House of Commons Hansard #128 of the 38th Parliament, 1st Session. (The original version is on Parliament's site.) The word of the day was workers.

Topics

Wage Earner Protection Program Act
Government Orders

3:45 p.m.

Conservative

Joy Smith Kildonan—St. Paul, MB

Mr. Speaker, it is viable to look at that very aspect, because it does not necessarily need to have the prioritizing change, which could be done in another way.

There are many questions centred around this bill right now. The member brought up what is really the most important point: the employees who work in a company. It is better to have a company able to restructure, to set things up so it can continue to be a viable business. It is better if the workers can still be employed to do that.

The member makes a good point. This is something that needs to be examined. I would expect that during hearings and when amendments are made to this bill this is one aspect which we as a House should and could take a very close and serious look at.

Wage Earner Protection Program Act
Government Orders

3:45 p.m.

Bloc

Robert Vincent Shefford, QC

Mr. Speaker, I listened carefully to the speech of my dear colleague. I am a little concerned about something. I would like to have her thoughts on that.

We were talking about students going bankrupt. On reading Bill C-55, I see that it allows a court to discharge bankrupt people from their student debts if they have been out of school for five years and if they are suffering excessive financial hardship. Moreover, for the court to authorize the foregoing of the student debt because of excessive difficulties, it must be certain that the debtor acted in good faith and will still have financial difficulties in the near future.

A student who is going bankrupt must have financial difficulties before and also after. How far can we go?

I would like to get the member's thoughts on this. It seems that the person must continue to have financial difficulties in the near future. This means that, being bankrupt, before getting the protection of the Bankruptcy and Insolvency Act, the person must prove that, in the years to come, he or she will still have difficulties and his or her life will be difficult, despite the provisions in the bill.

I would like the member to comment.

Wage Earner Protection Program Act
Government Orders

3:50 p.m.

Conservative

Joy Smith Kildonan—St. Paul, MB

Clearly, Mr. Speaker, students going through post-secondary school nowadays go through great hardship in many respects, because they get loans, they have to go out in the workforce and they have to pay them back. That aspect of the bill is being looked at right now and we should not be hasty in passing the bill until we have these questions answered.

I agree that students need to get all the help they can get, but the proof has to be concrete. They cannot just make up a story that they are going through hardship. It has to be concrete. I went through nine years of university and paid for every cent of it. It took me an awful long time. In our family we have six children and we have put them all through post-secondary education.

I can tell the member that this can raise some real questions. I think the intent of the bill and the intent of what members of the House are trying to do at this point is to be reasonable and to make things possible for people to be successful.

The one thing I do like about the bill is that I can see an opening for businesses to become viable if they have the opportunity to restructure. I can see in the bill that wage earners will be able to get their money if something happens. I can see also the student loan aspect, where students who are going through hardship are not put in an impossible position.

This is why I strongly recommend public hearings: so that we can get all these questions answered and so it is not done in a rushed way.

Wage Earner Protection Program Act
Government Orders

3:50 p.m.

Conservative

Stockwell Day Okanagan—Coquihalla, BC

Mr. Speaker, my colleague from Kildonan—St. Paul, once again, has accurately and incitefully described the major components of this bill and areas where there is some possible adjustment required.

I think the government is generally on the right track with this particular bill. That is something we do not often admit to in this House because we do not often have the opportunity to do so, given what we see. However, in this case, it is on the right track.

Basically, we are talking about protection for wage earners. It is a very key component and something that we want to support. The Bankruptcy and Insolvency Act itself does a number of things. It provides for the liquidation of assets. It provides also for the distribution of what may be remaining to creditors. Even more important, it provides mechanisms by which renegotiations can take place, and possible reorganizations, of either the company or the individuals involved. When it comes to the Companies' Creditors Arrangement Act, CCAA, it is looking at proper provisions under court supervision in terms of how assets can be distributed.

There is currently a framework in terms of the order of payout. If a company or an individual is going bankrupt and money is owed to other individuals or other companies, there is actually a ranking, a preference order, in terms of who gets paid first. This is very important, especially to the person to whom the money is owed.

It can be simplified by saying the classifications are: the secured, the preferred and the deferred. The problem in terms of the wage earners category is they are under the second classification and they come behind those who are secured. They would qualify as preferred, but they are fourth even in that list of preferred. There are a number of other creditors who would get paid out before the wage earners in a particular company. The people who worked hard, the people who applied the sweat equity to the company itself, are way down the list.

Quite rightly, the government is recognizing, and we have been urging this for some time, that those wage earners be moved up in terms of the preference order so that their hard work can be recognized and in fact redeemed through this particular system.

The danger in any type of legislation like this of course is that we have to be very careful with the balancing because we could take pressure off of a company or an individual who is considering going bankrupt. That of course applies to every type of government insurance. We do run the risk of creating a moral hazard. Do we want to encourage the very type of behaviour we are trying to in fact discourage?

That is why we will be watching this bill and how it progresses. We will be watching it very closely to ensure we get the right balance here. We want wage earners to be taken care of. We do not want employers, in the case of individuals, to sleep well at night thinking that the government will come along and take care of all these employees and there will be no problem, and they can go ahead and claim bankruptcy without having anything resting on their shoulders. There is a balance that has to be achieved here. The government is on the right track, but we are going to have to watch this carefully as we move through possible amendment stages.

As we go through the bill, and this is not a small bill, it is exciting nighttime reading, and I know some people will be waiting for the video to come out, there is some important detail here that is going to have to be looked at carefully at the committee stage.

Again, I think the government is on the right track trying to streamline some of the administration and some of the efficiency aspects, but we are going to be watching this very carefully.

We want the wages to be paid out quickly. In fact, we are going to look at this and we may even propose, depending how the government addresses this, the creation of a separate fund for wages for workers. If we have a separate fund created, then we do not have to worry and wait unnecessarily. There will not be the time restraints and constraints that could follow and hard-working people wind up not getting their dollars, not getting the money they are owed. We are going to look at that carefully in terms of setting up a separate fund.

My colleague from Kildonan—St. Paul went into some detail related to student loans. This is a factor that has to be looked at, something that students are dealing with in terms of the debt that they carry into their working life and their career environments. We have to look at this very carefully. My colleague detailed some of that.

The best approach actually, as in health care, is prevention. The more we can do to prevent or help a student not acquire a huge debt load the better. The more we can help them dispense of their debt while still recognizing their moral responsibility to do so, the better off we are.

That is why on this side of the House the official opposition, under our leader, is proposing a contingency based plan for paying back loans. Students would pay back a loan contingent with the rate of income they are receiving at the time. When most of us graduated either from elementary school, high school or university, most of us did not immediately move into the high wage end of a company or the profession we wanted to pursue.

We started at the low end, making minimum wage usually, and then we became upwardly mobile. When students graduate, they have a debt load. Let us allow some time for them to pay it back recognizing their rate of income at a particular time. When they are making just a little bit of income, the payment schedule should be adjusted.

That is not in Bill C-55, but we are suggesting that type of approach, so students will not face what this legislation is proposing but a mechanism providing a way for them to dispense with their loan. We want to help those students and we want to help them in a responsible way.

Those are the main elements that we wanted to address at this particular phase of the bill. We will be looking forward to the amendment stage and working with our colleagues to ensure that hard working people are properly recognized when a company or an individual falls into default. We want to ensure we are doing all we can to see the reorganization of debt before we see the obligation to pay the debt removed through bankruptcy, and especially addressing the concerns of students.

Wage Earner Protection Program Act
Government Orders

4 p.m.

Liberal

Paul Szabo Mississauga South, ON

Mr. Speaker, the last details I saw on student debt was that 95% of students do pay off their loans on time, which is good news. There are people who do have problems finding their first job and the member knows they do not have to start paying off their loan until they find gainful employment. Even then the amount paid is linked to income. However, there are always better ways to improve this.

I want to ask the member for his thoughts on the limitations on the maximum of unpaid wages that an employee could receive. There is a limitation. Even to the extent that they may receive secured creditor status, it is limited.

My colleague talked about balance. Does he see a balance for the bondholders, for example, who put up the money so the business or organization could exist? Should there be some sort of a balance where even the unpaid wages ought not be subject to such a low limit?

Wage Earner Protection Program Act
Government Orders

4 p.m.

Conservative

Stockwell Day Okanagan—Coquihalla, BC

Mr. Speaker, I understand the limit is at $3,000 at this point and that is something we should look into during our discussions. We should be hearing from various groups. As my colleague from Kildonan—St. Paul mentioned, that is why we need to have some public input. There is possibly some room to move on this. Let us look at all the implications, what it would mean if it was raised. The $3,000 limit could be woefully short of what a wage earner has put in, so it does need to be looked at.

Wage Earner Protection Program Act
Government Orders

4 p.m.

NDP

Pat Martin Winnipeg Centre, MB

Mr. Speaker, my question also has to do with the wage earner protection program aspect of Bill C-55. The bill, as put forward by the Liberals, makes workers who have less than three months on the job ineligible to make an application for compensation out of this program. Would my colleague's party share our view that it does not make any sense at all? If employees have less than three months on the job, they are even more vulnerable and perhaps need the compensation more than individuals who have had 20 years of employment to put life savings together.

Wage Earner Protection Program Act
Government Orders

4 p.m.

Conservative

Stockwell Day Okanagan—Coquihalla, BC

Mr. Speaker, that is a good question. I also congratulate the member for Winnipeg Centre. Many people may not be aware of some of the private member's legislation that he has proposed in this regard. Our party, in taking a look at that, saw some merits in what he was proposing.

As a matter of fact, in principle, philosophically of course, I agree with the member. Simply because individuals have worked less than three months does not mean their due is any less. They have put in the work and perhaps they are even more exposed than someone who has been with the company for some period of time.

We are sensitive to the member's proposal. We agree it should be looked at. We also congratulate the member for some of his thoughts on this in terms of his private member's legislation.

Wage Earner Protection Program Act
Government Orders

4 p.m.

Liberal

Paul Szabo Mississauga South, ON

Mr. Speaker, it is estimated that some 10,000 to 15,000 employees each year in both federal and provincial jurisdictions receive no unpaid wages as a result of the bankruptcy or insolvency of the companies or organizations that they have worked for.

This is an issue where I think Canadians would agree that the security status of employees who have made a company work may not be able to survive very well without having received wages owing. We must consider that a company that is imminently coming into some difficulty and the period during which wages would be unpaid is not necessarily since the last regular paycheque. It may in fact be an extended period. There could be a substantial amount of money involved.

I also understand that for those who do receive moneys, the average payout is about 13¢ on the dollar. Having said that, there is no question that Bill C-55 is an important bill. I hope the bill will have the support of the House following the rigorous review and consultation by the standing committee.

Bill C-55 is entitled 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. Most people will know what we are talking about in terms wage protection. They will also probably have a general idea about bankruptcy and insolvency. Most Canadians have heard these terms.

One piece of legislation people may not be familiar with is the Companies' Creditors Arrangement Act. It is a vehicle that has been around for a long time. As a matter of fact, before I became a member of Parliament I practised as a chartered accountant. I actually was involved with a company that went under the Companies' Creditors Arrangement Act. I thought I would very briefly explain what that means.

A company which gets into some difficulty and would otherwise be petitioned into bankruptcy by a creditor, such as a bank or a bondholder or whatever, has an opportunity under the CCAA to petition the courts to freeze the operations, as it were, in terms of its financial obligations. This provision gives them some time to come up with a plan to make a settlement with all of the outstanding creditors.

The courts would appoint a trustee to go in and takeover the operations and management of the company. In my experience, the most effective way in which trustees do that is they seize control of the bank account.

Following the appointment of the trustee, the interesting difference between bankruptcy and going under the Companies' Creditors Arrangement Act is that the company is allowed to continue to operate and that all persons and businesses who continue to be suppliers of goods and services to the company have preferred or first status in terms of payment. They will be paid. They are guaranteed to be paid, even though they may be owed other moneys leading up to the date under which they made the petition under the Companies' Creditors Arrangement Act.

That is an extremely popular and very important act because it does give companies an opportunity to survive once they can get some relief from the existing creditors which they may not otherwise be able to deal with. Very often a plan is put together which proposes certain details as to all the outstanding creditors and how much they will receive and be paid through the trustee. Then the business would carry on.

The whole proposal, though, is subject to the approval of all the creditors before the courts. As long as all of them agree to the proposal of the company, then the various creditors would take the settlements that they are entitled to and the company would carry on under the restructured basis. That may involve, as some refer to it, taking a haircut for the bondholders. There may be a moratorium on assets or forgiveness, or there may in fact simply be the same distribution of some percentage on the dollars. However, the livelihood of the business could in fact survive.

From what I have heard in the debate so far, I am please there is support here. I want to briefly remind the House of the elements. It is a very long bill but I think members will understand that it is important to establish a program like this and make the necessary amendments both to the Bankruptcy and Insolvency Act and to the Companies' Creditors Arrangement Act which takes a great deal of integration of the existing and proposed laws.

The enactment not only deals with those who are owed wages by employers who are bankrupt or subject to receivership, but it also sets out the conditions for the eligibility for payment. It is the process for the program and the administration arrangements for the implementation and enforcement mechanism. It also provides regulation making powers for carrying out the purposes of the act and provides for a review of the act within five years. I think this is very important.

From time to time I have seen legislation come before the House that does not provide for a periodic review to be done. I am hoping this becomes a regular feature of legislation. We need to ensure that it is kept up to date and that it happens on an automatic basis rather than at the discretion of the government of the day.

The bill 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 the obligations and amendments. They also expand the act to cover income trusts which is certainly a current topic of interest to many Canadians.

New corporate proposals have been created to address, among other things, the treatment of contracts and collective agreements which is important. It would provide the authority to amend the term of collective agreements. Other proposals are interim financing and governance arrangements and changes are made to the priority of charges, including with respect to wages and pension contributions, which are basic parts of the wage protection program.

The scope and application of consumer proposals is expanded. New provisions have been introduced to deal with bankruptcies, protecting retirement savings plans from seizure and to allow for the automatic discharge of second time bankrupts which is a matter that comes up from time to time.

The period of eligibility of discharge of student debt is reduced and members have addressed this area of concern. As I had indicated in my question to the member, part of the comment was that 95% of students pay their loans on time.

There are changes in the treatment of preferences, as well as other numerous technical changes.

As I indicated, there are amendments to the Companies' Creditors Arrangement Act. This is slightly different. They are to the same effect as the changes to the Bankruptcy and Insolvency Act. The amendments also expand the act to cover income trusts. I note again that the issue is being dealt with.

The scope and application of the initial stay is clarified, as I explained, and the nature of petition under this act. We have introduced new provisions regarding the treatment of contracts, collective agreements, interim financing and governance arrangements.

As members of the House can see, there are substantive issues and areas that are being dealt with to ensure that the bill is balanced and fair.

I had an opportunity to follow the debate earlier and I noted some of the points that were made by other members. I heard points that I did not know so I thought I could perhaps share them with members.

It is a matter of how these reforms will improve the protection to workers whose employers undergo restructuring or become bankrupt. As I indicated earlier, some 10,000 to 15,000 employees each year find that they receive nothing when something like this happens. That is not just with regard to their wages. It also may affect their pension benefits. In many cases there are horror stories where pensions have accumulated significant unfunded liabilities as a consequence of the failing business and its inability to meet its current obligations with regard to discharging an unfunded liability under pension plans.

Under our current system, three-quarters of unpaid workers in a bankruptcy receive nothing for their work. It is really interesting. The average payout was only $13 and the existing federal-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 bankruptcy or receivership occurs so they fall through the cracks, which is why it is important that this bill be here.

The program obviously has to operate efficiently and there will be a significant cost in doing that. It is estimated that it will cost about $30 million a year. In the event that we spike in terms of the total number of bankruptcies, that could increase to about $50 million. This is not an insignificant expenditure or contingency for the Government of Canada to protect these but it is important that the moneys be provided quickly to the employees so that they at least have some continuity while, hopefully, under the Companies' Creditors Arrangement Act, a deal would be struck with the existing creditors and their jobs may in fact be secure.

In the event of bankruptcy I do not think anybody wins but the lawyers and that is probably too bad. However it is a very substantial investment and it is important to protect the workers to the greatest extent possible.

There is an expectation that there will be a recovery of about half of those costs once arrangements are made with the creditors and payouts are made. Under the wage earner protection program, the government will assume the workers' claims against the bankrupt employer's estate so that the employee will somehow be represented in this process by the government being the spokesperson or the intermediary in this process.

The point was made that the limited superiority for unpaid wages balances the risk of bankruptcy between employers and other creditors of the bankrupt company. As I raised with the member from Coquihalla, there probably is a question that the committee should consider because there is a limit on the amounts that can be paid to employees of some $3,000. I am aware of the case that I was involved in where wages were unpaid for some time. It was not that we had a paycheque last week, two weeks ago or last month. It could be for an extended period where the employees are basically told that the company is trying to survive, that it cannot pay them now but that they should hang in there. However those are legitimate wages and I know there has to be some balance.

I am not sure what the current thinking would be and certainly the mark of the industry with regard to how much protection can be provided without impinging on the preferred or the fully secured status of bondholders who put the money up front and who in fact may very well be represented by someone's RRSP client or their investment in an organization that has provided funding. There are other parties that are directly or indirectly involved, so that if there is a loss, the money is neither created or destroyed, it just changes hands. In this regard there may have to be some offsets.

However if we were to have a serious impingement upon the security level that a first secured bondholder may have, if the laws indicated that they would be subrogated to unpaid wages for a much larger amount or something like this, the capital providers, those who provide the bonds to the company, may have built into their costs, the interests rates that they are charging to the company, a risk premium on the interest rate. We have to be careful about not disrupting the security level that they hold but at the same time try to balance the interest of the wage earners and those who provide the capital for the company.

I would like to mention one other thing. In most bills we usually see consequential amendments to other acts and in this one I believe there are three acts and the Canada Labour Code. There will be an amendment to the Canada Labour Code. The parties may agree to revise the term of a collective agreement without the approval of the board. That will be pretty important and it may be part of the arrangement.

One can understand when a company restructures to deal with all of its unsecured creditors, et cetera, it continues under the Companies' Creditors Arrangement Act and then all of a sudden it has union difficulties and decides it is time for a new contract which throws the company back into a situation. This is an important change which they may want to consider, for instance, extending the term of a collective agreement to ensure that there is some opportunity for the company to get on its feet and be able to deal with labour demands. I think that will be an interesting discussion as well in the committee.

There are some amendments to the Canada pension plan, particularly with regard to employer and employee contributions and the related interest during that period. Moneys held in trust by a company with regard to payroll deductions have secured status so they will have to be addressed. Similarly, the Employment Insurance Act will have a similar amendment to deal with that.

Finally, there is also a change to the Income Tax Act in a case where the minister has knowledge or suspects that a particular person is or will become, within one year, liable to make payments. There are some complications but it is interesting that they pick these things up. I find it to be a very difficult bill to read. One does need to have some of the other legislation and I think one also has to be close to the labour realities out there and some of the conditions.

I think the witnesses that will be heard by the committee will be providing an excellent education to members about the realities of what happens when employees lose wages to the extent that 75% would get nothing and those who receive something only get 13¢ on the dollar compounded with the likely impairment of their pension benefits.

This is an extremely important bill. I gather from the debate so far that the parties are very supportive of ensuring we have an appropriate bill to deal with the interests of not only wage earners but also with existing creditors to ensure there is a balanced approach to this and that we make sure wage earners are not put in an untenable situation.

Business of the House
Government Orders

September 29th, 2005 / 4:20 p.m.

Saint Boniface
Manitoba

Liberal

Raymond Simard Parliamentary Secretary to the Minister of Internal Trade

Mr. Speaker, in the spirit of cooperation and in order to allow the members of the Bloc Québécois to attend their convention, I believe you would find consent for the following motion:

That the House shall not sit on Friday, October 28, 2005.

Business of the House
Government Orders

4:20 p.m.

The Deputy Speaker

Does the hon. parliamentary secretary have the consent of the House to move the motion?

Business of the House
Government Orders

4:20 p.m.

Some hon. members

Agreed.

Business of the House
Government Orders

4:20 p.m.

The Deputy Speaker

Is it the unanimous consent of the House to adopt the motion?

Business of the House
Government Orders

4:20 p.m.

Some hon. members

Agreed.

(Motion agreed to)

The House resumed consideration of the motion 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.