Evidence of meeting #57 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 rafferty.
A recording is available from Parliament.
3:40 p.m.
Liberal
Marc Garneau Liberal Westmount—Ville-Marie, QC
I just wanted to say that I think things were going at blinding speed, so I think perhaps in the translation something might have been.... I think it's a perfectly reasonable request.
3:40 p.m.
Conservative
The Chair Conservative David Sweet
Okay. Mr. Garneau, I made sure that everybody had copies and was very specific on my questions, but that might be the case.
3:40 p.m.
Conservative
The Chair Conservative David Sweet
Hang on, Mr. Rafferty. Actually Mr. Cardin had his hand up first for the floor.
Mr. Cardin.
3:40 p.m.
Conservative
The Chair Conservative David Sweet
There's consent then.
The best way to do that, since there is consent, is I'll just ask for clause 2 again.
(Clause 2 agreed to)
3:45 p.m.
NDP
John Rafferty NDP Thunder Bay—Rainy River, ON
Chair, could I just have one word, please?
It seems to me that if there was confusion over one clause, there may have been confusion over all the clauses.
3:45 p.m.
Some hon. members
Oh, oh!
3:45 p.m.
NDP
John Rafferty NDP Thunder Bay—Rainy River, ON
I know that Mr. Wallace is smiling at this, but it's perfectly reasonable that all of the clauses might.... We might just quickly go through each of them again.
3:45 p.m.
Conservative
The Chair Conservative David Sweet
I'm always at the behest of the committee, Mr. Rafferty, but I would still be reluctant to ask that question, particularly because it sounds like there is not consent. But the members were absolutely gracious and went back to clause 2.
Shall the title carry?
3:45 p.m.
Some hon. members
Agreed.
3:45 p.m.
Conservative
Mike Lake Conservative Edmonton—Mill Woods—Beaumont, AB
Before we vote on that, I'd like to ask the officials maybe to comment, because we've got a brand-new piece of legislation here all of a sudden, with most of the clauses taken out.
Can you maybe speak to the impact of the two clauses that are left in? I'll give it some context. I know that a Liberal member who was on the committee for some time, Judy Sgro, said, for example: “Sadly, the bill is flawed, and there are some serious problems with it. It's not going to help the Nortel people, as you've indicated, which is very sad, because I believe many of us wanted it to.”
Do these changes address that?
February 15th, 2011 / 3:45 p.m.
Matt Dooley Senior Project Leader, Corporate and Insolvency Law Policy and Internal Trade, Department of Industry
No. To affect the Nortel proceedings, you would need to have either retroactive or retrospective legislation. This particular piece of legislation is only forward-looking. It will only affect cases that begin after the coming into force of this legislation. It will have no impact on the Nortel proceedings.
My colleague just suggested that I talk about the two provisions themselves.
3:45 p.m.
Conservative
3:45 p.m.
Senior Project Leader, Corporate and Insolvency Law Policy and Internal Trade, Department of Industry
These two provisions refer to the payment of severance and termination pay in the event of either the bankruptcy of a company or the company coming under a receivership.
As the bill now stands, it will put the severance and termination pay due to employees ahead of essentially all secured creditors. You will have the full amount of severance and termination owed now ranking ahead of secured creditors. I would point out at the same time that unpaid wages are given a super-priority as well, but up to a cap of $2,000.
So here you'll see the full amount of severance and termination being paid ahead of secured creditors.
3:45 p.m.
Conservative
Mike Lake Conservative Edmonton—Mill Woods—Beaumont, AB
To clarify, what does that change from the current situation under the legislation as it stands now?
3:45 p.m.
Senior Project Leader, Corporate and Insolvency Law Policy and Internal Trade, Department of Industry
Currently severance and termination is treated as an unsecured claim, so it would be paid after secured creditors and preferred creditors.
Under the insolvency legislation, bankruptcy legislation particularly, you have secured creditors, typically lenders, etc., who have taken a secured interest in the property of the debtor company when they have made a loan or when they're owed money by the debtor company. Preferred claimants are those who, by statute, are given a special claim in a bankruptcy. These include such people as the trustee who was doing the work of winding up the company, liquidating the company. Their payment is only preferred, so they would be paid after secured creditors. Some wages are also put at the preferred level.
The severance and termination had been paid at the unsecured level. So along with all creditors who are not either preferred or secured, now you will have this group jumping ahead of almost everyone.
3:45 p.m.
Conservative
Mike Wallace Conservative Burlington, ON
I need to get some clarification based on what's happened here.
Under the current legislation, which I understand, unpaid wages for those who are working at the time of bankruptcy or insolvency are entitled to unpaid wages up to a cap of $2,000, or something like that. Is that before or after—and I hate to say this—taxes and other statutory requirements? I know it's ahead of secured, but where do the governments, municipal, provincial, and federal, play in this?
Secondly, if this passes, which it may, this would not have a cap on it. Would this put them ahead of those who are currently working and subject to the cap at this point?
Those are my first two questions.
3:50 p.m.
Senior Project Leader, Corporate and Insolvency Law Policy and Internal Trade, Department of Industry
First, with respect to the position of governments, there is a deemed trust, essentially a super-priority that ranks ahead of almost all creditors, for the Canada Revenue Agency. That is limited to amounts that have been taken from an employee's pay for employment insurance, Canada Pension Plan contributions, and the income tax payable by the employee that the employer has taken from their paycheque but has not given to CRA. That amount gets paid ahead of almost all other creditors.
The next level is for property taxes, which is a municipal tax. Property taxes are ranked at a preferred level, so they are below secured creditors. They are actually low on the preferred list, so they come after wage earners, etc., on the preferred rankings.
For the amounts owed to governments--for example, if the corporation owes taxes, or anything else--the government typically is treated as an unsecured creditor. So any corporate taxes payable are at the unsecured level.
3:50 p.m.
Senior Project Leader, Corporate and Insolvency Law Policy and Internal Trade, Department of Industry
Your second question was whether this would put the severed and terminated employees ahead of employees who continued to work.
In my opinion, yes, that is what this will do. We have the wage earner protection program here in Canada, which pays employees up to roughly $3,100. People who are working but who did not receive their pay for the pre-insolvency period get paid up to $3,100. And in the insolvency proceeding, the government can recoup up to $2,000 through the super-priority for unpaid wages; or if the employee isn't eligible under the wage earner protection program, the employee gets the $2,000.
This bill, as it now stands, will put severance and termination--which are typically much more significant amounts--ahead of the unpaid workers for anything they're owed in excess of the $2,000.
3:50 p.m.
Conservative
Mike Wallace Conservative Burlington, ON
My final question, to follow up on that, just so I understand, because I haven't had the experience.... If I'm a terminated employee, are there laws around what those maximums are? Because we have a maximum in the legislation for unpaid work--the $2,000 that the government can recoup and give to the employee--but are there maximums...? If I've worked there 25 years and I'm being severed, is there a severance formula that we respect?
3:50 p.m.
Senior Project Leader, Corporate and Insolvency Law Policy and Internal Trade, Department of Industry
In the provincial employment standards acts, or if they're a federally regulated employer under federal labour laws, there are actually minimum standards. For example, in Ontario, if more than 500 employees are laid off at the same time, they are entitled to 16 weeks' salary. That's the minimum they're entitled to be paid.
