Mr. Speaker, I am speaking on Bill C-281, an act to amend the Bankruptcy and Insolvency Act, the Canada Business Corporations Act, the Employment Insurance Act and EI regulations, as presented by the member for Winnipeg Centre.
I am pleased to make my thoughts known as the member of Parliament for Kootenay—Columbia. I have always taken my commitment to people in my community very seriously, wanting to ensure that their interests are protected and that there is a proper balance between employers and employees.
Shortly after I was elected in 1993, there was a major bankruptcy in my constituency that affected many hundreds of people. As a matter of fact, more than 1,100 people ended up applying for EI benefits as a result of that bankruptcy. The communities throughout the Elk Valley and the East Kootenays had to deal with harsh realities far beyond their control.
The bankruptcy caused tremendous hardship for families and individuals who were impacted by the failure. My office worked diligently on behalf of former employees of the corporation to help them secure portions of their pensions. Unfortunately, those portions turned out to be a small portion of the pension funds owing to them.
Through these events, I became acutely aware of the importance of good legislation in the relationships between corporations, their creditors and their employees. I became convinced that in the event of a bankruptcy there is a distinction between wages owed and the status of employee pension funds. Combining pensions and wages in one piece of legislation is not only impractical but unworkable.
As written, this bill is poor legislation. If Bill C-281 were to receive approval from the House of Commons to move to committee, the first thing I would recommend to the committee is the entire removal of the pension provisions.
There may be value in reviewing pension provisions and protection of pensions in bankruptcies, but consideration of pension provisions should be drafted in a totally different bill.
A pension review must include two tracks. Pensions involve employer-employee relations, collective bargaining, previous negotiations, existing pension funds and regulations. In most cases, there is provincial jurisdiction combined with current financial market forces in the national and international investment community. This names simply a few of the issues.
The second track must recognize that pension funds and employee interests can be reduced to dollars and cents, but that money is totally different from funds that can be realized from tangible assets secured by lenders. We must remember that lenders have choices. They are not compelled to lend money. Anything that increases risks increases the costs of borrowing. A lender may reach a point of choosing to withhold funds as risks increase.
Let us take a look at the wage replacement portion of Bill C-281 as distinct from the issue of pensions. There must be a balance between the interests of wage earners, employers and potential lenders. This balance makes the difference between having a healthy business economy with good, productive, meaningful jobs and the potential for impoverishment.
Whatever legislation we become involved in, it is the responsibility of the House to ensure it does not inhibit relationships between businesses, potential lenders or investors. Put another way, it is the responsibility of legislators to create and maintain a healthy economic environment for all Canadians.
As written, Bill C-281 would place wages owing upon bankruptcy ahead of the rights of secured creditors. Its purpose is to provide superpriority status ahead of all other creditors, including secured creditors, for amounts owed to workers in the event of bankruptcy. This would include wages and salaries, payments in the form of severance or termination pay arising from collective agreements and legislation.
The problem is that secured creditors lend money on the basis of real assets, such as property, equipment or accounts receivable, and calculate the potential of realizing cash from those real securities. In other words, while the liability to the company for wages will be a specific amount of money, that liability for wages has no direct relationship to the security pledged to the lender.
Let me explain it this way. By way of example, a company may have $150,000 security in the form of current accounts receivable. The lender may choose to advance a fixed loan or line of credit up to a limit of $100,000 against a $150,000 asset. If the workers have a combined potential of $5,000 payable for two weeks' work the lender would reduce the $100,000 loan or line of credit by at least $5,000, if not $10,000.
This represents a withholding of dollars to protect the lender against possible claims by workers in a bankruptcy. This seriously diminishes the value of the company's securable assets.
It is irrelevant whether we like or dislike this harsh marketplace reality. The fact is, lenders make choices based on their judgment of what makes good business sense to them. Lenders have choices. They are not compelled to lend money.
If Canadian laws put lenders at a disadvantage in Canada, they could make choices to lend in other international jurisdictions. This would create negative pressure for Canadian businesses by increasing costs of loans and decreasing the amount of money available in the Canadian marketplace.
As of December 2003, there were 2.3 million small, medium and large businesses operating in Canada. Almost every business from time to time requires loans or operating lines of credit. That money is almost invariably secured by some form of asset. If all workers in Canada are given superior status over secured creditors, we will see a significant decrease in the amount of credit available to businesses. This would inhibit Canadian businesses' opportunity to access funds necessary for continuation of operations or expansion.
The fact is that while there are 2.3 million businesses, there were only 8,128 business failures in 2003. This represents only four-tenths of one per cent of all businesses operating in that year. To underline or restate, 99.6% of Canadian businesses would have access to business loans reduced as a result of four-tenths of one per cent of business failures. This is simply bad economic policy that reduces jobs and opportunities in Canada. I believe there is a better way.
Beginning with the premise that workers' interests must be protected in bankruptcy, I support the creation of a wage earners' protection fund. Its purpose would be to protect workers while eliminating potential liability for lenders. This is not a new idea. Many European countries have a form of wage protection plan.
It would be built on the original principles of employment insurance, where insurance premiums are paid by employers and employees into a fund that would be based on actuarial data. It would ensure that there were funds available to protect the employees' interests in the four-tenths of one per cent of Canadian businesses that end up in bankruptcy. It would be funded separately from employment insurance and would stand alone.
We have reviewed the European experience and can state that the premiums would be calculated in pennies, not dollars. The existence of the employee protection plan would eliminate the necessity of the consideration of employees' wages from any potential borrowing or lending activity. The fund would pay benefits to workers affected by bankruptcy within a matter of weeks. This would eliminate the long wait for money that employees endure as settlements wind through months and sometimes years of bickering and negotiations.
The Conservative Party has had a subcommittee dealing with this issue, with the encouragement of our leader. We have worked with actuarial tables and based estimates on foreign experiences in European countries.
We believe businesses drive our economy, creating good jobs, wages and benefits, creating wealth for our nation. We fund health care, social programs and other desirable public expenditures from that wealth. The Conservative Party is conscious of the protection of the Canadian wage earner within a balanced, productive business climate.
It is a matter of responsibility for us to create an environment in which personal dignity and a healthy society can thrive.
In summary, Bill C-281 is poorly drafted and unworkable, but because it is an effort to recognize and give greater protection to workers in bankruptcy, I will be voting in favour of it at second reading.
However, if the bill is not rewritten in committee to reflect the necessary changes I have outlined, I will not be able to support it at third reading.