moved that Bill C-624, An Act to amend the Bankruptcy and Insolvency Act and the Companies' Creditors Arrangement Act (providing protection for beneficiaries of long term disability benefits plans), be read the second time and referred to a committee.
Mr. Speaker, I am delighted to speak to Bill C-624, An Act to amend the Bankruptcy and Insolvency Act and the Companies' Creditors Arrangement Act (providing protection for beneficiaries of long term disability benefits plans).
Before I tell members of the House what the bill does, let me them what it does not do. First, it is not about pensions. It is about long-term disability, LTD, and that only.
Second, the bill is not about Nortel, although that situation precipitated the bill. It is about the over one million employees in Canada who can be affected now and in the future if they find themselves in similar circumstances with respect to LTD plans.
The purpose of the bill is straightforward. It is to protect employees on long-term disability, but while its focus is narrow, it speaks to larger issues, of fairness, justice and respect.
It aims to correct a situation that leaves the most vulnerable of our workers in the most desperate of straits and reaffirms the simple principle that people who pay their dues and play by the rules have the right to expect that they will receive what was promised to them.
At the moment, approximately 1.1 million employees in Canada have disability benefits that are self-insured by their employers. If a company with self-funded long-term disability benefits goes bankrupt, its employees who depend on these benefits, are given the same standing as an unsecured creditor. When a company goes bankrupt, they should be first in line.
In 2001, Amy Stahlke in Benefits Canada magazine wrote about the impending problem. She said:
In Canada, there has been little regulation of self-insured plans. There is no requirement that employers set aside adequate reserves to cover future liabilities arising from these plans. If reserves are set aside, there is no restriction on how those funds are invested. There is also no obligation to keep funds in trust to protect them from creditors. This means that a bankruptcy could spell the end of the benefits plan, including benefits for individuals already on disability.
Employees who are disabled, who cannot work, should not be shunted aside. Their needs are not over when their employer goes under. They still need their medication. They still need treatment. They still need rehabilitation. They still need all of the things that their long-term disability would have helped to provide.
The bill proposes to protect these beneficiaries under long-term disability plans by granting them preferred status. By bringing LTD claimants to preferred status, employees are more likely to get their full benefit coverage up to age 65 to be able to pay their medical bills and continue, which is very important, to live outside of poverty.
Some may have concerns about the cost, the impact it might have on credit markets and about the overall competitiveness of our businesses, but when we look at the evidence we see that not only can this be done but that many countries around the world are already doing it.
Thirty-four of the 54 countries studied by the OECD and the World Bank already have either super-priority or preferred status for employee claims in their bankruptcy laws, so 34 of 54 countries have better laws than we do, and that is for all pension claims, not just long-term disability. They have properly functioning credit markets and are still competitive with these in place, so the two are not incompatible. We can protect our most vulnerable employees and retain dynamic credit markets and stay competitive. We can do both. Other countries do and it has given stability for these people and these companies.
Also, at least 12 countries, including Germany and the United Kingdom, require the payment of insurance premiums by their corporations to fund their public pension plans and disability income guaranty insurance programs.
The United Kingdom system goes even further. In 2004, it enacted the pension protection fund that states that if an insolvent company's long-term disability fund has been underfunded, the government will compensate the scheme to protect employees. The government backs it, but the government is not going to have to put in one red cent in what I am proposing.
Employees are therefore protected before an employer goes bankrupt because the government requires their company to fund the LTD funds. If there is a shortfall, the government will step in to cover it. In essence, the most vulnerable will be protected.
Even our friends south of the border in the United States, LTD employees have disability protection for pensioners through the Pension Benefit Guaranty Corporation. Also, employees have legal recourse to go after LTD benefits after bankruptcy provided by their federal employee retirement income security act legislation. There is no such avenue here in Canada. They even have better protection in the states than we have in our country. They also have a more generous social security disability program, which pays more than twice what CPP disability pays the disabled in Canada. It is unbelievable that we treat sick employees this way.
Nowhere is the inequity of the present situation more starkly illustrated than in the case of the Nortel workers who live right outside Ottawa and in the surrounding areas. As that company goes about the business of divvying up its assets, over 400 of its employees on long-term disability are being cast aside.
Currently, the bankruptcy court has accepted an agreement for the dissolution of Nortel's health and welfare trust, pretty well taking it off the hook. The trust was set up to fund life insurance, long-term disability and other benefits for 18,000 Nortel workers. That fund has been underfunded for years and holds only 35% of the assets necessary to fund its obligations to all employees. This is a dire situation for Nortel's long-term disability employees whose average age is 54 years and may need benefits for many years to come.
I am going to tell a story about a lady who came to my office. She is not from my riding. She is from the riding of Glengarry—Prescott—Russell. It is a very sad story. It is a story about Josée Marin. She was a lab technologist at Nortel and a single mom. She had been on long-term disability since 2002. She suffers from Crohn's disease, an inflammatory bowel condition, and scleroderma, a chronic autoimmune disorder. She is in rough shape.
This is how bad it is. Under this agreement, because of the chronic underfunding of the trust by Nortel, Josée will see her monthly average benefit which she received on long-term disability go from $2,143 to $433. Effectively, she will be receiving only 20% of the income replacement benefit she has been receiving since she became disabled.
To make matters worse, Josée also faces high health care costs which were paid through her medical benefits. No more. These benefits ran out in January of this year, which adds a significant burden. The Conservatives could have made it right. This bill was in the other place and it had a chance to make this right. She could still be receiving benefits.
What will happen, of course, is that employees like Josée will increasingly turn to social assistance and make greater use of social services. One could say that is what they are there for, but people will have to make heart-wrenching decisions because there is not enough money to live and pay medical expenses. They will have to make heart-wrenching decisions on whether to buy medication or food for their families, to get treatment for their illnesses or to pay rent. Those are the decisions they are faced with after working many years.
Effectively, Nortel will have downloaded these costs onto taxpayers while the company walks away from its responsibilities.
Josée does not want to become a burden to the taxpayer or to her family. She just wants to be able to live the remaining years of her life in dignity, or as she has starkly stated:
I want to die in the comfort of my home, not in my car or on the street.
That is a pretty strong statement.
Nortel employees are not alone. Long-term disability workers from Pacific Newspaper Group, which is owned by CanWest faced this uncertainty last year. Thank goodness CanWest survived the bankruptcy. However, if the situation had led to liquidation, as in Nortel's case, those employees would have seen their benefits cut off as well.
This problem is not new. We have seen this kind of thing play out before. In 1988, when Massey Combines Corp. went into receivership, 350 employees saw their disability payments vanish, gone. Ten years later, the bankruptcy of Eaton's resulted in hundreds more being left without benefits. Everybody else is getting their money, but not the people on long-term disability.
Long-term disability is based on a simple bargain, if workers pay the fees, they will be covered should anything happen that makes it impossible for them to work. That is what it is all about. It is very simple.
In the case of Nortel and others, that bargain has been broken. In the future, if no action is taken, similar bargains can be broken again and again. As I said, one million workers in this country could be under this threat and taxpayers will have to pick up the costs.
The bill before the House today attempts to end this practice. It declares in no uncertain terms, that promising long-term support and making short-term decisions that leave those promises in tatters is not just a matter of liabilities that are unfunded, it is a matter of practices that are unfair, unjust and unacceptable.
This bill will not only bring a greater degree of fairness in the bankruptcy process, but will help protect some of our most vulnerable citizens now and in the future or, as Josée Marin said:
These changes to the bankruptcy act are about human decency. They ensure a situation like the one I have been through for the last year never happens to any critically ill or disabled worker ever again.
As I am wrapping up here, this reminds me of a couple of years ago when I introduced a bill in the House for employees who get sick. Right now there is only 15 weeks unemployment. My bill, at that time, would have given them a full year of unemployment.
Across the floor, the Conservative government quashed it. It was a really sad thing. Not only opposition members believed in that bill, many of the MPs across the way believed in it. They had people coming to their offices. I have a list of all the ridings around Ottawa where the Nortel workers had visited MPs, of all stripes, especially the Conservatives. They came into the offices with tears in their eyes, wondering how they were going to pay their medical bills.
There is no need of it. There is no need of it in today's society. There is no need for this to happen. There is no need for a wealthy country like ours, or countries that are rich, where everybody takes off with the money and people cannot pay their medical bills. They are going to be dying in their cars. They are going to be dying on the streets. And it is because we are not planning any action here. It is a sad what happened in the other House, but we cannot let it happen here.
I urge all members in the House to vote for this bill. It is the right thing to do. We are very fortunate, the 308 of us here. We have a good job. We represent people. We have a pension. We are going to be taken care of if we have medical problems. Our families are going to be taken care of.
People are not being taken care of. Other countries are doing it. We are not doing it. Why are we not doing it? Why are we letting this happen when these companies go bankrupt? Why should these people not be the first up to get their money?
It shows meanness. We do not have to be like that. I want my Conservative colleagues to really think about this over the break week. I want them to go back and check with the people who do case work in their ridings. Check and see the situation. It is not just Nortel. There are companies right across Canada that are having this problem.
I will ask everybody to support this bill. It is the right thing for us to do. This situation makes a mockery of our country when we do not take care of the people who need help.