Bill C-501 (Historical)

An Act to amend the Bankruptcy and Insolvency Act (termination and severance pay)

This enactment amends the Bankruptcy and Insolvency Act to ensure that the claim of a clerk, servant, travelling salesperson, labourer or worker who is owed termination and severance pay by a person is secured as of the date of the bankruptcy or receivership by security on the person's current assets.

[Bruce Robertson, Chief Restructuring Officer, AbitibiBowater Inc.]

Thank you, Mr. Chairman. I'll do my best.

My name is Bruce Robertson, and over the past 18-plus months, I've been serving as the chief restructuring officer for AbitibiBowater as the company works through the challenging period of restructuring itself under the Canadian CCAA and U.S. chapter 11 creditor protection processes.

I'm pleased to respond to your request to appear today to provide my thoughts on Bill C-501.

I must say at the outset that we're in the final stages of restructuring AbitibiBowater, and the company anticipates emergence within the next couple of weeks. Through the restructuring efforts, the company has been transformed to become one of the lowest-cost forest products companies in North America, with 18 pulp and paper facilities--11 of which are in Canada--24 wood products facilities in Canada, and close to 12,000 employees. The company has $5 billion in revenues and markets its products in more than 70 countries around the world.

Now, as a restructuring professional, I'll do my best to help the committee in its review of Bill C-501.

I'm afraid that however well-intentioned, Bill C-501 would have significant unintended consequences and would likely further penalize the very people the bill's author desires to protect.

Let me explain with a real-life example. If the proposed legislation had been in force in Canada two years ago, AbitibiBowater would have most likely been forced to liquidate its Canadian assets. Why? Because required financing for the Canadian operations, both debtor-in-possession and exit financing, would not have been available due to the huge reserves necessary to account for the pension solvency deficit super-priority.

What would have happened? In a liquidation scenario, employees and retirees would have taken a significant loss in their pensions. Canadian pensions for the company would have paid anywhere between 65¢ and 80¢ on the dollar. In effect, this would have locked in losses at the absolute bottom of the market and would have had the opposite of the intended effect. Also, as a result, up to 8,500 direct AbitibiBowater Canadian jobs would have likely been lost. In addition to these direct jobs, another 32,000 Canadians working in indirect jobs in communities across Quebec and Ontario would have been impacted. More than 40,000 Canadians, mostly in rural regions that are economically dependent on the forestry sector, would have been out of work.

Furthermore, the headquarters of AbitibiBowater would most likely have then moved to the U.S., where the Canadian portion of the company would have likely restructured and emerged with its American mills operational, a further potential hollowing-out of Canadian corporate head offices.

This real-life example demonstrates that the proposed legislation puts Canadians, companies, employees, and our country overall at tremendous risk and at a significant competitive disadvantage.

Mr. Chairman, I encourage you and the other committee members to also review the public record on another company that was recently under CCAA protection, Terrace Bay Pulp. Again, if this bill had been in place, I believe that this company in northwestern Ontario would not have emerged. Four hundred direct jobs would have been lost, many times that number would have been affected in indirect employment, and the pensions would have been significantly and adversely impacted.

An area of grave concern I have with Bill C-501 relates to the ability of companies to raise capital in credit markets to operate their businesses and provide jobs to Canadians. If passed, this legislation would make it extraordinarily difficult for Canadian companies to raise capital. Canadians would once again be at a strategic disadvantage in the marketplace. Financial institutions would have to take into account the possibility of even greater losses if a company were to enter bankruptcy proceedings, thus raising the cost of doing business in Canada.

Canadian companies would suffer from reduced available liquidity. During the credit crisis over the past two years, all Canadians saw what a loss of liquidity means to the economy. I'm concerned that this proposed legislation would reduce the productivity and competitiveness of our nation. With fewer Canadians working and fewer companies making profits and paying taxes, our governments and the social programs they provide would be impacted.

I believe that the best way to deal with pension deficits with companies in creditor protection is the approach taken by AbitibiBowater. Positive collaboration by management with the unions, provincial governments, retiree groups, creditors, and other stakeholders has resulted in no reduction to the pension benefits of the 20,000 Canadian AbitibiBowater retirees, and the company will continue to pay 100% of pension benefits to retirees and beneficiaries as the company emerges from creditor protection.

Let me make one further point. With today's extraordinarily low interest rates, the way we calculate solvency of pension plans in Canada creates a flawed reality. The formula utilized in Canada results in a significantly larger headline solvency deficit relative to the U.S., for example. Because of these differences, the companies do not face a significant pension deficit south of the border.

I realize that it's not the subject of today's hearings, but I encourage federal and provincial governments to consider alternative calculation methods and pension solvency formulas, as well as pension insurance, improved regulation, and other reforms.

In summary, Bill C-501 will kill credit for many good businesses and put them in danger of liquidation. This would obviously not be good for employment or economic growth. It will also encourage businesses to cancel what remaining private sector pension plans exist. As the penalty in terms of lost credit and risk will be too high, it will not actually protect existing pensions better than the current regime.

Policies that help strengthen the financial position of companies are the best solution to ensure that pension benefits are paid over the long term. These policies would include those that attract capital and encourage investment to improve productivity and to create jobs and economic wealth.

Thanks, Mr. Chairman.

Industry, Science and Technology

[The Deputy Speaker, Conservative, Andrew Scheer]

The House will now proceed to the taking of the deferred recorded division on the motion to concur in the 11th report of the Standing Committee on Industry, Science and Technology concerning the extension of time to consider Bill C-501.

[Anne Clark-Stewart]

I think the other organizations that were in favour of Bill C-501 will be more in favour of Bill C-501 as a result of this.

[Anne Clark-Stewart]

I don't think it would be better protection than that under Bill C-501 even if it were all across Canada for $1,000 a month. That legislation in Ontario was put in place in 1980 based on 1980 salaries and norms.

There was a report put together by Professor Harry Arthurs, which was submitted to the Ontario government in 2008. In it he recommended that the pension benefit guarantee fund be immediately upped to $2,500 a month. The Ontario government is not pursuing that recommendation.

He made 144 recommendations with regard to pensions and bankruptcy in Ontario. I read those recommendations, and if four or five of them had been in place before Nortel declared bankruptcy protection, we wouldn't be in this room.

[Robert Bouchard, Bloc, Chicoutimi—Le Fjord, QC]

Suppose the federal government were to bring in this measure which now applies only in Ontario and made it part of Canadian legislation? Do you think that it would provide broader protection than Bill C-501?

[Anne Clark-Stewart]

I wouldn't say it was more attractive than Bill C-501, because it only affects the people who work in Ontario.

In the Nortel case, where we had people working all across Canada--we have huge populations in Calgary and Edmonton, and 30% of our employees work in Quebec--they will not get any of that pension benefit guarantee.

So if they only have a $600-per-month pension, that's all they get.

[Robert Bouchard, Bloc, Chicoutimi—Le Fjord, QC]

Thank you, Mr. Chair.

Good day, Madam. Thank you for coming here to testify this morning.

You stated that there was a retirement fund in Ontario that provides $1,000 a month in benefits to recipients. In other words, if recipients are drawing $600 in pension benefits, this fund provides additional compensation up to a maximum of $1,000. Do you think this kind of provision could be beneficial or more attractive than Bill C-501?

[Anne Clark-Stewart, Member, Nortel Retirees and former employees Protection Canada]

Good morning, members of the committee.

First of all, I would like to thank you for making the amendment as outlined in the reference document submitted by Mr. Rafferty. We are pleased to see the inclusion of the unfunded liability or solvency deficiency in the amendment to Bill C-501. We feel, however, that these changes do not go far enough to secure pensions for Canadians caught in the lack of justice for employees and retirees in bankrupt companies.

Why do I refer to justice? It's because justice underpins every functioning society. Justice allows us to cooperate, to subjugate our self-interest for a greater common good, knowing in the end that not only we will be treated fairly, but that we will all be better off. And it is our laws that must deliver the justice that we are commanded to seek. In a nation's laws, one finds its true soul.

Professor Sandel of Harvard in his class on justice defines justice as “getting what you deserve”. Let's use that definition to look at how current federal bankruptcy law treats our pensioners.

Once a company files for creditor protection, that law pushes all pension and employee claims to the very bottom of the creditor heap. The elderly and disabled are forced to slug it out with sophisticated junk bondholders for the last scraps of company cash.

Is this justice? Is everyone getting what they deserve?

We believe all employee-related claims, for pensioners, the disabled, and terminated employees, should have preferred status in bankruptcy.

The proposed amendments are correct to require the funding of unfunded liabilities or solvency deficiencies. To be clear, once a company enters CCAA or BIA, the solvency deficiency is the amount to be addressed. By definition, “unfunded liabilities” assume that the company is a going concern, which is not the case once CCAA or BIA has been invoked.

Once a company enters CCAA or BIA, solvency deficiencies can be very large, and under current rules, top-up by the company is not mandatory and pensioners are left holding the bag.

The amendment refers to inclusion of the solvency deficiency as determined at the time of bankruptcy. To be clear, it should be specified that such payments must be for the full amount of the deficiency under windup assumptions, and the full responsibility must be attributed to the company as soon as it enters CCAA or BIA, should be fully payable before it exits CCAA or before it ends its responsibility for the pension plan, and must be based on current valuations of the plan.

In the case of Nortel, the gap between the solvency deficiency and the windup deficiency will be in the range of $1.2 billion on a $2.5 billion funded pension plan, a huge impact to pensioners.

Our former colleagues in the U.K. and the U.S. have virtually 100% pension protection, because all their pension deficit is covered. Their governments have recognized the fundamental immorality of depriving pensioners of their retirement incomes, which are in fact deferred wages.

Canada must be no different. We are actually one of the few major industrialized countries not to have pension protection for all workers in bankruptcy, another black eye for Canada on the world stage.

Bill C-501 as it stands will not help Nortel pensioners, because it does not apply to companies already in the bankruptcy process. Minister Bairdhas been recorded as saying that it would be unconstitutional to make Bill C-501 retroactive.

Our legal advice says he is wrong. A recent Supreme Court of Canada decision, in British Columbia v. Imperial Tobacco Canada, has authoritatively resolved the constitutional ability of any legislature, either federal or provincial, to enact retroactive legislation. The Supreme Court clearly and unequivocally held that except in the area of criminal law there is no constitutional requirement of legislative prospectivity. The court confirmed that if the intended retroactive effect is expressed sufficiently clearly, the statute is effective according to its terms.

The Supreme Court acknowledged that retroactive legislation can overturn settled expectations and may sometimes be perceived as unjust. Nevertheless, it is held that except in the area of criminal law, there is no constitutional impediment to retroactive legislation.

To save time, I have e-mailed copies of this ruling to the clerk of the committee for your information. Therefore, if the political will exists within this room, retroactivity could be added to Bill C-501 and Canadian pensioners would receive justice in bankruptcy.

However, legal precedents and numbers don't begin to describe the desperation spreading across the country. Angry widows and pensioners, led by Gladys Comeau, whom I know you all know, are withdrawing funds from the Royal Bank and changing their Bell-related services, as they don't like the attitudes their representatives presented at INDU, the industry committee, in hearings earlier this month. They hope their gesture will stimulate the banks and big business to have a change of heart regarding the passage of Bill C-501.

This bill represents a significant step towards protecting pensioners from a harm that many other civilized countries have already recognized and addressed. It should be suitably amended as described, with the inclusion of windup assumptions and retroactivity, and passed into law as soon as possible. We hope the committee will undertake its duty to Canadians and find the wording to make it applicable to companies already in bankruptcy process and thereby bring Canada into the 21st century. There is no impediment in law to doing so.

Thank you for listening to our concerns and our recommendations.

[David Sweet, Conservative, Ancaster—Dundas—Flamborough—Westdale, ON]

Mr. Speaker, I have the honour to present, in both official languages, the 11th and 12th reports of the Standing Committee on Industry, Science and Technology in relation to its study of Bill C-501, An Act to amend the Bankruptcy and Insolvency Act and other Acts (pension protection), and in relation to its study of Bill C-452, An Act to amend the Competition Act (inquiry into industry sector).

The committee requests a 30 day extension in order to give the bills their proper consideration.

[Mike Wallace, Conservative, Burlington, ON]

My point, Mr. Chair, is that I've had a private member's bill myself before, and it required a royal recommendation and it did not pass because it needed a royal recommendation--and I'm on the government side.

Private members' bills, in my view.... This has what, eight clauses, seven clauses, and we have eight changes to it. I think whether it's from a legislative clerk's perspective, it's a significant change, a wording change. Obviously, the wording has been difficult. The public has dealt with it in its present wording, and all of a sudden it's changed. The principles are basically the same. Based on the witnesses we heard, I think the mover of the bill has certainly made a point on this particular topic.

My personal view--and I'm not speaking for my party or my colleagues here--is that the issue has been brought to light. We've talked to witnesses who at first thought this would help the Nortel folks. We heard from many witnesses, including the head of the Nortel pensioners' group, that it is not going to affect them--not going to affect them. So my suggestion is that whether the wording is fixed a little bit or not, to make it a little clearer, I don't think we should be proceeding with this in the form it's in here. I'm happy to send it back in title and let the mover of the motion talk about the issue in the House, which is a very important issue, which I don't think anybody on either side of the House isn't concerned about.

Then a new Liberal private member's bill was introduced in the House to deal with the pensioners' bill of rights. The issue is being presented--I think this is what this private member's bill does--to put pressure on us as legislators to find the solution. I think we heard clearly that Bill C-501 is really not the solution. It may highlight the need for a solution, but it's not the solution.

In my view, whether the amendments pass or not, I think we should be frank with people that this doesn't work and that we need to find a better solution than what is here.

The other concern I have, and I'm going to put it right on the table here, is that there's no amendment to royal recommendation, but to remind my colleagues, if that clause does not pass, then this may not need a royal recommendation, and that will make a difference in the House of Commons.

Those are all my comments at this time. Thank you, Mr. Chair.

[Roger Charland]

As a number of witnesses indicated when they appeared before the committee, Bill C-501 covered all unfunded pension liabilities. The motions don't change that. The motions say the same thing, they just say it in a clearer way. So we're dealing with providing a super-priority for all the amounts needed to bring back the pension plan to a solvency ratio.

[Roger Charland]

In our reading of the motions, it clarifies that Bill C-501 covers all unfunded pension liabilities and provides a super-priority. These amendments only make it clearer that that's what the bill does.

There was, as some witnesses expressed, some discussion as to whether or not the current language was doing this. These amendments make it clear that it's all unfunded pension liabilities. It makes it clearer that that's what the bill achieves.

[Roger Charland, Senior Director, Corporate and Insolvency Law Policy and Internal Trade, Department of Industry]

Bonjour.

The way we understand the motions—and this is probably true of all eight of them, because they change the bill in the same fashion but in different circumstances--as a number of witnesses have indicated, the current version of the bill covers all the unfunded pension liabilities, but the language can be open for debate. The motions we see here would make it clearer that we are indeed talking about all unfunded pension liabilities covered by the super-priority that Bill C-501 would grant.

That's how we read and understand the motions.

[The Chair, Conservative, David Sweet]

Order.

We're going to be considering Bill C-501. We have received eight amendments, and you should have copies in front of you. They are numbered NDP-1 to NDP-8. We'll be considering those as we consider the clause-by-clause.

I should remind members of the committee that the Speaker has ruled that a royal recommendation will be required for this bill, due to clause 6.

We will begin, then, with the amendments.

On amendment NDP-1, Mr. Garneau.

Pensions

[Linda Duncan, NDP, Edmonton Strathcona, AB]

Mr. Chair, on June 16, 2009, the New Democrat motion calling for action on pensions passed with unanimous support of this House. The motion provided that, in light of the legitimate concerns of Canadians that pensions and the retirement security may not be there for them in their retirement years, the Government of Canada should begin work with the provinces and territories to ensure the sustainability of Canadians' retirement incomes. This should be done by bringing forward, at the earliest opportunity, measures such as: expanding and increasing the CPP, OAS and GIS; establishing a self-financing pension insurance program; ensuring workers' pension funds go to the front of the line of creditors in the event of bankruptcy; and, protecting CPP from imprudent investment practices by ceasing the practice of awarding managers performance-based bonuses and recovering those bonuses for 2009.

Canadians have been pleading for action on safeguarding and improving pension benefits. Yet a year and a half after voting for these measures, where is the government action?

In the time I am allotted I will speak to just a few of those agreed actions that have not yet occurred.

First of all, I wish to share a little of my personal experience in assisting seniors in my riding.

This summer, in response to a number of tearful calls to my office from distraught seniors, I did some house calls. I found it deeply troubling to find seniors who have worked hard all their lives, many of them widows of retired farmers, struggling to get by on their meagre savings and pensions.

We have, over the past few months, hosted sessions for seniors to provide information on pension and disability benefits. However, from the majority, the message I have taken away from these sessions with seniors is that they do not just want more information, they want the government to respect their contribution to society and provide greater pension support.

A senior wrote to me a few weeks back to remonstrate that this October seniors' OAS rose a maximum of six-tenths of one per cent; a mere 10¢ a day. He despaired that many seniors received zero increase due to clawbacks. He requested that an MP from any party rise in the House to thank seniors for their support of the economic recovery program, as among the few to have increased taxes are seniors. He specified the HST in Alberta and clawbacks.

On behalf of this gentleman I stand here in the House to thank all of Canada's seniors for all they have contributed and for their patience and forbearance.

We need this government to stand up for those who have worked for a lifetime contributing to our prosperity, yet are left struggling just to get by in the last years of their lives. Considering the state of the economy and minimal pension supports forthcoming, it is sadly probable, given the lack of government action, that even more will fall between the cracks.

Canadians need more than endless consultations. This is a time of restraint due to job losses; increased taxes, and that includes the HST; as well as seniors and far too many families living on fixed a income. Canadians need the federal government to make them a priority. Tax cuts continue to be extended to major corporations while a growing number of working, retired and laid-off Canadians struggle.

Why am I and all New Democrats calling for an increase in CPP pensions? Why the call to inform seniors of the benefits they are entitled to?

A September 2010 poll commissioned by CUPE reports 66% of Albertans support expanding the CPP. More than 11 million Canadian workers, 68% of the workforce, have no workplace pensions. There are eight million Canadians who are reported to have no private pension plan or RRSP. The vast majority of Canadians rely on public pensions and private savings for their retirement.

With only 31% of Canadians contributing to an RRSP last year, the government merely calls on Canadians to set aside more savings for retirement. Where, pray tell, are the majority of middle income, let alone low income, Canadians to find that extra cash?

Canadians' meagre savings are fast being depleted by rising costs for basic services: electricity, fuel, food, accommodation, extra school fees and new taxes.

Over 266,000 seniors are barely surviving at poverty level incomes. Given today's cost of living, it is a struggle for anyone to have quality of life on $16,000 a year.

It has been estimated that, by 2030, two-thirds of Canadian retirees will not have enough retirement income and are looking at relative poverty. Alberta's situation is the worst in Canada, with Albertans only able to replace 45% of their income in retirement. In my province of Alberta, more than half of senior families have no private pension. Among those without pensions, only 38% have RRSPs or registered investment funds.

For Canadian women, access to basic living support, or frankly any pension at all, is all the more critical.

In budget 2009, the government set women workers further back by killing measures ensuring equal pay for work of equal value for federal workers.

Canadian women are still not receiving the equal treatment they deserve, as they receive almost one-quarter less than what men receive on every dollar of income.

Almost half of Canadian workers are women, 60% of whom are over 50 years of age.

Three-quarters of Canadians living in poverty are women and children.

We all know that it is the majority of women who set aside their working careers to look after children at the front end, and at the back end to look after their aging parents. As a result, they qualify for less pension benefits than men, and that is the case for those lucky enough to have any pension plan at all.

By doubling the CPP, we could lift many Canadians out of poverty. We have the money. It is a political choice to grant yet deeper, unneeded corporate tax cuts or to allocate the dollars to quality of life for seniors.

Another proposed solution would be to allow for voluntary contributions to top up CPP. While the government has talked about this option since last June, so far it has not acted. The right to choose to invest in one's CPP is an important one, given how many lost their life savings through private RRSPs.

Yet another example of the government ignoring the will of the House and reneging on its own undertakings to act expeditiously to protect pensions is the delayed action to protect workers' pensions in the event of bankruptcy.

When the government failed to act, our party did. My NDP colleague, the member for Thunder Bay—Rainy River, introduced Bill C-501. The bill would ensure that pensions for employees of private companies that go bankrupt are granted priority over large creditors. This is a critical measure for Albertans, as the province has suffered the highest rate of bankruptcy during this recession, including small and medium-sized companies, an increase of 82% in one year.

Workplace pensions are nothing less than unpaid, deferred wages. Workers have a right to receive them.

Bill C-501 is currently before industry committee. I strongly urge support for the expedited completion of the review and a vote for it by all parties, including those in the other place.

In summary, the first step is to recognize the pension crisis. It was presumed that this occurred in the passage of last year's motion. The next step is for the government to take action on the many sensible measures put forward in this House. Canadians are still waiting.