My name is Lee Lockwood and I reside in Langley, B.C. I've been a Nortel LTD wage replacement recipient for 14 years.
Industry Minister Clement stated in the House on Monday that governments should not be superseding a settlement agreement reached between parties in the private sector. As someone directly involved with what happened, I believe the government needs to know that Nortel imposed a settlement of duress by its threat to stop payment for LTD medications effective March 31. A contract entered into with a gun to your head is extortion and cannot be considered a valid contract.
The judge rejected approval of the settlement agreement on March 26, having reserved judgment on the same for three weeks. On Sunday, March 28, 93 LTDers were sent an e-mail by the self-appointed steering committee and given four hours to consider acceptance or rejection of a revised agreement, which had to be approved by the court prior to March 31. I saw no evidence that there was significant approval for the settlement. It was not given notice of same by council.
This revised settlement gave me nine months of medical benefits, yet we had to forfeit all rights of remedy to over $100 million missing from the health and welfare trust. The second settlement also had me give up my right to benefit from a potential BIA amendment that would have solved the poverty that the missing money will now cause our group. Had the CCAA and BIA protected the long-term disability claims, we would never have been exposed to these tactics.
Industry Minister Clement must supersede this extorted deal with the reposed amendment to the CCAA-BIA to give preferred status to LTD claims.
I wish to put a human face on employees who are on long-term disability benefits. Employees who are on LTD benefits are already severely compromised from a health and income perspective. They shouldn't have to worry about the physical integrity of the employer LTD benefit plans they rely on to live.
Having joined a Nortel subsidiary as a strategic account manager in February 1990, it has only been since they filed for CCAA that I have learned my LTD wage replacement income is being paid by a bona fide third-party underwriter. My other 400 colleagues receiving LTD wage replacement benefits are not as lucky as I am.
In October 1996, rapidly declining health dictated my years as a road warrior with Nortel were finished. At this point in my career with Nortel I was earning in excess of $140,000 per annum. I was operating a farm raising purebred beef cattle, as well as providing financing alternatives for small business. Immediately my income took a 64% reduction. In addition, I had to retain legal counsel and threaten to sue Nortel for release of a copy of the LTD policy, even though I was an implied party to the agreement.
Imagine the position of my fellow Nortel employees receiving LTD wage replacement benefits who will be deprived of most of their payments from Nortel, effective December of this year. They will be forced to subsist, meet family obligations, and pay medical and dental expenses from their meagre CPP payments of $1,100 a month. Most of these people have prescription medications that cost them substantially more than that on a monthly basis.
Closer scrutiny of the benefits enrolment documents in place in 1996 stated that while ADD and life risks were underwritten by Mutual Life, all medical and dental items were self-insured, with the company paying the full tab. LTD coverage was being offered by the company, but nowhere in the documentation is the word “insurance” used and an underwriter named. Does this represent full disclosure of pertinent facts for a prospective hire or current employee to make an informed decision as to who the true supplier of this critical indemnification would be?
My Nortel compatriots had signed up for an LTD benefit plan wholly ignorant of the planned obfuscation of the true details by Nortel's use of weasel words. These people were hired for their engineering and management talents, not to determine if they were about to be potentially misled or defrauded by their employer. If I as an individual who was used to dealing with complex contracts, agreements, and legal actions on behalf of the company did not detect anything out of line, what chance would the average legally unsophisticated employee have?
The only benefit major human disasters can have is supplying the impetus and appetite for change to ensure they will never reoccur. For example, the inquiry into the sinking of the Titanic mandated there would be life jackets and lifeboats on board for all. Bank failures during the Great Depression mandated the formation of the CDIC, which guarantees a minimum of coverage for every bank and credit union account in Canada.
We must immediately address the current needs of employees on self-insured LTD wage replacement benefits who are about to lose their benefits due to the insolvency of their employer. We must realize and acknowledge that companies are increasingly using the CCAA as an effective business tactic to rehabilitate their balance sheets. This rehabilitation process generally consists of but is not limited to blowing off trade creditors, repudiation of debt and lease obligations, and beating recalcitrant labour back into line. Needless to say, the self-insured LTD wage replacement programs are shed with the other obligations.
The Nortel scenario is unique in the unusual fact that there are no secured creditors. The unsecured creditors are trade creditors, employees owed severance, junk bond holders poised to double dip, the pension deficit, LTD wage replacement recipients, and future medical and dental benefits for retirees and employees on LTD.
To top it off, there's expected to be $6 billion in cash available from operations and from the sale of the business units, with the sale of the intellectual property yet to take place. It is unfathomable that this much cash is simply sitting there with 400 disabled employees about to sink into an economic black hole in December 2010.
The only realistic hope these people have is input from this committee to move the government to some form of acceptable positive action to force Nortel and other employers currently in bankruptcy protection to pay all of their promised disability benefits, and the adoption of either Bill S-216, tabled by Senator Art Eggleton in the Senate, or of MP Wayne Marston's bill on its reintroduction into this session of the House of Commons.
The CCAA-BIA amendment for the preferred status of LTD benefit claims not only addresses the humanitarian crisis at hand for the Nortel employees, it provides for a permanent backstop to protect all future disabled persons.
After adopting the CCAA-BIA amendment for the disabled, governments should revisit making it mandatory for employers to insure their long-term disabled wage replacement income and medical benefits. The notion of safe self-insurance by employers because they are too big to fail is nonsense when one considers the implosion of GM, Chrysler, AbitibiBowater, Canwest, Nortel, and many others who were merely a 20-second clip on CBC's The National.
Please note that the requirement for long-term disability benefits to be insured is a private sector solution that does not cost the public purse. Insurance underwriters bail each other out in times of crisis, and owing to the industry's Assuris protection fund, there has never been a failure by the insurance industry to pay out on legitimate claims.
In summation, Mr. Chairman, the reason we are in this predicament is the sheer greed of corporations. In order to knock a few basis points off the cost of legitimate LTD insurance provided by underwriters who have been in the business for decades, they're willing to sacrifice the fiscal security of the disabled.
My only hope is that this committee and our government will do the right thing and respond now to the pleas for just and compassionate treatment of disabled Canadians in corporate bankruptcies. Every Canadian will applaud our MPs for their willingness, on a non-partisan basis, to address this Canadian disabled crisis.
Thank you.