First, I thank the witnesses--Mr. Harden, Mr. Everson, Mr. Casey, and Mr. Allen--for coming. I apologize that it was so brief.
We have another panel coming in. If we could suspend for a moment, we'll do that as quickly as possible.
Thank you.
12:05 p.m.
Conservative
The Chair Conservative David Sweet
Members, we're back in session now. We're going to hear from our first witness, Mr. Wacheski.
We have six witnesses here, I believe. If you'll accept my apologies in advance, I don't have enough time to introduce each one of you. Because I feel badly when I have to cut somebody off, I would ask you to please stick to your five minutes.
Go ahead, Mr. Wacheski, for five minutes, please.
November 18th, 2010 / 12:05 p.m.
Tony Wacheski As an Individual
Good afternoon.
Let me first thank the committee for inviting me to participate in this very important discussion. I appreciate that you must deal with many complex issues affecting many people in different ways and that laws must be changed very carefully and thoughtfully.
The current insolvency laws do not protect all creditors fairly. Employees are a distinct group of creditors, and it is imperative, and in the best interest of Canada, to adjust these laws to recognize this fact.
On April 30, 2009, after 18 years of service, I was terminated from Nortel without notice, without severance, and with a large portion of my pension unfunded and lost. I was saddened to see how the laws forced companies to treat their employees while restructuring.
I will let other witnesses argue for the protection of pensions and long-term disability benefits, even though my own pension losses are great. I will attempt to provide you with a new perspective on severance and convince you that changes are justified.
The simple facts are that suppliers and lenders have ways to protect themselves against bad debtors through securities and security agreements. Employees are protected against termination without cause by provincial employment acts and through severance. However, CCAA supersedes these acts and lumps all creditors together. Even if restructuring companies wanted to pay severance, the law prevents it.
Suppliers have multiple customers and lenders have diversified portfolios, but severed employees instantly lose their only source of income and the means to support their families. Suppliers and lenders can write off losses and insure investments. Lenders assume risk as a part of business. Suppliers can continue to operate and make money. The severed employees must mitigate the loss of income and benefits through tax-funded social programs.
Suppliers and lenders have leverage in the process. They sit at the creditors' committee. Their goods and services and capital are still needed. Employees have little leverage. Suppliers and investors are better able to wait for the plaintiff arrangement, but severed employees are often months away from defaulting on their mortgages. Employees are the least equipped to manage the impact of the employer insolvency that caused termination. They instantly lose their sole source of income, their health benefits, their insurance, and their means to save for retirement or their children's education. They even lose their homes.
Suppliers are impacted, but most will continue in business. Lenders may have lower rates of return, but in some cases they even profit from bankruptcies, as we've heard. Employees are the most severely impacted of all creditors, and they have few defences.
The objective of CCAA is to provide a means for a company to restructure, avoid bankruptcy, maximize returns for their creditors, and preserve jobs. When a company enters CCAA and severance is no longer paid, a bonus must be paid to retain employees. I assert that the security of knowing you will receive severance if your position is lost in restructuring is equally effective in retaining talent, and it is much less costly to the state. Lavish bonuses are insurance against potential loss of severance for people who actually keep their jobs, while those without jobs get nothing.
Severance is a powerful tool that helps to build a strong economy and enables workers to focus and apply their talents on building value for a company instead of looking over their shoulders and planning their escape routes or never taking a risk on a young or challenged company. For example, when a member of Parliament is voted out of public service through no fault of their own--perhaps their party takes the wrong side on a key issue--you will receive a severance, and I agree that you should receive it--well, most of you.
12:05 p.m.
Some hon. members
Oh, oh!
12:05 p.m.
As an Individual
This reasonable and necessary benefit serves to attract the talent needed to provide a strong, effective government for this great country. By allowing CCAA to lump severance in with unsecured creditor claims, the value of severance for building strong companies is being lost, and Canada suffers.
The Nortel bankruptcy is one of the most complex international insolvency cases in history. I have only touched on a few issues related to severance. There are many abuses of the current law and many opportunities for improving the insolvency process.
I hope I have provided some points demonstrating that severed employees are a distinct group of creditors. Suppliers and lenders can protect themselves against insolvencies; employees cannot. CCAA takes away entirely timely severance. The severed are most severely impacted, instantly losing their only source of income and the means to support their families. Removing the severance increases the cost to the state and lowers other creditors' returns. CCAA is undermining the value severance brings to building a strong economy.
I hope these points and the discussion following will convince you that changes are required to protect the hardworking Canadians who build the companies and wealth in this country. I urge this committee to work together and to ensure that Bill C-501 prompts the appropriate changes to the CCAA and the BIA to ensure that timely severance is paid.
Thank you.