Retirement security is about personal savings and pension security. Retirement security is being destroyed by unpaid severance and the loss of pension value during bankruptcies.
My name is Melanie Johannink. I am a Nortel-severed employee with 18 years of service. I was terminated with no severance pay on April 30, 2009. I am the person who initiated the petition presented in the House numerous times to change the BIA and CCAA to protect all Canadians impacted by a corporate bankruptcy. I am a mid-career hard-working Canadian victimized by bankruptcy, and my retirement is at serious risk. Unpaid severance has long-term impacts on hundreds of thousands of people, as dipping into retirement savings becomes a necessity to pay mortgages and bills to avoid personal bankruptcy while looking for new work.
I am part of a troubled generation with my future retirement heading down the drain. I currently stand to lose approximately $250,000 in my nest egg for my golden years due to an induced bankruptcy. I am here today to explain to you that the archaic bankruptcy laws we have can literally wipe out a family’s financial life savings, thus creating poverty into retirement. Lack of severance, lack of full pension owed, and immediate benefit termination deplete savings, and if this happens more than once in a career, the effects are truly devastating. The severed are a silent group. People have lost their homes, are hurting financially, are too afraid or embarrassed to speak up, and are busy trying to re-establish their lives and find another job during this hard-hitting recession.
At the same time, executives in companies under bankruptcy are receiving massive bonuses. Where is the justice? The faster the executives throw people off the ship and into the taxpayers' purse, the bigger their bonus.
Jobs are moving offshore. Defined benefit pensions are becoming a thing of the past, and more weight is being placed on our personal savings. According to a recent RBC study, people are not saving enough money for retirement, and yet the existing bankruptcy laws are allowing the financial industry to extract our net worth, which I call reverse Robin Hood. The middle class will vanish if nothing is done to protect the people.
On the date of termination, I lost my benefits, a remaining portion of my pension, and my severance. I am downloaded onto the taxpayers' purse, and now employment insurance is my income. EI means living barely above the poverty line. During a global economic recession, a time when it is so difficult to get a new job, the government is failing to protect the EI fund. It allows employers to escape paying any severance and lets taxpaying Canadians pick up the bill, despite companies having billions of dollars on their balance sheets and paying millions of dollars in executive bonuses.
What happens to severed employees in bankruptcy is an expropriation of our net worth. The federal government is causing my loss by wiping out provincial employment protection laws that workers fought decades to get. This is institutionalized abuse. Companies are able to stay all employee-related claims. The government assists the foreign junk bond owners to reap an inappropriate share of the bankruptcy assets.
In the Nortel case, there is expected to be $6 billion in cash from business sale proceeds and from the operations at Nortel. The government is expropriating my property by allowing the judges to interpret that it is the CCAA's intent that I should lose my money. Truly it cannot be the federal government’s intent to wipe out employment standard laws in place to protect my property. Nortel had $2.4 billion in cash when it declared bankruptcy protection. In Nortel's liquidation, my money will be taken out of the country, forcing me to use my retirement savings as supplemental income in my mid-career. People have been told to save for retirement, and yet the federal government has an archaic bankruptcy policy that is expropriating my savings and future retirement savings.
Unpaid severance and shortfall in my pension received deny me the ability to save for my own retirement. Does the federal government know that they are expropriating my savings? Some provinces have stepped up to help pensioners. However, the severed continue to lose the remaining funds on their pension and need to reach into personal retirement savings. This is devastating.
I urge you, when you are reviewing retirement security today, to look at the wide-reaching effects of people in my situation. Loss of severance means reduced retirement savings, reduced immediate savings, and significant loss to the overall economy. To create a strong economic action plan would be to put the money that belonged to the people into the people’s hands, but instead we have to reach into our life savings, reach into our children’s future education, delay our retirement, and lower our retirement living expectations due to the existing BIA and CCAA.
Is this the Canada I know and love?
The cost of capital seems to be an issue behind the failure to change the BIA and CCAA to protect Canadians. I would like to table a few reports on this.
The first is a report from Australia when that country changed its BIA equivalent to include preferred status for employees and employee-related pension claims, which confirms there was no impact on the cost of capital.
I have spoken directly with Gordon Thompson, who did a study at the World Bank and whose finding I'd like to submit as well. He found that 38 of 53 countries have minimum preferred status for employees. Canada is not one of them.
Another report is from Insolvency Institute dealing with the significance of employee-related claims for preferred status and recommendations on how to change the acts to protect employee-related claims.
The Australian paper confirms there was no issue for the cost of capital, and it's a paper that was strictly related to the cost of capital on severance payments.
Another previously tabled study also confirms that 0.16% would be the impact—a baby toe in the big ocean—with 99.84% still working to continue the cost of capital.
Credit default swaps are not a private matter. They are a public matter impacting thousands of Canadians who are harmed by bankruptcy. Insurance is available to offset the credit losses of junk bond owners, and even to gain windfall profits, yet employees have no insurance to offset their liabilities.
In the Nortel case, the bankruptcy legal representation entered into a settlement agreement that I feel severely wronged by. Our duly appointed representation, through the law firm, led us into an agreement for all parties, the severed, the disabled, and the pensioned. To get the tuppence of $3,000, I am now legally bound by an agreement without being consulted. To me, this is abusive. The agreement was a private agreement that did not seek my approval. What constitutes an agreement reached? The agreement did not represent the severed.
I fully believe that the federal government would have been able to make the BIA change for unpaid severance, and now that the government needs a retroactive BIA, it's imperative. An interim settlement agreement to make us equal with junk bond holders destroyed a massive campaign that had momentum to change the BIA. We are left with such little value rendered, it will be difficult to get us out of the hole we're in.
The government is legally able to make the CCAA and BIA amendments retroactive to all proceedings that began prior to the implementation of the amendment. It is paramount to protect hard-working Canadians. Bill C-501 needs to be implemented to apply to all current CCAA and BIA proceedings, including any settlement agreement that is put into force before the final plans have been sanctioned.
We are young families who are being told we aren’t saving enough. We need to deplete our retirement savings to supplement our incomes due to archaic federal bankruptcy laws, and at the same time we are being reprimanded by the government for not saving. My unpaid severance is due to an abuse. It's not a compromise I should be asked to make so there can be an ongoing business concern helping others receive a windfall. It's massive amounts of wealth that junk bond holders receive, with the government gifting my money to these large and powerful investment companies.
I urge the government to act immediately so that I and thousands of other Canadians impacted through bankruptcy can live in democracy, manage our savings for retirement, and retire in dignity.
Thank you.