Bill C-281 (Historical)

An Act to amend the Bankruptcy and Insolvency Act, the Canada Business Corporations Act, the Employment Insurance Act and the Employment Insurance Regulations

Supply

[David Christopherson, NDP, Hamilton Centre, ON]

Mr. Speaker, I appreciate the opportunity to address the House today on a very important motion. I wish to advise the House that I will be sharing my time with my colleague from Nanaimo—Cowichan.

This is one of the more important things that we will debate during the time and life of this minority government, for the simple reason that we are trying to find an agreement on when we can hold the election. Nothing can be more important to the life of a Parliament than its ending, because at that point, of course, all stops.

That is the whole issue. We are trying to prevent the grinding down of the House to the point where nothing happens. We will quickly get to that point if we do not find an agreement. We are almost there. We now have the Conservatives, the Bloc and the NDP in agreement through a process of compromise. It has been stated by MPs from each of those other two caucuses and our caucus that everybody indeed gave a little. It is the nature of compromise. For the most part, it is what makes Canada tick.

Here we are, in the most Canadian tradition, three-quarters of the way to a compromise that would meet all the requirements that everyone has, at least to the point that they could live with it. Everybody gets their main points and gives a little on a few other things.

The Gomery report was mentioned by the previous speaker. Our compromise today allows that to come out. People will have the Gomery report, part two, even though I would say with all due respect that I could not imagine members of a caucus in the House saying that they are going to disagree with any recommendation that Justice Gomery makes in part two. Notwithstanding that, it will still come out prior to election day. The Prime Minister said that was important. We disagreed with him on his point, but the compromise provides that part two of Gomery will be in the hands of voters before they go into the balloting booth. That meets one of the government's requirements.

More important, this compromise allows us to get through a number of bills that we have all agreed need to get through the House. As an example, I will mention Bill C-55. Again, it is not a perfect piece of legislation, but thanks to the work of my colleague from Winnipeg Centre, there are things in there that are definitely going to benefit working people. We are prepared to see that it gets through.

Now, with the amendment to it, I would hope that we are not going to get bogged down in voting procedures, but I hear that is possible. That would be a shame. It is an important bill. With the minor amendment, to which the government has agreed, we definitely will have moved the yardsticks forward, at least notionally.

It does not, however, address the issues that are contained in Bill C-281, the workers first bill. Again, it was introduced by my colleague from Winnipeg Centre. This is the bill that in the case of a bankruptcy takes pensions and puts them to the top of the list so that workers and the decades of work that they have done are not lost and they are the first ones to receive whatever money might be available afterward. The banks, the suppliers and the government right now stand in line ahead of the workers. Bill C-55 does not do what Bill C-281 would, but it will make some improvements if the common sense compromise that the opposition is putting forward today passes that bill.

Another example is Bill C-66, the energy rebates. I do not imagine there is anybody in the House who is opposed to the notion that we would try get some relief to those individuals and families who are in most need given what is happening to fuel prices and the fact that we are heading into a Canadian winter. That bill can pass under this compromise. There are two other bills that are equally important to other Canadians. I will not get into the details. They will pass the House under this compromise.

We might ask ourselves why it is not happening. I would have to say it goes to the same reason why there was a Gomery report in the first place and why there is a rage across the land. It is the arrogance of the current governing Liberal Party. It is pure arrogance.

The Prime Minister of the day does not have the support of almost two-thirds of Canadians and almost two-thirds of the House, yet the Prime Minister and the Liberal Party believe that under their culture of entitlement they are entitled to govern as if they were almost imperial. They are there and there they shall stay, they believe.

All we are asking is for a little humility and a little compromise and for them to recognize the fact that even though they have been driving around in the limos for a dozen years without a break, in the last election the party that is currently in power was not returned with a majority. The people of Canada sent that party a message. The problem is that the Prime Minister will not listen to that message. He will not listen to Canadians. He will not listen to other parliamentarians. He will not listen to anyone except other Liberals and their strategists, who, by the way, are still doing quite well in Canada, thanks very much.

Notwithstanding Gomery, and I am not suggesting there is anything wrong, but boy it did raise the eyebrows when we saw another article today about another contract to Mr. David Herle, who is with Decima Research, to do work for the recent mini-budget.

I will just say parenthetically that what is interesting is the fact that the limit for having to go to tender is $25,000. Under that, contracts do not have to go to tender. Is that not interesting? It is pure coincidence, I am sure.

I am absolutely certain it is a mere coincidence that even though $25,000 is the limit, Mr. Herle managed to just tuck underneath at $23,112. Therefore, there was no need to bother going out to ask anyone else if they might want some of that work. The government can continue to give it to whom? To the key strategist for the Liberal Party of Canada. It does not stop.

The Prime Minister and the Liberal Party ask what the difference is. Eight weeks, they say, and they ask why the opposition is getting all cranked up about this. We are very concerned about continuing to give the keys to the Challenger jets and the limos and all the other perks and tools of office to a party that clearly is prepared to use Canadians' money for their own partisan purposes. We want to bring it to a halt. We think that Canadians want to bring all of this to a halt, but we will let the election decide that part of it.

It has been mentioned that this is somehow unconstitutional, that we are doing this horrible thing to the traditions of Parliament, that it is terrible what we are doing in breaking with tradition and almost being illegal in what we are doing.

First of all, let us make the record very clear. It has already been mentioned that a challenge to this motion was placed this morning. By whom? Let us ask ourselves who would challenge it. Oh, right, the Liberals. They challenged it and tried to deny this motion even coming to the floor. The Speaker ruled that it was entirely in order. Nothing that we are talking about right now vis-à-vis this motion is out of order.

As for the issue of the constitutionality of what we are attempting to do, I am not a parliamentary expert, but I was the Deputy Speaker in the Ontario legislature and I have some notion of how the rules of Parliament run. I have to say that when the Prime Minister stands up and makes a public commitment to a particular date or time period for an election, that is all it is. He does not have to follow that. The Prime Minister can change his mind any time he wants. There is nothing to hold him to that. There is no constitutional trigger, no legal lock-in, to this position. It is just that the Prime Minister has said that he is going to have this election sometime in the early spring.

All we are asking is that it be recalibrated. All we are asking is that the Prime Minister stand up and say that in the interests of Parliament, out of respect for the minority Parliament Canadians sent here, out of respect for the need to get these bills through, out of respect for the first ministers conference with the aboriginal leaders, out of respect for all those things, he is prepared to revise the date on which he said he would call the election, at which point he will trigger his constitutional authority and ask the Governor General to dissolve Parliament and issue the writs for an election. That is all.

It is not a big parliamentary deal, but it does seem to be a big personal deal for the Prime Minister. We are asking, we are imploring, we are pleading, and we are demanding that the Prime Minister of the day respect the majority of the House and the majority of the country. We are demanding that the Prime Minister give us an election timeframe that we can all live with, that is fair to everyone, and gets the important business of this House done. That is a good common sense compromise.

Committees of the House

[Karen Redman, Liberal, Kitchener Centre, ON]

Mr. Speaker, discussions have taken place among all parties concerning the recorded division scheduled to take place later today on the motion to concur in the eighth report of the Standing Committee on Industry, Natural Resources, Science and Technology, requesting an extension of time to consider Bill C-281. I believe you would find consent for the following motion. I move:

That the recorded division scheduled to take place later today on the motion to concur in the eighth report of the Standing Committee on Industry, Natural Resources, Science and Technology, be deemed concurred in.

[Brian Masse, NDP, Windsor West, ON]

Mr. Speaker, I have the honour to present, in both official languages, the eighth report of the Standing Committee on Industry, Natural Resources, Science and Technology requesting an extension of 30 sitting days to consider Bill C-281, an act to amend the Bankruptcy and Insolvency Act, the Canada Business Corporations Act, the Employment Insurance Act and the Employment Insurance Regulations.

I would also note that the member for Winnipeg Centre put this bill forward and it is a very good bill.

Wage Earner Protection Program Act

[Tom Lukiwski, Conservative, Regina—Lumsden—Lake Centre, SK]

Mr. Speaker, prior to the introduction of Bill C-55 there was going to be, if my memory serves me well, introduction of a private member's bill sponsored by the member for Winnipeg Centre. I think it was Bill C-281. I was prepared to support that bill, as I am prepared to support Bill C-55.

One question I have is on a point of clarification. Before I get to that let me say that I am prepared to support this bill even though there are some questions as to whether the passage of this legislation might tighten up the financing options of some small businesses. Lending institutions may feel that they are getting squeezed out of what might be a situation in which they had to recover money but are dropped in the order of preference. There may be some question as to whether lending institutions are going to be as willing to lend money to small and medium size businesses in the future.

I still think this is an important piece of legislation. It has certainly been my realization that when insolvency and bankruptcy occur, the people who, quite frankly, really get screwed are the workers. This is an important step to ensure that at least the working men and women who perhaps have worked for 25 or 30 years at a company that eventually goes bankrupt have some recompense.

My question is one of clarification and it deals with pensions. Let us assume hypothetically that someone had worked for 35 years for a company and was already receiving a pension. How will this bill deal with that? Let us assume for a moment that the individual who was in a contributory pension plan had over the course of his or her lifetime contributed close to $100,000 into a pension fund and had received, because he or she had retired a number of years earlier, $50,000 in benefits and then the company eventually went bankrupt. What steps, if any, does this legislation take to protect the pension of that individual? Exactly what rights would that person have under this legislation?

[Jim Prentice, Conservative, Calgary North Centre, AB]

Mr. Speaker, it is my privilege to rise and speak today to Bill C-55, the wage earner protection program act, which is before the House. I will be speaking generally in favour of the concept underlying the legislation while taking issue with some of the specifics which form part of the government's proposal.

I would like to acknowledge the work of a number of members of the House. First, the member for Winnipeg Centre did a great deal of work in terms of putting Bill C-281 before the House. I have worked with this member very closely. We do not always agree on issues, but I do respect the philosophy with which he has brought this matter forward and the private member's bill that he brought is a precursor to Bill C-55.

I would also like to acknowledge the hard work of the member for Edmonton—Leduc who is our critic in this area. He has worked very diligently, has examined this very complex legislation, and has led the Conservative Party in its very able response to the legislation. The member for Souris—Moose Mountain, our labour critic, has also worked with him and similarly been responsible for the carriage of this legislation.

My comments follow those of the member for Vancouver Island North. It is worth pointing out that he has been a very outspoken advocate on behalf of working Canadians and the protection of working Canadians under this legislation. He served on the subcommittee of the Conservative shadow cabinet which brought this concept to the House earlier this year in May.

There is some unanimity in the House in terms of the spirit which underlies this legislation, but there are important differences between the way the Conservative Party and the government has approached this issue. I wish to draw the attention of the House to the May 3 motion which was put before the House of Commons. It read:

That, in the opinion of the House, immediate steps be taken to amend the Employment Insurance Act to provide for the establishment of a workers' protection fund that is funded and administered under the Employment Insurance Act to protect workers wages, medical and dental premiums, and severance payments to an amount of $5,000 per employee in the event of a business bankruptcy or insolvency.

Herein lies the genesis or the concept behind Bill C-55, but there are important differences between the Conservative position and that of the government which I will underscore in my comments this afternoon.

Generally speaking, I favour the wage earner protection program aspects of Bill C-55 and I will direct my comments exclusively to those provisions of the legislation. There are equally complicated provisions that deal with other aspects of the Bankruptcy Act. I will not be turning my mind to those today. The wage earner protection program features of this legislation are quite important because they provide protection for everyday working Canadians who find themselves caught up in the nightmare of a bankruptcy or an insolvency or a creditor protection scheme.

This is a matter that I have some experience with on a personal basis. In my own family, I recall being a young lawyer many, many years ago and my mother, who was an employee of a company called the Betty Shop, found her employer to be in a state of bankruptcy and insolvency. I remember how difficult it was for her when she discovered that she had absolutely no protection or priority as a wage earner. That company went bankrupt and it was my mother who was out of pocket with her wages because there was no government program to cover the company. She had absolutely no security under the Bankruptcy Act. That was 15 to 20 years ago, so I am pleased to stand here today on behalf of her and other working Canadians who find themselves in similar circumstances.

It is important that the House is drawing together to protect working Canadians, so that they do not suffer those kinds of losses in the event of a bankruptcy.

It is important that the matter proceed to committee and that the committee conduct a very diligent and searching review of the legislation that is in front of the House. Bill C-55 is quite complex and detailed in terms of the priority regime that it creates and the legislative balance that it strikes.

It is important that the committee hear from people in the legal and banking professions and the labour unions to make sure that the appropriate balance is struck with the legislation, because it is a question of balance. It is a question of striking a balance between protecting wage earners on the one hand and making sure on the other that we do not disrupt the balance which is at the heart of creditor relationships in the country. This is something I know in particular the member for Edmonton—Leduc and the member for Souris—Moose Mountain have spoken about but it requires some emphasis.

The priority scheme in the event of a bankruptcy is extremely complicated. It strikes a delicate balance between those who work in businesses and those who finance businesses. We must be very careful with this legislation that we do not disrupt that balance, because the ultimate losers will be working Canadians. It will be working Canadians at the end of the day who will suffer the consequences if it becomes more difficult to finance a business.

No one should think that by according superpriority status to one category of claims, in this case past wage earning claims, somehow it will be simply the secured creditors, the banks, who accept that loss. In fact, the way it works in the law of the business world is that the banks and other secured creditors will make darned sure that they have adequate security ahead of time. They will simply add the wage claims to the security which they seek which will make it harder for people to finance businesses. Essentially it will add to the equity that business people need before they can finance a business, because there will have to be adequate equity ahead of the other business assets to protect the banks. We have to be very careful of the balance which is struck.

There is one thing I am puzzled by. The motion that the Conservative Party put forward linked the employment wage protection, which is so important, and the Conservative Party specified an amount of $5,000 per person, not the $3,000 suggested by the government, but it linked it equally importantly to the Employment Insurance Act by ensuring that those claims would be paid from the employment insurance system. The government in a sense would guarantee wage earner claims in the event of a bankruptcy, up to the amount of $5,000 and it would be covered out of the premiums that had been paid by employers and employees to the employment insurance fund.

What the government is proposing is something that is in fact quite different from that. First, the protection is offered only up to the level of $3,000 per employee, which is much less generous than what had been proposed by the Conservative Party, much less protective of working class Canadians. Second, there is this very puzzling feature such that the money which is paid out under Bill C-55, the $3,000, can then be recovered by the government from the bankrupt estate, yet it can only be recovered in the sum of $2,000. This is very puzzling. I hope that the committee has a look at this.

I do not know why we would put forward a legislated system that compensates wage earners for $3,000, yet allows the government to pursue recompense or security protection only to the tune of $2,000. That simply makes no sense. There is no reason that the Government of Canada, if it is protecting wage earners and being subrogated in its position, should not have the position to step forward and seek full recompense for the amount of $3,000.

There are other features of the legislation which I think are sensible. One concern that we must have in looking at the legislation is whether it puts forward a government system which simply involves more government. I do not find that in the legislation.

I note there are extensive responsibilities in clause 21 which have been imposed on the bankruptcy trustee and receiver. It is their responsibility to police the system, to make sure they have identified the claim, determined the amount of wages, informed the individuals and provided the minister with the report. There is also a sunset provision relating to this aspect of the legislation. From the way it will work, I do not think it will necessarily produce more government in this country, but it will provide protection for working Canadians up to the sum of $3,000 in principal. That is something we support as Conservatives, although we would have sought legislation which provided even greater protection for Canadians.

[John Duncan, Conservative, Vancouver Island North, BC]

Mr. Speaker, I think this has been a good day with a good set of debates on Bill C-55, which is an act to establish the wage earner protection program act and also to amend the Bankruptcy and Insolvency Act, the Companies' Creditors Arrangement Act, and to make consequential amendments to other acts.

Amazingly, we actually have a consensus from all parties in the House of Commons that we need legislation in this area. This bodes well for the fact that we have people who go to work every day and expect to be paid for their day's wages. Very often their medical and dental premiums are covered as part of that package. They will have other benefits paid for and so on.

Lo and behold, I think all of us in this place represent large enough constituencies such that over and over again we have seen instances where this does not occur. In some cases it leads not only to devastating personal circumstances, but on a very large scale it can affect whole communities where those communities are tied largely to one employer.

I certainly have that circumstance in my riding, along with the unhappy circumstance that the employer ended in insolvency. There was a restructuring, which also ended in insolvency, and we are now into another restructuring exercise which we are hopeful will conclude successfully. This community, the community of Port Alice, with its specialty cellulose mill, has been through a lot over the last couple of years and that has demonstrated the shortcomings of the status quo in terms of how workers' earnings protections are handled.

Bill C-281, the private member's bill from the NDP member for Winnipeg Centre, promoted an initiative in this place for all parties to get their act together in terms of doing something about this matter, which resulted in Bill C-55.

If one were to take a look at Bill C-55, it would be hard not to agree with the thrust of Bill C-55 and not hard to disagree with some of its details, because this is an area that is quite complex. For example, any attempt to try to change the creditor priority can have a positive effect on one party and a negative effect on another party and sometimes can be counterproductive for both parties. In order for me to explain that, I will probably have to give an example, but it does point out why we need to hold hearings on the issue. It is a complex area of law.

The bill is important to many people and consistent with the fact that I have a large union-certified membership in my riding. I have taken an active interest in these kinds of issues in my 12 years representing that area.

I joined the shadow cabinet subcommittee, which we put together as the Conservative caucus, to develop and propose a wage earner protection fund in the case of a bankruptcy. On May 3, 2005 the Conservative shadow cabinet approved a comprehensive proposal that would be funded through the Employment Insurance Act. Consistent with this report, the Conservative caucus tabled a motion in the House of Commons which reads:

That, in the opinion of the House, immediate steps be taken to amend the Employment Insurance Act to provide for the establishment of a workers' protection fund that is funded and administered under the Employment Insurance Act to protect workers wages, medical and dental premiums, and severance payments to an amount of $5,000 per employee in the event of a business bankruptcy or insolvency.

This demonstrates our direction and intent at that point. On June 3, one month later, the government tabled a bill to establish a wage earner protection program. The government's bill would create a fund which would pay laid off employees up to $3,000 per employee in lost wages. The NDP proposed a similar program, of course, in Bill C-281 that gives super priority to workers in the event of a bankruptcy.

The difficulty we would have in the example that I have quoted, which was the Port Alice cellulose mill with something like what is proposed in Bill C-281, is the fact that the level of assets would be the determinant of how much an employee would receive and this would also be almost certain to result in a long wait for the employee to receive anything.

This is why the direction that Bill C-55 takes, in that specific area of the bill, is actually better because payment would be more quickly achieved. There is no time that is more appropriate for employees to receive their paycheques than when they were expecting them or very shortly thereafter.

The assets were being run down on a monthly basis and at the end of May, the 330 or so employees at the cellulose mill would have had a payout much less than $3,000 per employee. That is another way that Bill C-55 does have some improvements over the private member's bill first enunciated as Bill C-281.

However, we need to look at this in a broad way. I think all of the parties have their hearts in the right place in terms of trying to protect the workforce from employers that have, in some cases, actually gone out of their way to hide from them the fact that they have not been paying into things like their medical and dental premiums.

There was even the case, in the situation I was talking about, where a family support garnishee program had been shorted. In other words, the payments had not been forwarded. That employee was in trouble not just from a financial standpoint in not receiving wages and benefits but owed a payment through the courts that should have been automatic.

These are some of the wrinkles that can occur. We have to avoid an incentive to drive businesses having difficulties into early insolvency in order to keep the asset base up. That occurs as well.

Wage Earner Protection Program

[Brian Masse, NDP, Windsor West, ON]

Mr. Speaker, it is a pleasure to speak to a very important issue. Bill C-55 is critical. For the first time we have legislation before us that would allow workers to be put on the top of the heap as opposed to on the bottom of the heap when bankruptcy happens.

I can speak from personal experience. My brother worked for years at a plastics company here in Canada. He was a very diligent worker who went to work every single day. He made sure he made his contributions to the union, to his pension, and to the United Way. The company declared bankruptcy and went to the United States. The company not only took the workers' wages, but it also took their pensions.

It is very important to note that pensions are a deferred wage. They are a negotiated settlement among the workers, management and owners of a company. Pensions are deferred wages. They are important not only to the workers but also to our society. Pension earnings are a requirement for seniors in their lives after they have finished working. They are wages owed to them through their own planning and through arrangements made with management and the company. Those pensions belong to them. It is important to note that. This is missing from Bill C-55 and it is something our party is going to work on.

The company where my brother worked took the pension money. It also took the United Way money that the workers had contributed. It literally robbed the community of the contributions which the workers had made for the benefit of others.

The United Way in my community has had the highest donation per worker for a number of years. The money provides a full range of programs and services for people in need. I commend the executive director of our United Way, Sheila Wisdom. We have been challenged lately because many jobs have been lost in the auto industry and we have had to make sure that the United Way campaign expands into other groups and organizations.

We do not need companies leaving and taking money that workers have contributed toward their pensions. Sadly enough, Bill C-55 does not yet address this issue.

I want to continue the discussion with regard to students declaring bankruptcy. It is unconscionable that students have to wait 10 years to declare bankruptcy. We have witnessed a very significant escalation in tuition costs across the country, as well as other costs associated with going to school, such as apartment rentals, books, or other supports. Those costs have all gone up significantly and as a result, students have gone into more debt.

Young people have to be trained. People going back to college or university have to invest a lot of money in training, and they can accumulate a lot of debt as a result. With the record the students have with respect to repayment of their loans, they have earned the right to be treated better rather than being chastised at the 10 year limit. That is unacceptable.

As this crisis continues in terms of the educational system needing the necessary funds to run the programs, the training and the degree of technological improvements that are so important to compete in the world, people are increasingly being put into debt when they exit school and pursue their careers.

Some people are going to school later in life. They are not able to earn the necessary wages to pay off the debt. This also delays the start of families, which is a very important issue. Canadians are having children later in life. We need to put supports in place to avoid that. It is important that Bill C-55 address this problem.

I look forward to seeing amendments to this legislation. I am still not satisfied with the seven years. That can be improved.

I would like to note one of the other important issues related to this. It is the fact that as I started my speech this evening it is the first time ever that there is some mechanism whereby workers are at the front of the line, through the fact that they get $3,000 back in wages. That is very important. When a company goes bankrupt, for whatever reason, whether it is mismanagement or good management and the market conditions change, people lose their employment and do not have an opportunity to plan appropriately.

Three thousand dollars is a mere pittance. People cannot get by on that for very long, but at least it is something immediate that people can get. It will provide some sense of stability for them and their families as they look for employment transitions. That is important.

What I cannot understand about the legislation, though, is that the government will then try to get only $2,000 back. Why would it only go back for $2,000, not $3,000, from the company after insolvency? I do not understand that logic. I do not know why it would not, on behalf of taxpayers, try to recover the full amount. This should be looked at for sure.

The member for Winnipeg Centre has worked very hard on his private member's legislation on these matters, Bill C-281, which is much better than this bill, but this bill does have some elements of his. I want to recognize the fact that he has been able to push the debate on the matter this far and get Bill C-55 some attention because there has been a reaction. I am a member of the industry committee, where Bill C-281 has actually been sitting for a while. If we do not get to that bill right away, we will be looking at Bill C-55 as well. It at least encourages some modest improvements.

The member for Winnipeg Centre should be acknowledged for bringing this issue to the forefront far sooner than many expected. He has done similar work on the oil and gas industry with progressive legislation and also with a series of other bills. I want to acknowledge that and the pension issue, which I think definitely needs to be expanded upon.

Also important is the fact that the bill is going to take away a procedure that right now allows a judge, on a whim, to basically throw out a collective agreement between a company and a union. That is an atrocious abuse of an agreement collectively negotiated between a company and a union. The bill will require dialogue, and that was the spirit when this was originally dreamed up in the 1930s: that there would be some actual collective working together at the table before the judge would make some type of arbitrary decision in regard to anyone. This is important because the deals negotiated in terms of pensions, wages, benefits and all of those things come out of good faith negotiations.

Let me note that this is what should be happening with the CBC right now. The lockout should end. People should be back working together to make sure that they actually have a good agreement.

So that dialogue is what the judge will be doing in this new agreement. That is very important because it also, I believe, will create a healthier environment for the future.

We also want to note that it will be very important to change the legislation in regard to the $200,000 tax debt no longer being eligible for automatic discharge. It is something that could be abusive. We think this would be an important change to the legislation.

Last, I want to touch on the Radwanski example of the loophole that is finally going to be closed. It is unconscionable that an individual in our society can get hundreds of thousands of dollars of tax relief and then one day later receive a job for a quarter of a million dollars a year. That is unacceptable. This change is a very important one, because that was an absolute abuse of the people who get up and go to work every single day just to make a living.

(Bill S-31. On the Order: Government Orders)

June 22, 2005 — The Minister of Transport — Second reading, report stage and third reading of Bill S-31, An Act to authorize the construction and maintenance of a bridge over the St. Lawrence River and a bridge over the Beauharnois Canal for the purpose of completing Highway 30.

[Lynne Yelich, Conservative, Blackstrap, SK]

Mr. Speaker, I noticed the member spoke about student loans. Right now the current legislation says that an individual can apply for discharge 10 years after he or she ceases to be a student. Bill C-55 talks about applying a discharge after seven years and allowing a hardship discharge after five years. I noticed Bill C-281 does not cover it. I am just wondering whether the member supports the discharge clause.

[Peter Julian, NDP, Burnaby—New Westminster, BC]

Mr. Speaker, I will be splitting my time with the member for Windsor West.

I am very happy to bring forward discussion on Bill C-55 today, the first part of the NDP's plan to address the issue of workers' wages in the event of bankruptcies. I will come back to that in a moment.

Bill C-55 is in large part a result of the NDP's negotiation for a better balanced budget last spring where we saw for the first time in some time a federal budget that actually responded to the needs of ordinary Canadians from coast to coast to coast. Part of our agenda has been wage protection. The other part of our agenda is pension protection. I have to flag the member for Winnipeg Centre's Bill C-281 which would protect pensions in the event of bankruptcy. We need to see is both wage protection and pension protection. We are happy to see that initial addressing of the NDP's concern, which we have had for some time, in Bill C-55.

Ordinary Canadians are having a harder and harder time of it. Over the past 15 years most Canadian family incomes have eroded. Lower income Canadians, working Canadians, Canadians in the middle class have lost 5% to 10% in real terms in family income over the past 15 years. That is the unfortunate legacy of both the Conservative government and the current Liberal government. Over this 15 year period Canadians are having a harder and harder time of it. Real income has declined at the same time as we have seen overtime charges and longer and longer working weeks. It is skyrocketing up to 33%. Canadian families are working harder and harder for less and less. They are working longer and longer weeks for smaller and smaller real income.

In addition, they have had no protection in the event of bankruptcies. That is why the NDP caucus pushed very hard last spring to change the budget to eliminate the corporate income tax cuts put forward by the Liberal government and to put in place wage earner protection. We will be working equally hard to put in place pension protection.

I would like to briefly work through the four key elements of the bill, most of which we support and some of which needs to be modified. We are hoping in committee to push forward those amendments. These are the kinds of changes that will help make a difference on the main streets of the country, from coast to coast to coast. We have seen Bay Street receive a lot of attention over the last 10 or 15 years. Now it is main street's turn. As a result of pushing forward these amendments, we hope to make Bill C-55 better.

First let us talk about the key elements. I would like to address the issue of the threshold of $3,000 that would go to wage earners in the event of bankruptcy. That is an important first step in addressing workers' concerns in the event of bankruptcies. We have 10,000 bankruptcies a year in our country. We need to ensure that workers are protected. However, we believe the $3,000 threshold is not high enough to address the valid concerns that come out of bankruptcies and how workers are impacted.

We have seen a couple of elements that are very positive. For example, the change that does not allow judges to arbitrarily change collective agreements any more is an important step in recognizing collective bargaining rights. Now we finally have union and management sitting down and if there is mutual agreement to make changes through a collective bargaining process, that may take place. It is not to be imposed by an outside judge. It is not to be imposed on the workers. That is a important key improvement in Bill C-55.

We also are strongly in support of closing the loopholes that we have seen in the tax system, particularly for wealthy Canadians.

We saw with the George Radwanski affair where a wealthy civil servant started a new job at $230,000 a year and saw back taxes of $630,000 basically rubbed out with the stroke of a pen. It is a type of income tax system where ordinary Canadians are paying their taxes, ensuring that their responsibility to their community and country is kept. Yet wealthier Canadians have had the option to simply have their back taxes written off, even in the case of somebody like Mr. Radwanski who was starting a job which paid almost a quarter of a million dollars a year. It is very important that we close this loophole.

We in the NDP have been fighting the types of loopholes that exist. The member for Winnipeg Centre has been one of the strongest proponents in this regard. We need a tax system that is fair to all Canadians, where all Canadians pay their fair share. That is our collective wealth and our collective resources to deal with things like our health care system, to help support new child care programs, to help support working families. It is extremely important that we do not have these loopholes. It is extremely important that we not allow certain wealthy individuals to get off from paying taxes that they owe to the nation, to our country, to all Canadians.

We are certainly in favour of these key elements. There are other elements as I mentioned that need to be addressed in committee. As we adopt this bill in principle and send it to committee, we need to pay particular attention to these key issues, such as the threshold which I mentioned is too low, and particularly the elements affecting students.

What we are saying right now with the current bill, if there are no amendments, is that a student who undertakes student debt because of the current chaos in the post-secondary education funding in the country is chained to that debt for a 10 year period. Yet we know that inadequate funding for post-secondary education and inadequate supports for students across the country have led to the debt crisis among students. Many students have had no other option because there has not been the support in place for post-secondary education.

Our post-secondary critic, the member for Halifax, has been front and centre in this regard, pushing forward an agenda that meets the needs of students. We need to make sure that this bill does not handcuff students and does not treat them differently from how other Canadians are treated in the event of bankruptcy.

Still, it is important that certain elements of this legislation be adopted. We know full well that workers all over Canada have been suffering for the last 15 years because of policies put in place by this Liberal government and the Conservative government that came before it. Indeed, family incomes were reduced by 5 to 10%. A majority of Canadians have been hit.

It is important that we amend the Bankruptcy and Insolvency Act in order to help workers who lost their job because their company went bankrupt. This is what the NDP tried to negotiate last spring.

First, we want to deal with the issue of the money owed by these businesses to their employees. Second, with Bill C-281, we want to deal also with pensions lost because of the bankruptcy of businesses. The NDP member for Winnipeg Centre raises the issue of pensions and the CPP and the fact that we must protect the pensions of workers. This is the second aspect of the proposal that the NDP will make to this Parliament.

Consequently, we support Bill C-55, at first, in principle, so that, later on, in committee, we can improve it and ensure that it better protects the interests of all Canadians.

Wage Earner Protection Program Act

[Don Boudria, Liberal, Glengarry—Prescott—Russell, ON]

Mr. Speaker, I am pleased to have the opportunity to speak to the second reading of Bill C-55, an act to establish the wage earner protection program act and to amend the Bankruptcy and Insolvency Act and the Companies' Creditors Arrangement Act.

As members know, insolvency laws cover both personal and commercial situations. For my part, I will be focusing these comments on the commercial side of Bill C-55. In particular, I will be addressing those amendments which deal with commercial reorganizations. I would, however, first like to elaborate on the importance of our insolvency laws.

Data from the Office of the Superintendent of Bankruptcy illustrates the extent to which businesses experienced financial difficulties. In 2004, notwithstanding the tremendous health of our economy thanks to the excellent government we have, notwithstanding that, there were still some 8,200 businesses that filed for bankruptcy for various reasons. These firms had approximately $800 million in assets and over $3 billion in liabilities. As we can see, there were, at least in some situations, a lot more liabilities than there were belongings.

Unfortunately, there is no detailed statistical breakdown on the Companies' Creditors Arrangement Act cases, as there has not been a central registry. However, it is estimated that there are more than 50 cases under the Companies' Creditors Arrangement Act each and every year. It is generally accepted that the restructuring of major companies take place under the CCAA rather than the Bankruptcy and Insolvency Act. One of the goals of Bill C-55 is the creation of a central registry for the Companies' Creditors Arrangement Act cases within the Office of the Superintendent of Bankruptcy, which would enable statistical and other analysis of the restructuring process.

Canada's economy is a market economy based on entrepreneurship and risk taking. As we all know, risk taking is integral to the functioning of the marketplace and it is fundamental to success in a market based economy. This is particularly the case with today's increased global competition.

Risk taking also helps to ensure that Canada's prosperity is maintained and continues to move forward. In other words, risk taking is the essential ingredient of economic growth and jobs. When risk taking is promoted and encouraged, by definition there will be failures. If there were not failures, there would not have been a risk. There are many successes, but some failures, unfortunately. Supporting risk taking behaviour, because of the prosperity it brings, also means that our laws must deal with the cost of these failures, however unfortunate they are.

From this perspective, the obvious role for bankruptcy and insolvency laws is to provide the legislative framework by which non-viable firms are liquidated and dissolved. In these situations, the business assets are sold off, the business closes its doors and, unfortunately, employees lose their jobs. The situation is almost always devastating for those involved. Jobs are lost. Small communities and single-industry towns are faced with decreased economic activity and prospects, not to forget the principals in the companies, who have invested sometimes everything they had, and who also sometimes lose their life savings in the failure of the business in question. They should not be forgotten in all of this either.

However, bankruptcy and insolvency laws provide a framework to permit and facilitate potentially viable but financially distressed firms to survive and hopefully to continue to operate. They should allow and encourage the financial restructuring of firms which have a reasonable expectation to return to financial health but which at the present moment are not capable of meeting their current obligations.

Bill C-55 makes many improvements that promote restructuring. These changes are necessary and indeed critical to improving the reorganizational provisions in both the Bankruptcy and Insolvency Act and the Companies' Creditors Arrangement Act.

Interim financing, while not explicitly covered in the current legislation, is a critical issue for reorganizing companies. This short term financing allows a company to continue to operate while finalizing its restructuring. Courts have permitted interim financing but have done so on a case by case basis.

Bill C-55 would add both the Bankruptcy and Insolvency Act and the Companies' Creditors Arrangement Act ground rules for the granting of interim financing.

By providing factors to be considered directly within the legislation, the parties involved would be better able to understand when and under what circumstances the court will grant interim financing. These new rules would provide a much greater degree of predictability and should help companies obtain the financing needed during the critical restructuring period.

The proposed amendments would also allow a restructuring company to terminate certain agreements where it is necessary for the viability of its restructuring process and would not be overly injurious to the other party to the agreement. This amendment would make it easier for companies to escape economically damaging contracts while providing the other parties to the agreement with a right to claim damages caused by the disclaimer. This amendment would ensure greater clarity in the process and would create a more orderly process for disclaiming contracts and ensuring successful reorganization plans.

Collective agreements, however, do not fall into the group of contracts that can be disclaimed by debtors. These agreements will remain in force until the parties agree to change them. Bill C-55 would create a process that would allow the parties to negotiate but would not force workers to make concessions.

The bill would also make changes to the role of key participants in the insolvency process. Interim receivers would be just that, interim. Limits on their power and on the term of their appointment would mean that they would no longer be allowed to operate for extended periods of time.

To cover the gap, we are creating a national receiver that would be able to operate in any province. The bill would also clarify the role of the monitor in a Companies' Creditors Arrangement Act case, ensuring that the monitor would be a qualified trustee, acting in accordance with the code of conduct and responsibilities placed upon trustees under the Bankruptcy and Insolvency Act.

The changes would also improve the transparency of the process by establishing clear rules regarding notice to creditors and by providing that payment of the third party costs may be paid out of the debtors' assets to allow all key parties to effectively participate. It would also allow courts to remove directors who unreasonably impair the restructuring process and it would allow them to make orders indemnifying the directors from liability.

The proposed legislation also contains amendments to the provisions governing international insolvency. Bill C-55 adopts the United Nations Commission on International Trade Law, or UNCITRAL model laws, for dealing with cross-border insolvency and should facilitate cooperation with foreign jurisdictions.

Our largest trading partner, the United States, recently approved the adoption of the same model. Therefore, standardized rules governing international insolvencies are becoming increasingly important to foreign investors. Adopting the most up to date and comprehensive rule in this area will make Canada a more attractive place to invest.

There is no doubt that Canada's insolvency laws fundamentally contribute to the efficient functioning of the marketplace. These rules of the game provide predictability and security to the marketplace participants, both domestically and foreign. It is important that marketplace framework laws, such as insolvency laws, be kept up to date and respond to the needs of the marketplace. Bill C-55 responds to the new issues that have emerged from a rapidly changing marketplace. I urge all members to support the provisions in Bill C-55 and of course the bill overall, along with its reference to committee.

As I said earlier, it is a pleasure for me to speak in the House at second reading of 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. As I said already, insolvency legislation applies to individuals and businesses. So does the legislation before the House today.

I am pleased to hear our colleagues propose various amendments on protection for workers. I am eager to see the bill go before the committee. We will ensure that the bill has the broadest scope possible, while maintaining balance, encouraging investments in business and—as has been said so eloquently a number of occasions—protecting the rights of workers.

Some might ask why we are doing the insolvency reform now. An efficient and well functioning insolvency system is vital to our economy. I believe I was sitting in the House in opposition when we started these reforms in the 1990's but many issues were left unresolved and new issues have emerged with our rapidly changing marketplace.

As I indicated a few moments ago, the United Nations and the United States have adopted that model and it is incorporated in the bill we have today. Therefore it is important that the marketplace framework laws, such as the insolvency laws, be kept up to date, respond to the needs of the market and to a degree, as well, to the needs of the international conventions that we sign on to.

We all know that extensive consultations were conducted regarding the bill. As was indicated a little earlier, there was a broad consensus to reform and to modernize Canada's insolvency laws. The proposal before us today reflects the input received from a broad spectrum of stakeholders, such as, insolvency practitioners, representatives of the financial and business communities, labour groups, for which I am proud, consumers' associations and, of course, members of the academic community.

The Senate committee on banking, trade and commerce also conducted public hearings in 2003 and made a number of recommendations for changes to the law and I understand that some of these recommendations are found in the bill that is before us now at second reading.

The reforms in question, if I were to summarize them in the little bit of time that is left, have four main objectives. First, it would encourage restructuring of viable businesses as an alternative to bankruptcy. In this regard, the Companies' Creditors Arrangement Act will be significantly modified to provide increased predictability while preserving flexibility.

Second, the reform would improve the protection for workers in bankruptcy. We have heard a lot about that issue particularly over the last little while. The bill creates a legislative framework for the wage earner protection program that will ensure that workers get compensation for their unpaid wages in the event of an insolvency.

Third, the bill is designed to make the insolvency system fairer and to reduce the potential for abuse. For instance, the bill introduces an exemption for RRSPs and lowers the period of discharge for student loans while it tightens the rules for debtors with surplus income and those with high income tax debts.

Fourth, the bill contains a number of technical amendments to improve the administration of the insolvency act. I raised the issue of the recommendations made by the Senate committee and the work of the committee was very helpful, I might add, and provided a solid basis for developing many of these proposals.

Finally, in response to the issue of Bill C-281, or the wage earner protection raised by other members later, the bill proposes a comprehensive reform to Canada's insolvency system.

In summary, those are basically the highlights of the bill. I urge the committee to do a thorough review and improve it where necessary so that we can further improve on Canada's laws, creating at the same time a favourable climate for investment, both domestic investment and investment from an outside country, while at the same time increasing the protection for consumers, wage earners and others where it is provided in the legislation.

[Stéphane Bergeron, Bloc, Verchères—Les Patriotes, QC]

Mr. Speaker, to begin with, if you would permit me, I would like to warmly thank my colleague from Shefford. I thank him for his concern in permitting me to express myself today on this bill. I also thank him for being so flexible, for at first I was supposed to speak ahead of him, but gradually we reorganized things. So very great thanks to my colleague from Shefford.

It is with some emotion that I take the floor today on Bill C-55, an Act to establish the Wage Earner Protection Program Act, to amend the Bankruptcy and Insolvency Act and the Companies' Creditors Arrangements Act and to make consequential amendments to other Acts. Not only is this bill important to me, but this is probably one of the last speeches I will give in this House. I therefore ask the indulgence of the Speaker and my colleagues should I ever digress.

We must be very aware of the fact that when there are brutal closures or bankruptcies of companies, the fate of the workers is often tragic. Their families have to suffer the consequences of this as well.

Thus far, these employees do not rank very high in priority among the creditors when the time comes to wind up a company's remaining assets. So, as was mentioned earlier, we find wages and severance allowances unpaid, and, sometimes, pensions lost or heavily mortgaged. After working all their lives for one firm, often these people find themselves without resources, without a pension fund, and often with a reduced likelihood of returning to the labour market.

It is imperative that this Parliament consider the tragic situation of these employees who are the victims of brutal corporate closures or bankruptcies. It is high time that we did so.

A number of my constituents experienced such a situation when the Aciers Atlas plant closed in Sorel-Tracy. In fact, the Aciers Atlas retired steelworkers' association contacted me to ask Parliament to pass legislation to deal with this problem. That people should be lobbying for this is nothing new. The Steelworkers have been pressuring parliamentarians for months to look into this glaring problem. This was due in large part to the worrying situation of a number of steel plants, particularly in the Hamilton region.

After that, our colleague from Winnipeg Centre introduced Bill C-281, a bill we supported 100%. We must admit we even helped our colleague prepare the bill.

Obviously, we are extremely pleased to see the government step in with Bill C-55. In this way, we are assured that the existing legal framework will be improved in order to protect workers and ensure that they are among the preferred creditors when a company is dissolved.

As was said earlier, we support the principle of Bill C-55, but it still contains a number of irritants and gaps, particularly with regard to the concept of secured creditor. The Government of Quebec should be consulted as to how this new legislation may work with the provisions of the Civil Code.

A few moments ago, my colleague from Saint-Bruno—Saint-Hubert spoke quite pertinently about the waiting period that students face before being allowed to discharge their student loans through bankruptcy. This is another area of concern with regard to Bill C-55, as is the issue of penalizing individuals receiving EI benefits, who may be taxed on the benefits they receive when a company is dissolved.

We will have to ensure that a number of amendments and improvements are made to the bill in later stages, so that it is able to truly respond to the very legitimate expectations of workers and pensioners of companies that may one day close.

As I said earlier, I am very happy to speak on this issue. It is clear just how important it is to me.

As I said, I will be leaving this place soon for another arena where I hope I will be able to continue to serve and to meet new challenges.

I would like to take the few minutes I have left to thank all my present and former colleagues in this House. It has been a great privilege and honour for me to be able to sit in this House and be surrounded by extraordinary people here to represent their constituents in Canada and in Quebec.

I would like also to say goodbye to everyone here, House staff, clerks, security personnel and so on. I have particularly fond memories of the late Major General Cloutier, with whom I worked closely during my time as chief whip for the Bloc Québécois.

I also want to acknowledge and thank the legal advisors, and in particular Diane Davidson, an extraordinary woman now working with Elections Canada. These legal experts provide such devoted services to parliamentarians. Then there are the maintenance staff, the support staff, the food services people, the mail room employees, the pages, the researchers and Library staff, in short, all personnel of the House, past and present, who make it possible for us to do as worthy and efficient a job as possible of serving our fellow citizens.

I wish to mention the efficient, competent and devoted staff of the Bloc Québécois in general, and in particular the ones who have worked with me since 1993, who have made it possible for me to do this exciting job of representing the people of Verchères and Verchères—Les-Patriotes in the House of Commons. Words are not enough to express my great appreciation for their devotion, which has made it possible for me, I hope, to do my job as effectively and appropriately as possible.

And then there are the countless volunteers who have worked in the federal riding of Verchères and later Verchères—Les-Patriotes, the ones who have made it possible for me to be here for four terms, a total of some 12 years.

I wish to pay particular tribute to my family, my wife Johanne and my daughter Audrée-Anne. Without them, I could never have fulfilled this mission for the past 12 years.

Lastly, Mr. Speaker, I would be remiss if I did not express my equally warm and heartfelt thanks to the people of the federal riding of Verchères and Verchères—Les-Patriotes, who have showed their faith in me in four elections, who invested in me and reiterated their confidence in me. There is no way I can fully express my gratitude for the touching support they have manifested in me on four occasions, starting in 1993.

I thank them for allowing me to go through the exciting adventure of representing them in the House of Commons. I hope I always lived up to their expectations.

[David Christopherson, NDP, Hamilton Centre, ON]

Madam Speaker, I want to thank my colleague from Winnipeg Centre for the leadership he has shown on this issue and on Bill C-281, the workers first bill, which does actually speak to the issue of protecting pensions in a real and meaningful way.

I want to break out a couple of the pieces that my colleague has already raised and dissect them a little more. First, I would like to join with my colleague in setting the record straight. I was reading yesterday's Hansard where the minister said in his opening comments, referring to Bill C-55 and wage protection, “This type of program is not radical or new, but it is for our country”.

On a technicality, on a federal basis it is, but within our nation, within the country, my friend from Winnipeg Centre is absolutely right. The Bob Rae government, the first NDP government in Ontario, brought in as its very first bill an employee wage protection plan that did exactly what Bill C-55 speaks about. In fact, it went a little further. Let us understand that the NDP has a track record of taking commitments on these issues, putting them into legislation and making them real, and doing it long before other parties in this place have seen it as a priority and enacted it.

What is important in this story, though, in addition to setting the record straight as to whether or not this is ground breaking legislation, is to understand that in the Province of Ontario right now, as a I stand in this place, that law has gone. That protection for workers has gone. That law was ripped out and that protection does not exist in Ontario right now. Why? Because the Conservative government of Mike Harris eliminated it and took away those rights. Let us understand that when it comes to workers' rights, really, at the end of the day, we are either with them or we are against them. It is clear where Harris was and where the NDP and Bob Rae were. It is good that this is happening. Parts of the bill are important and do provide protection, but it is far from ground breaking in the context of Canada as a nation.

Again, the bill has some good elements in it. There is no question about that. It needs serious work in committee and we are hoping we will get the commitment from all the other parties. Certainly, today, it sounds like our colleagues in the Bloc are prepared to roll up their sleeves and make the amendments necessary to give effect to what Bill C-55 purports to do, but without that work, the bill will fall short. However, we will support it. There are some good things in the bill and we will make it better, but it does not protect pensions.

I am emphasizing the comments of my colleague from Winnipeg Centre that it does not protect pensions. It will take Bill C-281, the workers first bill or one like it to do that. Let us remember that in the case of a bankruptcy, again articulated by my friend, under the currently law, if our pensions are not totally funded, we are at the bottom of the list. The banks, the creditors and the government come first. Workers are at the bottom.

It is interesting that the minister said in his comments yesterday: “--protection of workers whose employers undergo restructuring and become bankrupt. I am very passionate about this topic”. Great. Let us see some passion behind Bill C-281 and make some real changes that provide real protection for workers. That is the kind of passion we want to see from the Minister of Labour.

In the last couple of moments I want to deal with section 33. My colleague has talked about that. The minister made some reference to it where he said:

Canadian workers suffer lost wages, reduced pension benefits and uncertainty that their collective agreements may be unilaterally changed by a court.

The working assumption right now is that federal judges do have the power. That is the current wording. That is somewhat unclear and the first thing that the committee has to do is establish whether or not judges currently have that power. If that takes us into some legal battle, so be it. However, we cannot adequately deal with section 33 until there is an absolute determination as to whether or not, under existing legislation in its entirety, a judge is allowed the power to step in, in the case of bankruptcies and restructuring, and unilaterally order that collective agreements be changed. Let me say parenthetically that they are never changed to the benefit of workers, they are always changed to reduce the benefits that are in those collective agreements. That is the worry.

If they do have that power now, then subsections 33(1) and 33(2) take us two-thirds of the way, but there needs to be another amendment, an amendment that we would call the local 1005 steelworkers amendment. In the question and answer part of the package the minister released, there is the kind of protection that my friend from Winnipeg Centre spoke of. It says that a judge, upon application of the employer, can give a court order that negotiations can begin and it forces the two parties to sit down.

In the context of judges having unilateral power, if that is now curtailed to only direct an order that there be a negotiation at a table, then that is a good thing because it would then be more restrictive. It is taking away the authority and putting it into bargaining. What is missing is what is included in the questions and answers. It is missing in the legislation and it asks, what happens if they cannot agree to any concessions?

The questions and answers part of the package put out by the minister said that the agreement would then stand pat as it is. Every word, every comma and the expiry date, and that package, the collective agreement as it was, then goes in as part of the proposal that is put forward to the creditors as to whether or not that is acceptable. It may help the proposal float. It may sink it but nonetheless in law it would establish that judges will not unilaterally change it and that one cannot be forced to make changes at the bargaining table.

The employer representatives begin by saying their niceties, then the other side looks at them and says, we have no interest in changing anything in our collective agreement right now and we will meet you at the end of the expiry date and until then we do not need to talk about this collective agreement in terms of amendments any further. Period. End of meeting. The contract would stay in place. The powers of the federal judges would have been curtailed and the labour movement would have maintained the rights that it currently has to collectively bargain on behalf of its employees without a judge or anybody else unilaterally changing that.

If it is determined, however, that judges do not have that power right now and that it becomes the accepted interpretation by all, that they do not have it, then we want section 33 out of there because it means that we are now, through Bill C-55, giving judges the power to intervene in the collective bargaining process in a way that they currently do not have the power to do. We are not interested in amending section 33 with a new subsection 33(3) in that case. We want and will demand that the entire section 33 be removed. Make no mistake. This issue will be a major determinant as to whether or not the bill meets the test.

I have not heard from the minister. The minister said in his language that there is uncertainty. There is and that is why we want the uncertainty removed. It should be replaced by clarity, so that we know if judges have that power or not. Depending on the definitive answer to that, what will happen with section 33 will then make itself apparent in a way to which I have already spoken.

Bill C-55, as imperfect as it is, contains some benefits and is here for two reasons. One of them is not because the Liberals care that much about workers. The other is because the NDP through the member for Winnipeg Centre introduced Bill C-281 in terms of protecting pensions and putting them at the top of the creditors list, and the government was on the dime. It was on the spot and it had to do something.

To date, the government has not told us it is prepared to make that legislative change, although on the campaign trail the Liberals were all full of protection for workers and pensions. It was so motherhood and apple pie one would be shocked to believe it had not already become the law.

The second reason Bill C-55 is here is that it was ordered and demanded in the NDP budget amendment Bill C-48.

Those are the reasons it is here. The NDP drove this bill to be here. We will work with colleagues in the House to make this bill as good as it should be. We will continue to fight for Bill C-281. That is not going off the radar screen just because Bill C-55 is here. Those pensions will be protected.

Bankruptcy and Insolvency Act

[Pat Martin, NDP, Winnipeg Centre, MB]

Mr. Speaker, I put forward Bill C-281 because there are 10,000 bankruptcies a year in this country and more often than not, or all too frequently at least, workers are left owed back wages, benefits and, most important, pension contributions from underfunded pensions.

Hearing the debate today and even in the first hour of debate, I have to remind my colleagues that we are in the House of Commons. This is the place where we are supposed to be advocating on behalf of ordinary Canadians, the common folk, and what I hear are apologists for the banks more than anything else, frankly.

Those who are opposed to the idea of bankruptcy protection for ordinary Canadians are acting like corporate shills for the banks by saying that we need a tag day for them and we need to ensure they get everything that is owed to them in order of priority over and above the needs of the working people. Something is terribly backwards with this tone and this attitude.

In actual fact, there is money in most bankruptcies to pay the employees. My bill seeks to put workers first on the list of priority when we are distributing the assets or the proceeds from a bankruptcy instead of dead last where they are now. I do not see what is so revolutionary about that concept. Were we not all sent here by ordinary Canadians to advocate on their behalf?

Somehow things got so screwed up in Ottawa. Big money has been running things here for so long that all of the legislation seems crafted in such a way as to serve the interests of big money. Here we have an opportunity to do what is right for ordinary grassroots Canadians and put them first and we hear people saying that it might interfere with the banks' ability to be secure, blah, blah, blah. Honestly, I could spit with anger. It really makes me angry.

We have recent concrete examples. My colleague from Acadie—Bathurst was explaining perhaps the most egregious example of what is wrong with the bankruptcy legislation in the country. He spoke about the Nackawic pulp mill where people with 35 years' service were getting zero of their pension contributions, while $100 million of assets were being distributed among the creditors. Workers are not viewed as creditors.

The interesting thing is if the company has been operating for the last few months of its existence by ripping money out of the pension plan that makes workers creditors. They are investors in the company but unwillingly and unwittingly. They deserve a super priority, in my view, for that very reason.

There is a trust relationship between the employer-employee that is ancient and, I argue, is sacrosanct and should not be tampered with. That trust relationship is, “I will come to work every day and I will lay down my life to dedicate it to your financial enterprise and you pay me x amount of dollars”. That is the trust relationship that exists. However in the event of bankruptcy that gets tossed out the window and everybody gets their share before that employee gets a single cent and more often than not there is nothing left for them.

When I hear people acting as apologists for the banks over the interests of ordinary Canadians, it makes me wonder which side they are on in this very simple debate.

I will tell members where Canadians stand. In a recent Vector poll, 87% of Canadians said that the current bankruptcy laws were unfair, needed to be changed and were overdue to be changed. We have had commissions and studies for 30 years saying that our bankruptcies laws are unfair and do not represent the interests of workers.

The NDP for the last three Parliaments has submitted virtually the same bill. It came within four votes when my colleague from Churchill put it forward as a motion two Parliaments ago; that is, two people voting the other way and we could have had some satisfaction. The workers at the Nackawic mill would not have been screwed if we had listened to the member for Churchill back then.

Year after year, decade after decade goes by with no protection for employees in the event of bankruptcy. The number of bankruptcies is not going down and the protection of employees certainly is not changing.

I cannot believe anyone who was sent here by ordinary Canadians to advocate on their behalf would be a shill for Bay Street and an apologist for the banks, instead of an advocate for ordinary working Canadians. It is a shame.

[Marlene Jennings, Liberal, Notre-Dame-de-Grâce—Lachine, QC]

One of the members in the House continues to call out “pensions”. The member is quite right. The government needs to look at the Bankruptcy and Insolvency Act, the Canada Business Corporations Act, the Employment Insurance Act and so on.

I wish to deal with the issue of wage protection. Today, the Government of Canada announced a wage earner protection program. I would like to read part of the news release that went out. It states:

Today, the Minister of Labour and Housing, accompanied by the Leader of the Government in the House and the Minister of Industry announced the Government's intention to move quickly to establish the Wage Earner Protection Program. The program will help protect workers by providing a guaranteed payment of wages owed up to $3000 should their employer declare bankruptcy.

Under the present bankruptcy system, workers' claims for unpaid wages rank after secured creditors. As a result, many workers have to wait from one to three years to get a fraction of the wages owed to them--13 cents on the dollar on average. These workers are often the most vulnerable and working in low-wage jobs in small businesses (under 10 employees) in the construction, retail and food services sectors. Under the proposed program, affected workers could make their wage claim right away and should receive their money about six weeks later.

The Minister for Labour and Housing stated:

This program is about fairness and helping the most vulnerable workers. The Wage Earner Protection Program will ensure that workers get their wages quickly, when they need it most. It will also ensure that payment of wages will no longer depend solely upon the amount of assets in employers' estates.

The Leader of the Government stated:

There is a need to address a number of issues related to employees and businesses that suffer bankruptcies or insolvencies...Our Government has put forward an ambitious legislative agenda that reflects the priorities of Canadians.

The member who put forward Bill C-281 is correct in that protecting workers and employees, who have earned wages when their employer goes under bankruptcy or insolvency, is something that is a priority for Canadians. The Leader of the Government also stated:

We want to ensure workers do not face undue hardship if the business or enterprise, where they are employed runs into difficulty.

The Minister of Industry stated:

The Government recognizes that the present insolvency system lacks an effective mechanism to provide certain and timely payment of the wages owing to workers whose employers go into bankruptcy or receivership under the Bankruptcy and Insolvency Act...The Wage Earner Protection Program is designed to remedy this gap and to form part of a comprehensive insolvency reform package, which I intend to introduce this spring.

When the member was calling out the word “pensions”, I wish to repeat that the Minister of Industry has already stated that there will be a comprehensive reform of the Bankruptcy and Insolvency Act.

When the Minister of Industry states that he intends to bring forward a comprehensive insolvency reform package this spring, that means that the issue of workers' pensions, when their employers either goes into bankruptcy or insolvency, will also be addressed.

I call on hon. members to look carefully at Bill C-281, but I do believe it should go to committee for that kind of extensive analysis.

[Marlene Jennings, Liberal, Parliamentary Secretary to the Prime Minister (Canada—U.S.)]

Mr. Speaker, I would like to start by saying how pleased I am to participate in this debate on Bill C-281. The principle, the concept and the objective are all worthwhile.

I grew up in a union family. My father was a union member all his life. He even was the secretary-treasurer on the executive board of his union for the region of Quebec. All that to say that I have seen the tough times families can go through when the head of the household is a union worker or a labourer.

I was a shop steward for several years before completing my law degree. I was first elected to this place in 1997, and the Dominion Bridge Lachine plant, a subsidiary of Dominion Bridge Corporation, whose reputation is well known to all hon. members, I am sure, was located in my riding. This major company was a symbol of economic development in Canada during the 19th century and the early part of the 20th century.

Soon after my election, this company went bankrupt and the plant located in my riding faced closure. This meant that some 300 employees, the majority of whom were members of the steelworkers local, would be losing not only the wages owed for the work already performed, but also pension benefits, among other things.

In the community of Lachine, we immediately set up a Dominion Bridge Lachine survival committee, comprising representatives of the local metalworkers' union, my provincial counterpart, MP François Ouimet, municipal officials of the day, myself, local people involved in economic development, representatives of the CEDC, the community economic development corporation, and of Transaction pour l'emploi and many other interested parties. With the help of the Fonds des travailleurs du Quebec, we interested another company in buying the assets of Dominion Bridge Lachine and hiring all the employees.

In the meantime, the employees had to depend on employment insurance. I must congratulate the department of the time, which handled the employment insurance scheme. It immediately set up a committee of officials to help workers apply and ensure that they did not lack money to put food on the table and pay hydro, the rent or the mortgage.

Bill C-281 does have problems, though. I would be prepared to have it referred to committee, because I think committee is the best place to examine the question and the objectives. It does have some serious problems, though, in connection with use of employment insurance, for example.

I would like to speak to that because what is quite interesting is that at times life and reality overtake a piece of legislation that is being proposed. I would like to talk about the issue of protecting workers for payment of wages that they are owed if their employer declares bankruptcy.

[Jerry Pickard, Liberal, Parliamentary Secretary to the Minister of Industry]

Mr. Speaker, Bill C-281 put forward by the member for Winnipeg Centre contains a number of amendments to increase the protection for employees for losses that they may incur in their employment when a bankruptcy occurs. In short, Bill C-281 proposes to create a super priority for all employees' claims that would be ranked ahead of creditors, including any secured creditors.

These amendments would represent a radical change to the bankruptcy system. In doing so they would create a number of direct and perhaps unintended adverse consequences on the Canadian economy.

These amendments would fundamentally change the treatment of debt in bankruptcy. In effect, the proposed regime would override established contractual and legal rights of existing secured creditors which are a fundamental feature of a market economy. Let me explain to members of the House the economic effects that proposed amendment would have. I have to focus my intention on small and medium size businesses and how it would impact them.

It is well established that commercial lenders finance businesses based on the value of assets used to secure loans. In other words, business owners use the value of their company's receivables and inventory as well as fixed assets as collateral to secure financing. Lenders use a borrowing base formula to determine the amount of money the business owner is qualified to borrow.

The single most important determinant of a business's borrowing base is the realizable value of the assets pledged to secure a loan. The lower the realized value in bankruptcy, the lower the borrowing base. The higher the realized value in bankruptcy, the higher the borrowing base. This is where bankruptcy laws intersect with commercial lending practices.

Bill C-281 creates a super priority for claims of losses by employees in bankruptcy. This priority is open-ended and unlimited. As such it creates a great deal of uncertainty for lenders when they are making a lending decision. Given this uncertainty, lenders will face greater difficulty determining the realizable value of a borrower's collateral. As a result, lending institutions will, to protect their own asset base, reduce the amount they will lend to people.

Reducing credit availability by changing the priority scheme in the Bankruptcy and Insolvency Act as Bill C-281 proposes would have detrimental effects on small and medium size business enterprises. These businesses are the most vulnerable to a change in lending practices as they generally have a less diversified source of capital financing than large enterprises.

Small and medium size enterprises account for 98% of all businesses in Canada. Indeed, 75% of all Canadian businesses have fewer than 10 employees. In terms of employment, in 2003 more than five million people, or 49% of our private sector labour force, worked in small and medium size businesses. Those with 100 employees or less are small and medium size businesses. According to Statistics Canada, small businesses made the greatest contribution to net job creation over the period of 1996 to 2003.

We cannot put the engine of economic growth at risk. Bill C-281 would put the brakes on building the 21st century economy as we know it today. Not only would the proposed amendments reduce credit availability, but they would also increase the cost of credit for those who could obtain it. Lenders would re-evaluate the credit risk associated with their entire commercial portfolio, and would conclude that Bill C-281 increases the credit risk. This would translate into higher interest rates not only for existing loans, but for every commercial loan going forward.

The proposed amendments would also require increased monitoring by both lenders and borrowers. This would lead to increased costs for each business, as lenders would pass on their increased monitoring costs. Moreover, businesses would face higher internal compliance costs to ensure that any loans they may have remained as performing loans.

I am strongly opposed to the measures that would cause small and medium size businesses to incur added inefficiencies. Businesses, particularly small and medium size enterprises, would be negatively impacted by increasing the cost of capital. As a result, these firms would find it more difficult to expand and create employment opportunities. In fact, I would also argue that these companies would be more reluctant to invest in innovative technologies. This would have a negative effect on the growth potential of small and medium size businesses and the entire Canadian economy.

The implementation of an open-ended super priority scheme for employees' claims in bankruptcy would also have a detrimental effect on businesses that compete on an international market. None of Canada's major trading partners have such a regime of bankruptcy in their laws. This runs counter to the smart regulations approach that our government has espoused.

In the United States wage claims are given preferred status similar to that in Canada. In some European countries as well as in Australia there are government funded schemes guaranteeing the payment of wages and vacation pay.

The Canadian economy has a strong reliance on international trade, particularly trade with the United States. Close to 80% of our GDP is trade related. Our livelihoods and standard of living are dependent on Canadian businesses and their ability to compete in the international markets. Indeed, with a small domestic market, the steady expansion of multilateral trade is critical to the economy and the continued prosperity of our nation.

However, the proposed amendments contained in the bill would have severe restrictions on Canadian firms' access to capital as well as increasing costs. As such, the proposed amendments would place Canadian firms at a competitive disadvantage in the international marketplace.

All of us in the House are concerned about the problems faced by employees whose employer has gone bankrupt, particularly those who experience unpaid wages and other work related benefits. However, the Bankruptcy and Insolvency Act is a framework law which has horizontal application across the entire economy. Changing it requires careful analysis and balance. There could be unforeseen ripple effects which could have serious unintended consequences on the economy.

The government agrees that there is a need to protect workers who remain unpaid when their employer goes bankrupt. Indeed, it is my understanding that as we speak, the government is studying options to improve the treatment of workers' claims in bankruptcies. I want to see reform to improve the protection for employees' claims in bankruptcy, but Bill C-281 is certainly not the answer.

[Yvon Godin, NDP, Acadie—Bathurst, NB]

Mr. Speaker, I am extremely pleased to speak on this important Bill C-231 introduced by my hon. colleague from Winnipeg Centre.

First, in a way, I am totally saddened, because, while the bill is already at second reading, members still have many concerns. Many members are more inclined to take the side of major employers than that of the workers, even though they like the workers to vote for them when an election comes.

That is unfortunate because, at present, the employees get their pensions, back wages, vacation pay, severance pay and any other benefits only after the taxes, creditors and suppliers have been paid.

The best case in point is what happened just recently when the pulp mill in Nackawic, New Brunswick, went bankrupt. As the principal creditor, the company's president, who was from the U.S., made sure he got paid first by another company he owned.

Earlier, I heard the Conservative member express concern for Canada's banks. The Conservatives, and the Liberals as well, worry about the banks, while the banks are making between $5 billion and $6 billion in profits. Are you afraid they will pack up and go home?

I will tell you something, dear friends in the House of Commons. There are people working underground in the Brunswick mine who risk their health and safety every day. How many miners in Canada do that? How many people work in the woods, from morning till night, with sweat on their brow?

We may be shaken here in the House of Commons by the sponsorship scandal. Nonetheless, even if an election is called, every one of us will receive our salaries and our pensions. However, that is not the case for miners, forestry workers, the man or woman working at the paper mill in Nackawic from morning till night. They will be the last to get paid. It is shameful.

As a former union representative who negotiated many collective agreements, I would say to my colleague from Winnipeg Centre that the bill does not go far enough. The bill should require companies that offer retirement funds to put that money elsewhere rather than keeping it, waiting to declare bankruptcy and then not paying out the pensions to these employees.

It is a shame to see people who have given 20 or 25 years of their lives to a company that made profits, that had some good years, but that went bankrupt because it was not properly managed, with the result that these people lost their pensions.

It was sad to see these people cry in Nackawic, New Brunswick, because they lost their jobs after working 25 years for a company that made millions of dollars in profits. It is sad to see that the last ones to get anything are the workers.

I want this bill to make it to second reading but, at the same time, it must be accepted by the federal government. However, in order to be adopted before the election, the Liberals must stop listening to the right-wing party, namely the Conservatives. Even the member for Kootenay—Columbia said that employment insurance premiums should not be in dollars, but in cents. This is because they do not believe in employment insurance and in workers. They do not believe that when a worker loses his job, he should get some income. That is what is shameful.

It is a shame that today there are still places of employment where people go to work for the company from morning to night, where men and women work for 25 or 30 years and if the company goes bankrupt, they lose their wages. The workers are the last ones to be paid. The creditors get paid first.

The CEO of the pulp mill at Nackawic had another company. He was the principal creditor and he was the first one to get paid before the workers. Does the government support that? Is that what the government is going to do? What a shame. It is a shame to treat the working people of our country like that.

At election time, every member of Parliament is very pleased to shake hands with people and ask for their support. The candidates are always pleased to shake hands with people at the gates of a plant and ask, “Could I have your support? I will support you if I become a member of Parliament”.

We hear today that we have to be careful about the banks, that the banks will not lend money. If they do not want to lend money, they close their doors and go home. We do not need them. They are not all going to close their doors. We do not have to take that threat from anyone. We have to respect Canada's working men and women who get up every morning to go to work for years and years.

Will we as members of Parliament pass a bill in the House of Commons that if we lose in an election, we will lose our pensions? Are we ready to do that? Why are we not ready to support the working people of our country? Why does the same thing not apply to the working men and women of our country as applies to us?

It would not be a shame if for once Parliament looked at Bill C-281 and passed it. I think many companies would agree with it because those families live in communities. When they lose their pay and pension, the whole community suffers for it. Over 850 people work at Brunswick Mine in Bathurst. If the mine went bankrupt and the workers lost their pensions, what would happen to the communities of Bathurst, Chaleur and Acadie? It would hurt those communities. The banks would be laughing. That is what would happen if members do not support this bill.

It would be a shame to water it down to where it does not mean anything anymore. What is wrong about doing a day's work and getting paid for that day of work? What is wrong about making it law that the company would pay for everyone's houses and get the bank to give them the money? The money does not belong to the bank. It belongs to the labourer who works all week. It is his money.

When a pension plan is negotiated, there is a limit on how much one will get from the company, two per cent, four per cent. Does that mean there will be no more pension plans, that we put everything in wages and we get paid right away? Is that the message we want to send to workers? No, we say to people to make a pension plan, make something good of life with the little bit of money they have left. That is what we say, but in the end, if the company goes bankrupt, we will steal it from them, we will take it from them, and that is wrong. It is morally wrong. It is totally wrong.

Anyone who gets up in the House of Commons and does not vote for this bill should never go to a plant gate and shake hands with the working people come election time because they have no respect for the working people if they do that. I recommend very strongly that all parties in the House of Commons think about what they will do and what they will say to the people when they go to the ridings looking for votes. It is just unbelievable.

The CEO of the Royal Bank will not cry on the night a company goes bankrupt. I never see them cry; it is just one big group that was lost. But I see the families cry. I see the father and the mother crying. I see the kids crying. The kids will go to school with nothing. That is what we have done. It is totally wrong not to support Bill C-281.

That is why it is important to adopt this bill at second reading. People must have an opportunity to express their views. Personally, I would even adopt the bill in its present form, because it is so important. If it is amended, it would be to improve it.

Let us look after our citizens and after Canadian families. As I said, I cannot even imagine that a parliamentarian would vote against this bill and then ask workers to support him as a member of Parliament. It would be tantamount to asking workers to vote for him to represent them in Ottawa, and then to rob them of their pensions, salaries and fringe benefits. How could anyone say they would rather defend the banks than support the poor people who worked so hard and who put their health and safety at risk?

I am pleased to have had these 10 minutes to address this very important bill for workers.

[Robert Vincent, Bloc, Shefford, QC]

Mr. Speaker, first of all, I would like to congratulate the member for Winnipeg Centre for having intoduced the bill to amend the Bankruptcy and Insolvency Act to provide better protection for workers. Several of my colleagues in the Bloc Québécois, myself included, would have introduced it if that had not been done already.

There is no need to tell you, therefore, that I am in favour of this important bill that would put workers first on the list of creditors when companies go bankrupt. The reason is simple and obvious: when a company goes bankrupt, it is indebted first and foremost, in my view, to its employees. They should be paid for the hours they worked. In addition, some employers do not hesitate to dip into the workers' pension fund in order to pay off creditors. This means that employers are paying off creditors with employees' money—money that does not belong to them. This is the reason it is somewhat understandable that the Liberals would hesitate to support this bill because they themselves have been misappropriating workers' money by looting the employment insurance fund.

Workers have much more to lose in case of bankruptcy than financial institutions. In light of the billions of dollars in profits that these private institutions make every year, it is only natural that the first creditors paid off by employers in case of bankruptcy should be their workers, whose only source of income is their employment.

Companies that are in danger of having to close their doors put employees in a difficult position. It is not only very hard for employees to evaluate the financial health of the companies for which they want to work but also more difficult for them to absorb a loss of income than it is for large private investors, such as banks.

Changing the law would give workers more security and companies would also benefit. Employers experiencing financial difficulties are at greater risk of losing their most valuable workers if their personnel does not have any protection. If employees knew that they would be first in line to be paid in case of bankruptcy, would they not obviously be less likely to leave their jobs if they sense that their company is in financial danger? Both employees and employers would benefit.

Unless the government wants to support creditors such as banks, I do not see any reason for members not to support this bill. One cannot be against virtue itself!

Hon. members will surely remember that, during the last election campaign, the Bloc Québécois made a commitment to amend the Bankruptcy and Insolvency Act, so that workers' salaries and pensions would be the first debts to be repaid. Personally, I find it even harder to understand how, in a case of bankruptcy, the employer can have access to the workers' pension fund. A pension fund is money set aside for retirement. The employer also contributes to the pension fund, as provided under the collective agreement. That money does not, in any way, belong to the employer, and it should not be used to repay creditors in case of bankruptcy. The problem is that the current legislation allows that. This means that a company can use other people's money to repay its own debts. This is incredible. It does not make any sense.

What would hon. members say if the law allowed the government to dip into their pension fund when there is a budget deficit? There is no doubt in my mind that Bill C-281 would get the unanimous support of this House.

Yet, these members accept the fact that companies can freely use the workers' money to repay debts that have nothing to do with them. I am anxious to see how the Liberals from Quebec will vote on this issue.

In the meantime, they say the bill goes too far, that we have to think about the investors. The workers need to figure out how to cope with a smaller retirement fund, find another job, since they unwittingly did volunteer work for their employer. It is the wealthiest in our society who oppose this bill to protect the weakest from abuse in the private sector. The individual suffers for the benefit of the major investors, yet again.

With investment comes risk, but it is a calculated risk. A job should not be calculated as a risk factor, a job should provide security and stability. A worker should not have to assess the risk of a company declaring bankruptcy. Did the employees at Nortel—which experienced explosive growth a few years ago—calculate the risk of downsizing? Was it their responsibility to do so? Thousands of employees were laid off even though Nortel did not declare bankruptcy. Nonetheless, if it had, would it have been the responsibility of these workers to have calculated the risk?

Would it have been their responsibility to use their salary and their pension fund to pay back the company's creditors? No, they are not investors, they are workers.

Furthermore, an investor only invests if he has the means to do so. He does so in full knowledge of the facts. If an employee could predict the risk of bankruptcy, then maybe he would choose to work elsewhere. The working person does not have the means not to work. Otherwise, he would spend his time, in my opinion, pursuing personal interests, not professional ones. The investor has a choice.

We are talking about labour peace and justice. To me, justice is allowing those less able to bear the burden to be reimbursed first. The worker is not an investor, but a taxpayer, an employee. His salary and pension fund should not be used to reimburse any creditor. It is ridiculous, disrespectful and irresponsible. Drawing from salaries and pension funds in such a way is theft. It is unethical and makes no sense. Workers must be protected, I will not back down from that.

Everyone knows there is a fiscal imbalance between the provinces and the federal government. Everyone agrees except the Liberal Party. Today, we are talking about a social imbalance between workers and creditors.

In addition, the current Bankruptcy and Insolvency Act threatens industrial harmony. I have two examples drawn from events that took place in my riding in the 1990s.

I am thinking of the bankruptcy of the Peters plant in Granby. Management took all the money to pay back creditors, and none of the employees got paid for their work before the bankruptcy. There was no money left. The employees had to initiate legal proceedings against the three principal shareholders in order to reach an agreement and be paid what was due them. Is that the way it should be? I do not think so.

The example of the Simond firm is all the more flagrant. Simond has subsidiaries in a number of countries. The one in Granby went bankrupt at the end of the 1980s or early in the 1990s. It represented only 3% of the company. Following the bankruptcy, in order to pay back its creditors, this major international company drew $6 million from the employees' retirement fund. After a court battle, which went on for seven years, the unionized employees won the case. It took seven years for them to recover the money that had been stolen. In the meantime, 15% of the retirees died.

Furthermore, at the end of this considerable struggle, the law was tightened up so that workers could no longer turn to the courts to defend themselves. The fact that it is legal to take money from the employees' fund was already absurd, but then, the government tightened the regulations. I feel faint when I hear this story or tell it or even think about it. Let me continue, however.

Allow me to point out an interesting fact. Who was the main supporter of the workers throughout these long lean years of the Simond dispute in which the workers' money was stolen? It was none other than the member for Shefford at the time, the current Minister of Transport. I would like to congratulate the member for Outremont on the work he did at that time. So I can reasonably expect him to support this bill. I also expect the Quebec Liberal lieutenant to show leadership among his colleagues so that Bill C-281 will also have the support of Liberal members.

[Jim Abbott, Conservative, Kootenay—Columbia, BC]

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.

[The Acting Speaker (Mr. Marcel Proulx)]

Before beginning today's private members' business, I have a short statement to make concerning the provisions of Bill C-281, an act to amend the Bankruptcy and Insolvency Act, the Canada Business Corporations Act, the Employment Insurance Act and the Employment Insurance Regulations.

As with all private members' bills, the Chair has examined this bill to determine whether its provisions would require a royal recommendation and thus prevent the Chair from putting the question to a vote at third reading. It has been the practice to raise such concerns about private members' bills before the House takes a decision at second reading.

Among other things, Bill C-281 proposes to give workers first priority to amounts owed them after the bankruptcy of their employer; to ensure that payments from a bankruptcy do not form part of employment insurance benefits; and to provide a procedure whereby employees of bankrupt companies can proceed with claims against the directors.

In this particular case, Bill C-281 contains one provision which appears to require a royal recommendation, that is, a provision which proposes spending that solely the Crown can recommend under our system of parliamentary government.

Clause 6 proposes to modify section 19 of the Employment Insurance Act dealing with deductions to benefits. The clause adds the following provision:

Payments made to a claimant out of proceeds realized from the property of a bankrupt or by the government of Canada or of a province in the event of a bankruptcy shall not be deducted under this section.

In other words, where currently amounts owed to workers form part of the calculations used to determine benefits, this bill would propose that they not be used for future calculations of those benefits. This would result in greater benefits being paid to claimants. Therefore, this provision authorizes additional spending, and such spending would require a royal recommendation.

In its present form, I will decline to put the question on third reading of this bill unless a royal recommendation is received.

Today, however, the debate continues on the motion for second reading as scheduled and the motion shall be put to a vote at the close of this second reading debate.

Airline Industry

[David Christopherson, NDP, Hamilton Centre, ON]

Mr. Speaker, that is ridiculous. Nobody is suggesting that at all.

Consumers are not the only ones devastated this morning. There are 1,350 Jetsgo employees waking up to find their jobs are gone and they have no protection for their pensions or wages owed.

Bill C-281, the NDP's workers first bill, is aimed directly at protecting vulnerable workers caught in exactly these tragic conditions. Will this government at the very least commit today to sending this bill to committee and prove to Canadian workers that their Parliament is working for them too?

Bankruptcy and Insolvency Act

[Marc Godbout, Liberal, Ottawa—Orléans, ON]

Mr. Speaker, the protection of wage earners when their employers go bankrupt is not a partisan issue, nor should it be. All of us in the House are concerned about this problem. We agree, I am sure, that wage earners, whose employers have gone bankrupt, leaving wages and other benefits unpaid, are vulnerable. Over the years, different governments have considered options for wage earner protection. Each option has both benefits and drawbacks. I am confident that members on all sides would like to see the most equitable solution possible and are prepared to work toward the solution.

I wish to congratulate the member from Winnipeg for having brought this to the attention of the House. As a starting point for this debate, let me note that the government agrees that wage protection is deserving of attention. I can also tell the House that the government is actively exploring options in order to deal with this important issue.

To better assess the bill, let me describe the features of the current act. To protect employees, the Bankruptcy and Insolvency Act makes employees preferred creditors when their employer goes bankrupt. That places them ahead of ordinary creditors but behind secured creditors. This preferred status is limited to $2,000 in wages earned in the six months before bankruptcy, including vacation pay. Amounts in excess of $2,000 remain as ordinary claims. It also protects up to $1,000 in disbursements for sales people.

The provision for wage liability also exists in the Canada Business Corporations Act. Right now directors of corporations are jointly and severally liable to employees for six months wages in the event of a bankruptcy. This is an absolute liability.

Bill C-281 would radically alter the situation. It fails in some ways to reflect the many other parties in a bankruptcy. Bill C-281 proposes to give unlimited super priority protection to all employment-related claims. In addition to wages and vacation pay, it would add termination and severance pay and other benefits. It would also add protection for pensions, including unfunded liability. In that respect, I personally have some sympathy for that aspect of the bill.

Upon bankruptcy, these claims would be moved ahead of all other creditors. For any shortfalls in recovery, directors of a company would have personal liability that would be determined, not in court but by an adjudicator, without right of appeal.

There are a great many drawbacks to this bill.

The amount of the termination and severance pay and unfunded pension plan liability could far exceed the total wages owing, potentially reaching several billions. As a result, this super priority will, without a doubt, have a negative impact on credit availability and commercial loan rates, which will make business start ups or expansions more difficult than ever, in a number of situations.

As for the clauses relating to directors' responsibilities, the bill does not add very much, except to set in place a parallel system without some of the usual recourses. Regardless of cost, the standard of rigour imposed by absolute liability would justify the existence of guidelines compatible with formal legal procedures.

Bill C-281 puts pension claims in the same basket as wage claims, despite the fact that pensions are covered by separate legislative regimes, and in a number of instances by provincial legislation. Mechanisms making it possible to address pension issues are already in place in these forums, and concerns relating to unfunded pension liabilities should be raised there to ensure employee protection.

Finally, even with this type of protection in place, payments would not be guaranteed, nor would they be made promptly. Many stakeholders maintain that the promptness and certainty of payment are essential to worker protection. Creation of a wage protection fund is one valid option, which merits a thorough study, along with super priority and other factors.

The significance of this bill is that while it does go a great deal further in protecting workers, the scope of what it includes shifts an unreasonable burden to other stakeholders. As a result, it could have a detrimental impact on the ability of businesses to access credit and increase employment opportunities for Canadians.

This is not what our insolvency system is about. Bankruptcy laws are a significant part of our marketplace framework. The bill would have a negative effect on commercial activity. Creditors grant credit based upon the assessment of risk. Bill C-281 would significantly increase that risk. While some of the creditors who may be adversely affected are those often thought of as being able to take care of themselves, such as large institutions, some are individual contractors and small businesses that are no better able to face the loss than employees.

In fact, small businesses and new start-ups are two of the most vulnerable groups when it comes to insolvency because they are hit twice. As creditors, they cannot afford the greater losses that the bill would cause. Greater costs of borrowing as debtors makes it less likely that they can get started and thus create jobs.

We must be mindful of these effects, as we all know the importance to the Canadian economy of small and mid-sized enterprises.

Our system must respect the risks taken by small businesses and independent contractors that also have claims in bankruptcies. It must respect the security interests of creditors. It must respect the efforts of directors who try to ensure the survival of the company. And yes, it certainly must respect employees. The fact is that bankruptcy is about not having enough money to go around. The issue is how best to allocate that shortfall when everyone deserves to be paid.

I am not saying that superpriority should be rejected as a way of handling wage and pension contribution claims in bankruptcy, but I am stressing that it is a complex issue, that it has a long history and that it involves certain trade-offs. The economic effect of any change needs to be thoroughly considered.

Last year, the Senate Standing Committee on Banking, Trade and Commerce conducted a comprehensive review of our insolvency system. The committee only went so far as to recommend that the existing protection be elevated to a limited superpriority over some assets. It further recommended that pensions not be included in this form of protection and in that aspect I think it did not go too far.

To conclude, I have sketched out these details to make a simple point clear to my hon. colleagues of various stripes.

My point is that this whole issue of wage earner protection in the event of a bankruptcy is of great interest and must be addressed. However, to find a fairer solution than what currently exists will require a great deal of work and thought. The process is already well underway but is not yet complete. The solution put forward in Bill C-281 is neither practical nor reasonable in certain circumstances, because of its impact on other stakeholders.

As I indicated at the beginning, this is not a partisan issue. Different governments have been confronted with this issue, which must be resolved. In 1991, a bill was introduced to establish a wage claim protection program to be financed through payroll, but it was not passed. There are various models for increasing protections, and these were discussed during the period before the amendment of the Bankruptcy and Insolvency Act in 1997. But once again, consensus could not be achieved.

Still, and I stress this point again, while Bill C-281 is certainly well intentioned, it is definitely not the best solution.

Industry Canada is currently working on developing a fair solution to ensure the protection of workers whose employer has declared bankruptcy. Until such time as this work is complete, the government cannot support a bill to amend existing safeguards.

However, I give my personal pledge to work with my hon. colleague to find a solution that is fair to all those involved.

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

Mr. Speaker, I want to thank my colleague from Winnipeg Centre for having introduced Bill C-281. As I have already said elsewhere, if he had not introduced it, I would have been happy to do so in my capacity as Bloc Québécois labour critic.

There is no point in repeating that the Bloc Québécois supports the bill in principle. Obviously, employees normally have no way to protect themselves when their employer experiences financial difficulties. Unlike financial institutions, which have more than one source of income, employees do not have the same ability to absorb a loss of income for hours they have already worked.

Obviously, it is difficult for employees to assess the risks of working for a particular company. When an employer has financial problems, its best resources may decide to leave to avoid losing any income, which would further decrease the employer's chances of resolving his problems.

I want to reiterate the commitments the Bloc Québécois made during the last election campaign. The BQ committed to proposing amendments to the Bankruptcy and Insolvency Act so that the wages and pension funds of employees would be the first debts paid if a company went bankrupt.

The current situation, as we know, is inadequate. Under the current legislation, an employee who has worked all his or her life for the same firm can end up without any income if that company goes bankrupt. The employee loses not only future salary income, but also all contributions to the company pension plan.

For example, in 2003, the workers and retirees of the Canadian Steel Foundries in Montreal found themselves with an unfunded pension fund when the foundry closed. In that case, the guaranteed creditors were owed $5 million, which left nothing to pay for the system's unfunded liabilities, such as the pension fund, amounting to $260,000. The employees' pension benefits were reduced but the bank was able to recover its $5 million.

The Bloc Québécois voted in favour of a motion brought before the House by the NDP in October 2003, asking the government to amend the Bankruptcy Act to ensure that the wages and pensions of employees would be the first debts paid in case of bankruptcy. Unfortunately, the Liberal Party voted against that motion and the bill was not passed.

Today, as I said, the Bloc will vote in favour of this bill but during the adoption process, it will propose certain amendments. For example, the Bloc will propose the creation of a fund to guarantee pension benefits, which could provide protection to participants in pension plans that are unfunded when the business closes. Such a fund exists in Ontario.

The wage guarantee has not been changed since 1975. The $2,000 amount would be equal to around $7,300 in 2004 dollars, according to the Bank of Canada's conversion as of December 3, 2004. It should be increased and indexed.

The fact is that the rights of creditors and the rights of workers are seriously out of balance. Secured creditors are usually the ones who can forgo that guarantee, that is, they can survive financially without a guarantee.

Creditors at the top of the list, financial institutions and large suppliers, have the expertise not only to assess a company's risks, but also to create a guarantee in a legal context. In contrast, employees do not have the opportunity nor very often the information they would need to obtain any guarantee that their hours of work will really be rewarded.

Employees cannot easily absorb a loss of income, unlike financial institutions that have several sources of income.

Even though the proceeds of their activities might be higher than wages, financial institutions diversify their risk, which a regular employee cannot do.

Thus, by giving first priority to unpaid wages, Bill C-281 would reduce the burden on an employee who has just lost his job and, need I remind you, would be a better social measure.

It is important to note that there is no guarantee employees would receive the full value of their unpaid wages, since the amount paid would depend on the value of assets being liquidated. Nonetheless, the money paid back would be even less if we kept the current system.

Some have said that making unpaid wages a first priority might inhibit the borrowing capacity of the companies, particularly those with a very large payroll. Some also say that the rules for borrowing could become stricter and that interest rates could increase if lenders no longer had priority status.

In response to these arguments, let us remember that financial institutions broadly diversify their risks and that wages are often much lower than capital costs.

These days, pay day is usually every two weeks, which greatly limits the risk of having huge amounts to pay in wages.

Passing this bill would shake up the bankruptcy and insolvency rules and standards, which have for too long gone undisturbed.

However, this restructuring is more than necessary, since the business world is constantly changing and workers can no longer be so sure about the future of the companies that employ them.

It is wrong not to ensure a minimum of protection for workers' wages and certain benefits, such as the pension funds they contribute to their entire lives while their employer has enjoyed profits.

To those who claim that amending the act will cause major problems for companies in terms of financing, they should never forget that the operation and success of a company depend in large part on its workers.

It is unthinkable that in the quest for profits and the lowest possible operating costs, we are failing to show due respect for workers.

[Ed Komarnicki, Conservative, Souris—Moose Mountain, SK]

Mr. Speaker, I would like to make some brief remarks with respect to Bill C-281.

There is no question that when it comes to protecting the rights of workers and their wages and salaries, every member of the House would agree that those are important issues which need to be addressed. Workers need to be protected. We have many human tragedy stories that would indicate people have suffered through loss of pensions, entitlements or severance pay. It is not a question of whether those rights need to be protected. The big issue is how they are best protected without creating problems in other places and with regard to other interested parties.

There are obvious examples in a bankruptcy of people who have to take economic loss. Many suppliers are even below the worker in terms of unsecured status. They too suffer significantly.

When a business comes into being, there are many dreams, aspirations and hopes by many parties. Fundamental to getting that business started is the ability to raise capital and operating funds to buy inventory, goods and supplies and to have the plant and the process operate. Most people would go to banks, credit unions or third parties to obtain finances to get their businesses started and to establish those jobs in the first place. Those parties provide funds in return for security. It could be hard assets, inventory or floating charge debentures, but they take those things in exchange for providing cash. They expect to realize on that security. That is why secured creditors have been given preference.

I find it hard to understand how employees are in a situation where pensions are unfunded to the degree they are without some policing taking place. The one who provides the funding expects to get the cash back when the business fails. If we start to destroy the concept of secure transactions, we will be unable to start businesses and create the jobs. We need to be careful.

When we look at the scheme that presently exists under section 36 of the Bankruptcy Act, secured creditors are first, then preferred creditors and outside of bankruptcy fees and costs, the workers are number four. Then it goes to unsecured creditors. Workers are protected to the sum of $2,000 in past wages.

The previous bill introduced by the member talked about super priority status for workers, and it was limited to $10,000. Why was it limited to $10,000? It was for good reason. It is hard to estimate or understand the amount and value of unfunded pensions, et cetera. The present bill places the workers ahead of all creditors, regardless of time and dollars. How is a person, who is advancing funds, to know what these liabilities may be?

If this bill were passed, there would be severance, which would depend on the length of time the worker was employed. There would be unfunded pensions. A lack of money in the pension fund could be created by it being actuarially unsound by the economic conditions, or by perhaps negotiations through collective bargaining agreements that would enhance the pension which has not yet been funded or to which no contributions have yet been made. These amounts could be huge, but unknown at the time the business started up and unknown at the time the financing was advanced. The only thing that can happen is they would have to plan for a contingency. They would have to plan for what the eventuality may be, which would then restrict credit, lower the amount that could be loaned or increase the interest rate.

This is not the way we want to go. This is not the way we want to deal with business, taking the problem from one area and placing it in another, particularly when the secured creditor has little to do with funding pensions and policing how that happens.

We must look at other alternatives that would preserve the current lending system and that would look at protecting the workers. I think that is a valid concern.

It is interesting to note that workers in other jurisdictions, the United Kingdom, the United States and Australia are not given a super or high priority status over secured creditors. They have considered something akin to a worker's protection fund where there is a contribution from the employer, the employee and perhaps from the government. These funds are then used in part to protect workers. It is funded by the people who are affected and the people who have some control of the government.

In each of the jurisdictions they have limitations, so there is some certainty as to what is involved. The United States has put a cap in dollars but has given them a preferred status. It is those kinds of options that need to be reviewed. These are options that take into account the rights of the workers and the security of the market. They ensure that trade and commerce can continue, that we are able to do business as we have known business to be done, and it does not take a resolution that resolves one problem and creates another.

It is for this reason that I feel this particular bill ought not to be approved. It should be opposed. We should look at a bill, introduced in proper time, that takes into consideration all of the stakeholders, all of the parties that are involved, and addresses the issue fairly and into the future.

It is not something we can resolve in what is happening today in a particular situation. It is what we do to resolve an industry issue that is of concern to us. We need to address worker protection. We must address the issue of pensions. Some of that may need to be addressed through pension legislation separate and apart from the bankruptcy legislation. In any event, it must be a broader perspective. It must have a broader view. It must take all of the interests into account when it is being drafted.

[David McGuinty, Liberal, Ottawa South, ON]

Mr. Speaker, it is a pleasure to respond to Bill C-281. I congratulate the member for Winnipeg Centre. There is no doubt that wage earners need protection when their employers go bankrupt. Everyone in the House is concerned about this problem and has been for a long time.

Over the years different options for wage earners' protection have been considered. They have been considered here and each with its own benefits and drawbacks.

I would like to offer up some comments as a former unionized worker, as a former small businessman and as a recovering corporate lawyer.

In examining the various options, one question has to be answered and it is this. Is this approach fair to all parties? Make no mistake, bankruptcy means there will be a shortfall and not all debts will be paid. All parties suffer in a bankruptcy, including employees, creditors, suppliers and the owners of the company.

Our challenge here is to find the proper balance in the protection of these various interests.

While it is difficult to say that the protection of workers, the backbone of our economy, can go too far, I believe Bill C-281 does just that. It goes too far. The bill throws all balance and equity out the window. It represents a radical departure from the existing system, one that if adopted into law, could have a dramatic effect on the economy and the very workers that it seeks to protect.

Let me explain. The solution proposed in Bill C-281 is straightforward, an unlimited super priority for all employment related claims to all of the assets of the bankrupt company. In addition to wages and vacation pay, it would add termination, severance pay and other benefits. It could also add protection for pensions, including unfunded liabilities.

The liabilities, in particular the unfunded liabilities, can be huge, outstripping the value of the company's assets and the company's ability to pay.

Due to the magnitude of the super priority contemplated in the bill, it could have serious effects on credit and capital access, particularly for higher risk new businesses, particularly high technology companies, over 1,500 of which exist, for example, in my region here in the National Capital region.

Creditor claims, even those that are secured under the appropriate law, would fall below employment related claims. If all the company's assets go to satisfy worker claims, there would be nothing left to pay remaining creditors. Creditors would be less certain about their ability to collect debts owed to them and it could be assumed would be less interested in investing in Canadian companies.

We must also consider smaller creditors, such as trades people and suppliers. These individuals are in many cases no more capable of protecting their interests than workers. Small businesses and independent contractors take risks when they supply other companies, and our system must respect their efforts as well as their claims in bankruptcies.

Again, we come back to the issue of balance. The underlying factor is that disharmony in the system will have potential economic costs. If credit is not available, businesses will not expand and they might even contract. If business does not expand, new jobs are not created and labourers will see less demand and less opportunities for their services.

The protection of wages must not be examined in a vacuum. Insolvency reform cannot eliminate risk or harm. It should strive to strike the best possible balance of the needs of all parties in a bankruptcy proceeding. The fact is that bankruptcy is about not having enough money to go around. The issue is how best to allocate that shortfall when everyone deserves to be paid.

Bill C-281 does not strike the right balance. It attempts to benefit one group in the equation, while placing an unfair burden on the others. To be sure, the super priority proposed by the bill is not the issue. Indeed, it might be a proper approach to take, but the balance proposed in this bill is off.

It is the position of the government that finding the right balance will require additional study. Reform in this area should wait for the results of the Industry Canada review of this and other insolvency related issues.

I would like to address one other element of the bill that has not received enough attention. The proposed bill also amends the Canada Business Corporations Act. I would commend to my colleague, the member of the NDP, to listen and learn carefully about how the Canada Business Corporations Act actually grants the minister of labour the power to appoint an adjudicator to hear and resolve wage claims by employees.

While it can be appreciated that everyone's best interests are served when claims of this sort are settled quickly, it is unclear as to why the bill would replace the courts as the mechanism for settling these disputes.

The Canada Business Corporations Act already has provisions for wage liability for directors. Right now the directors of a corporation are jointly and severally liable for six months of wages owing to employees in the event of a bankruptcy. This is an absolute liability. There is no statutory defence. These claims, even in a moderate sized corporation, can achieve sums in the millions of dollars.

The courts already have the expertise to deal with large claims of this kind. The small claims courts can deal with situations that involve only a few employees. In any event, given that wage liability is absolute, all that remains for a court to do is satisfy itself that the claim is valid and order the payment. The bill adds little except to set up a parallel system without some of the usual due process rules, including a specific prohibition of a right of appeal. Due process in my estimation should not be capriciously discarded. Despite the cost, the rigorous standard created by an absolute liability offence justifies having the safeguards consistent with a formal court proceeding.

Under the provisions of the bill, the adjudicator may summon and enforce the attendance of witnesses, compel testimony, compel the production of documents, administer oaths and order directors to pay employees the wages owing. This sounds like a court to me. Substitute the word judge for adjudicator and we have a system very much like that which currently exists, and one that operates transparently, fairly, and without the additional layers of bureaucracy. I see no need for these provisions.

The government agrees that wage protection is deserving of attention and is actively exploring the options to deal with this important issue. The solution put forward in Bill C-281 is neither practical nor reasonable, insofar as its effects on other stakeholders. It ignores the concept of balance. It favours one group to the exclusion of all others. It ignores the economic impact of unlimited super priority. It ignores the interests of the many creditors, both large and small, who by taking risks and supporting Canadian business, allow our economy to flourish and allow so many of the hundreds of thousands of jobs to be created in the first place.

[Pat Martin, NDP, Winnipeg Centre, MB]

moved that Bill C-281, an act to amend the Bankruptcy and Insolvency Act, the Canada Business Corporations Act, the Employment Insurance Act and the Employment Insurance Regulations, be read the second time and referred to a committee.

Mr. Speaker,it is a great honour for me to speak at second reading of the bill I introduced, Bill C-281. I would like to begin by recognizing the contribution of my colleagues in the NDP caucus in the development of the bill, first, my seconder, the member for Hamilton Centre, who was instrumental in developing the content of the bill to the form it is in now, and second, my colleague from Ottawa Centre, who brought forward recommendations regarding the bankruptcy laws as they affect workers and employees in this country. I want to recognize and thank both of these colleagues for their contribution.

Every week in this country there are roughly 200 commercial bankruptcies, 1,000 bankruptcies a month, and roughly 10,000 bankruptcies per year, many of which leave behind employees who are owed back wages, benefits and pension contributions. The total figures we can only estimate. Over $1 billion per year is a figure that has been used.

It is workers who pay the price when workplaces shut down. This is especially true when these shutdowns are triggered by bankruptcy, because not only do the employees lose their jobs and their source of income, they also often lose wages that they have not been paid, as I have stated, and vacation pay, termination pay and severance pay.

The reason for this is the order of priority in which employees find themselves when it comes to the distribution of the proceeds of the remaining assets of the company. Workers find themselves at the bottom of the list. I argue that today in the House of Commons in 2004, the members congregated here should be putting workers first in the event of a bankruptcy.

My bill simply reverses the order of priority. Back wages and benefits owing to employees would be ranked at the top of the list when it comes to the distribution of the remaining assets. I urge colleagues to remember or to at least contemplate that big money has controlled things in Ottawa for so long, in my view, that it is no surprise that many of the laws are crafted in such a way as to look after the interests of big money better than they look after the interests of ordinary Canadian voters.

Working people in Canada send us to Parliament to put their interests first, I argue, and in this case, this is one thing we could be doing to look after the interests of Canadian workers as a prime concern, as a priority, by putting them first in line in the event of a bankruptcy.

Parliament has tried to address the inadequacies of the bankruptcy act a number of times in recent years. I am the first to acknowledge that both the House of Commons and the Senate have been seized of the issue and I think this illustrates a growing awareness in Canada that the bankruptcy laws are in fact unfair to workers or at least do not recognize their unique status in the event of a bankruptcy.

When I argue about putting workers as the first priority, we have to view workers who are owed back wages as creditors. I think there is a case to be made that if the company has been operating on or using back wages owed to employees to operate the company, the employees are in fact creditors. Maybe they are creditors against their will in that they certainly did not give any approval to use the back wages and pension contributions to operate the company, but that is in fact what they are.

This is what we are asking members of Parliament to recognize. Employees are justified in being viewed as creditors in the distribution of the assets. In fact, we are asking Parliament to entertain the idea that they should have superpriority, because the other aspect we should acknowledge is the unique trust relationship that exists between the employer and the employee.

Banks, should they take some loss in the event of a bankruptcy, are in that business, we argue. They mitigate that loss by charging interest rates throughout the period of the loan. Even if the order of priority were reversed and employees were paid first, our research shows that the banks would still get most of what was owed to them. They would not lose all of it if some went to workers. The inverse is true, too, in that employees are vulnerable creditors, more so than the banks or the other lenders because they cannot spread that risk over a number of investments. All of their eggs are in one basket.

In the case of a bankruptcy, it is not just the back wages and benefits that are left owing. More often than not in recent high profile bankruptcies, it is the contributions to the pension plan that have a lasting effect, with an underfunded plan leaving employees with far, far less for their monthly retirement than they had earned and were led to believe they would receive.

All of those points add up to a compelling case that the current Bankruptcy and Insolvency Act does not serve the interests of Canadian workers-Canadian voters as it should. We in the House of Commons should put as a priority the best interests of workers and employees, not the best interests of banks and financiers who would object to this reprioritization.

We tested the views of the Canadian public. I brought with me the results of a Vector poll that we conducted with the cooperation of our partners in the labour movement, specifically the United Steel Workers of America which represents a number of workplaces that have been affected by bankruptcy recently.

This nationwide Vector poll of 1,200 Canadians, conducted with what is called a plus or minus accuracy of 1.9%, asked the following question: “Under current laws usually a bankruptcy pays its debts in this order: first, taxes, followed by the banks and other lenders, suppliers and then employees. Do you think the current bankruptcy laws are fair or not fair to employees?” Eighty-four per cent of Canadians said that the current situation was not fair to employees.

When asked a more specific question: “Sometimes bankrupt companies do not get enough money from selling off the assets to pay everyone. Under the current laws, the first to be paid are secured creditors and lenders who have a guarantee. Employees, however, are not secured creditors and may not get the wages owed to them when a company goes into bankruptcy. Should the law be changed to provide more protection for employees' unpaid wages?” Eighty-nine percent of Canadians across the country said that the law should be changed so that it provides more protection for employees' unpaid wages.

I would think that if there was any need for further argument in the House of Commons or any question of whether this is the political ground that the government wants to take, this should give it some comfort that this is what Canadians want it to do.

I welcome any other polls to this effect but I challenge anyone to show us results that are dramatically different from what we have demonstrated here today.

Canadians want a fair shake for employees. We want to put workers first. This after all is the House of Commons and it is not called the House of Commons for nothing. This is where common people send their representatives to make laws that work for them. It is as simple as that.

Lobbyists for the financial interests have been so prominent that laws have been crafted in such a way that they do not look after our concerns any more, at least not in this one example of the Bankruptcy and Insolvency Act.

Bill C-281 would do three things. First, it would reverse the order of priority to put employees first in the distribution of the proceeds from the assets of the bankrupt company.

The second thing it would do, until we can add more fairness to the bankruptcy laws, is it would change the Employment Insurance Act. If employees were laid off due to a bankruptcy and were collecting EI, if they received some settlement for back wages owed to him, those back wages would not be viewed as income in the period of time they were collecting EI. If the wages were, they would be deducted dollar for dollar from their EI payments. Seeing as they earned those wages while the company was still open, those earnings when paid later on should not be viewed as income for the purpose of EI. This is a consequential amendment to the principle and the concept of what we are introducing.

Third, the bill would change the Canada Business Corporations Act to provide a more efficacious procedure by which former employees of a bankrupt corporation who are owed wages by the corporation can proceed with claims against its directors.

In other words, under the current law if the proceeds of the bankruptcy are not adequate to pay for the back wages and benefits, the employees are currently allowed to sue the directors of the corporation to make up for any shortfall. However the process is tedious. It can take years, and not all the employees involved have a union to advocate for them. The bill would expedite that process. The employees could still make a claim against the directors for any shortfall but it would be expedited by an arbitration board or tribunal which could fast track the claim against the directors.

The key principle I ask members to please keep in mind is that what we are trying to do is rejig the order of priority whereby employees would rank first in priority and not at the bottom. Canadians want this and expect it. When members of Parliament are given the opportunity they should be fighting for the little guy, speaking out for the person who is left in the wake of these corporate decisions that are far beyond their control or input.

We can point to dozens of recent examples of Canadians who have been impacted. When there are almost 10,000 commercial bankruptcies per year in Canada there is no shortage of empirical evidence to point to and to draw from. In one recent example in the province of Ontario, 1,300 unionized employees with Ontario Store Fixtures lost their jobs because of bankruptcy. Even though another company restarted the business for a brief period of time it too filed for bankruptcy. When the dust settled in that, over 1,200 employees had lost their jobs. They are owed roughly $12 million in back wages and benefits.

In the case of Ontario Store Fixtures, no money was in the bankruptcy estate to pay for any of these claims. Guess who got paid first? Any cash that was available at the time of the first bankruptcy went to the company's banker, CIBC. Assets from the auction of the property of the second bankruptcy automatically went to other secured creditors, who in this case were the shareholders of the Ontario Store Fixtures partnership.

Virtually everybody received their money except for the actual employees of the company. I ask my colleagues to consider the ancient trust relationship that exists between the employer and the employee.

I, and many people with whom I have spoken, would like to think that whatever assets remain after a bankruptcy and after the owners have walked away, that the company would like to see that money go toward paying some of the wages it owes its employees and then whatever is left could be distributed among other creditors on the list.

This is an idea whose time has come. In the interest of fairness and on behalf of Canadian workers everywhere, I urge my colleagues to allow the bill to pass at second reading and go to committee where we can give it a more fulsome review, submit amendments, craft it whichever way we want as long as the end result is that our number one concern is to protect the interests of employees in the event of a bankruptcy. We must put workers first.

[Pat Martin, NDP, Winnipeg Centre, MB]

moved for leave to introduce Bill C-281, an act to amend the Bankruptcy and Insolvency Act, the Canada Business Corporations Act, the Employment Insurance Act and the Employment Insurance Regulations.

Mr. Speaker, my colleague, the member for Hamilton Centre, and I are proud to introduce legislation today that would provide, in the event of a bankruptcy, that any back wages, benefits or pension contributions owing to employees would rank first in priority when distributing the assets of the bankrupt company, not at the bottom of the list as is currently the case. The bill puts workers first in the event of a bankruptcy.

It is also necessary to make consequential amendments to the EI Act so that benefits from the distribution of the assets of the bankruptcy are not clawed back as income from EI benefits.

The third element of the bill expedites the process by which employees can seek redress from the directors of the company should there not be enough remaining assets to distribute to make up the back wages, benefits or pension contributions.

It is an important bill. There are 10,000 bankruptcies a year. This is on behalf of Canadians and putting workers first in the House of Commons.

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