Evidence of meeting #61 for Finance in the 44th Parliament, 1st Session. (The original version is on Parliament’s site, as are the minutes.) The winning word was pensions.

A video is available from Parliament.

On the agenda

MPs speaking

Also speaking

Kathleen Wrye  Director, Pensions Policy, Financial Sector Policy Branch, Department of Finance
Mark Schaan  Senior Assistant Deputy Minister, Strategy and Innovation Policy Sector, Department of Industry

3:50 p.m.

Liberal

The Chair Liberal Peter Fonseca

I call this meeting to order.

Welcome to meeting number 61 of the House of Commons Standing Committee on Finance. Pursuant to the House order of reference adopted on Wednesday, June 22, 2022, the committee is meeting to discuss Bill C-228, an act to amend the Bankruptcy and Insolvency Act, the Companies' Creditors Arrangement Act and the Pension Benefits Standards Act, 1985.

Today's meeting is taking place in a hybrid format, pursuant to the House order of June 23, 2022. Members are attending in person in the room and remotely using the Zoom application.

I would like to make a few comments for the benefit of witnesses and members. Please wait until I recognize you by name before speaking. For those participating by video conference, click on the microphone icon to activate your mike. Please mute yourself when you are not speaking. There is interpretation for those on Zoom. You have the choice, at the bottom of your screen, of floor, English or French. For those in the room, you can use the earpiece and select the desired channel.

I remind everyone that all comments should be addressed through the chair. For members in the room, if you wish to speak, please raise your hand. For members on Zoom, please use the “raise hand” function. The clerk and I will manage the speaking order as well as we can. We appreciate your patience and understanding in this regard.

I would now like to welcome, for our first panel, our witness, who is before us, the author of Bill C-228, MP Marilyn Gladu.

Welcome, MP Gladu, to our committee.

3:50 p.m.

Conservative

Marilyn Gladu Conservative Sarnia—Lambton, ON

Thank you, Mr. Chair.

I'd also like to thank all the committee members.

I'm happy to be here today to tell you about my bill on workers' pensions.

Over the last 10 years, there have been numerous efforts in the Senate and in almost all parties in the House to find a way to protect the pensions of those workers who have worked their whole lives when, unfortunately, at the end of their careers, a company goes bankrupt and they don't get, in some cases, very many pennies on the dollar, or sometimes get no severance.

I looked at all the previous bills that had been brought forward. I looked to the parts that people could agree on, cherry-picked all those parts and put them together in Bill C-228. Then I added what I thought were my own brilliant ideas; we'll talk about whether they are or not.

That's where this came from. We know the history of all the companies—Eaton's, Sears, Nortel, Indalex, Grant Forest Products and so many more—that have gone bankrupt. Basically, a number of things were brought forward in the House. I see that my colleague Marilène Gill is here at committee today. She had a bill in the last Parliament that talked about making sure that pensions were paid out in priority, before large creditors. That went to the INDU committee and was very thoroughly studied, with a lot of witnesses. We were in a position where, with some minor changes, that thing would pass, but an election was called. I'm glad to be able to incorporate her great ideas into this.

There was a bill from Erin O'Toole. One of the good features in that bill was the tabling of a report on the solvency of funds to the House of Commons every year. This is not additional work. Currently there is a report that is done on the solvency of federally regulated funds, but it goes to the superintendent of finance. It's not clear what, if anything, is actually done to remediate these situations.

My bill will require the tabling of this in the House every year for greater transparency so that we can see where the troubled funds are. Then it adds a mechanism to be able to transfer money into the pension fund, without tax implication, to fix the problem. We want to prevent any of these situations from happening.

Then, in the case of bankruptcy, we would adopt a priority. The Bankruptcy and Insolvency Act is this document here. It's quite thick. For your benefit, I have provided a table prepared by the Library of Parliament that clearly shows the priority of where we're recommending pensions go: It's after the Canada and Quebec pension plans; all taxes that are payable; the employment insurance; suppliers' goods that were delivered shortly before the bankruptcy, and the same for agricultural products; unpaid salaries and allowances to $2,000 maximum; other salary contributions and the contribution to the pension plan; and costs incurred by a government to decontaminate land included in the bankrupt's assets. At that point, we would put in the pensions. After that would be secured claims, preferred claims and unsecured claims.

In terms of the feedback received from stakeholders, let's talk first about one of my brilliant ideas. I thought we should also add a mechanism so that if there was an insolvent pension fund, you could have third party insurance cover the insolvent portion. That might be helpful. Unfortunately, nobody liked this idea. Apparently, there's already a mechanism in place that allows people to transfer the risk to a third party, which is really the intent of that mechanism. So I would propose that we get rid of that part by striking clause 6.

Second, there was a drafting error. We tried to take out the part of the bill from Erin O'Toole that changed the type of pension. We feel that it's like a contract between the employer and the employee when they first start, and it's not right to change the deal at the end, after they have worked their whole lives. In order to get rid of proposed subsections 29(8.1) and 29(8.2), I am suggesting that we say no to clause 7.

There was another provision that had been recommended when this bill last went to INDU. There was a concern from the banking community that perhaps the mechanism would need to be changed so that the coming into force of some of the provisions, like the priority, should be delayed from the beginning. I'm suggesting a change from five years to three years. There's a proposal to perhaps add severance. I'm open to that discussion.

With that, I look forward to your questions and I look forward to your support of this bill.

3:50 p.m.

Liberal

The Chair Liberal Peter Fonseca

Thank you, MP Gladu, for your opening remarks and for taking us through how we got to this point on Bill C-228.

We're going to start with our first round. In our first round—you would know this—we will go through each party. Each party will have up to six minutes to ask questions.

We are starting with the Conservatives. I have MP Lawrence up first, for six minutes.

October 17th, 2022 / 3:50 p.m.

Conservative

Philip Lawrence Conservative Northumberland—Peterborough South, ON

Thank you, Chair.

Thank you very much, Ms. Gladu, for your great work. I just wanted to give you a little bit of an opportunity to talk about the benefits your bill actually has for Canadians.

I'll give you a bit of a story about a friend of mine who worked 30 or 40 years at a company called Atlas Steel, in Welland, Ontario. He worked his entire life expecting there to be a pension at the end of the day, and then the company went bankrupt just as he was ready to retire. He lost 50% of his retirement that he had worked so hard for.

With that story in mind, perhaps you can talk about the actual impact on seniors and other folks in Canada.

3:55 p.m.

Conservative

Marilyn Gladu Conservative Sarnia—Lambton, ON

Actually, the reason I came with this bill was that my neighbour worked at Sears. She had worked at Sears for 30 years and was really happy about being able to retire, and then ended up receiving 70¢ on the dollar. Now that was certainly better than what happened at Eaton's, where they got no severance, no benefits, and in fact 40¢ on the dollar.

In many cases, there's money paid out to the lawyers in the bankruptcy case, executive bonuses, many things that are paid out, but the workers who worked their whole lives are left hanging out to dry.

I think there is an intent everywhere to fix this. We may not be able to do everything in this bill, but I think what's important is to get a bill passed that at least moves us in the direction of good. There may be chances to improve it in the future, but I really don't want to see us spin our wheels after 10 years of attempts to see this go.

3:55 p.m.

Conservative

Philip Lawrence Conservative Northumberland—Peterborough South, ON

Thank you very much for that.

Maybe I'll go into a little bit more of the substance of the act from there.

As I understand it, and you can correct me if I'm wrong, a well-funded pension or any pension itself stands outside of the Bankruptcy and Insolvency Act and is administered separately. It's only when companies fail to fund the pensions that your bill would step in and give the higher priority.

So that the folks who are at home can understand that as well, maybe you can talk a little bit about what that actually means. What's a higher priority in the bankruptcy processing?

3:55 p.m.

Conservative

Marilyn Gladu Conservative Sarnia—Lambton, ON

Essentially, while companies are solvent and they're not going bankrupt, obviously they manage their own pension funds. Every year, they prepare a report on that to the superintendent of finance, but there is evidence...for example, in cases like Air Canada, where the pension fund has been insolvent for almost 10 years. It's unclear whether the remediation and encouragement to fix it is happening.

In the event of bankruptcy, of course, there's a judge who will oversee the case and look at the assets of the company. There is a prescribed order in the Bankruptcy and Insolvency Act—and that is the summary that you have—that makes sure there are things that are going to be paid out before pensions, and potentially severance.

3:55 p.m.

Conservative

Philip Lawrence Conservative Northumberland—Peterborough South, ON

We want to bring some fairness to the workers and not have them be at the back of the line. Literally, as an unsecured creditor, they're there at the very bottom of the line when the assets of an insolvent company are handed out. I think that's a very admirable objective.

One of the criticisms of your bill and of its predecessors that I'd like to give you a chance to address is that if in fact we bring up this superpriority for workers, it may make the company less attractive for investors or for lenders to borrow. Could you address that concern for the committee?

3:55 p.m.

Conservative

Marilyn Gladu Conservative Sarnia—Lambton, ON

Absolutely. I did hear from the lending community that they felt perhaps those with insolvent funds would be receiving less credit and their credit would be at a higher interest. In order to address that, the coming into force of the priority part of the bill I've suggested is five years. Stakeholders have said they think that's too long—immediately they'll be tabling documents to see which funds are in trouble and allow the mechanism to top it up and fix it. I would suggest that the priority go into effect in three years. Essentially, if businesses can't get their house in order in three years, they actually are a larger business risk. As the free market goes, they would pay more interest and they would be allowed to have less credit.

3:55 p.m.

Conservative

Philip Lawrence Conservative Northumberland—Peterborough South, ON

Your belief is that by giving them either three or five years, the businesses will be able to repair themselves, as opposed to if you just implemented this immediately upon royal assent, when the businesses may not have time to prepare. Is that correct?

3:55 p.m.

Conservative

Marilyn Gladu Conservative Sarnia—Lambton, ON

That is exactly right. We've added a mechanism where they can transfer money into the fund with no tax implication. Certainly, it will take some time for this to go to the other place, if it passes here. People know this is coming, so businesses will have a chance to get their houses in order. I think if they can't do that in a number of years, then certainly they are going to be considered more risky.

4 p.m.

Conservative

Philip Lawrence Conservative Northumberland—Peterborough South, ON

Thank you very much.

4 p.m.

Liberal

The Chair Liberal Peter Fonseca

You have about 20 seconds.

4 p.m.

Conservative

Philip Lawrence Conservative Northumberland—Peterborough South, ON

Thank you, Marilyn, for bringing this fabulous bill to committee.

4 p.m.

Conservative

Marilyn Gladu Conservative Sarnia—Lambton, ON

Thank you.

4 p.m.

Liberal

The Chair Liberal Peter Fonseca

Thank you, MP Gladu.

Thank you, MP Lawrence, and congratulations on your new role.

We are going to the Liberals now for six minutes. We have MP Baker up for six minutes of questions.

4 p.m.

Liberal

Yvan Baker Liberal Etobicoke Centre, ON

Thanks very much, Chair.

MP Gladu, it's great to have you here and to see you. Thank you for bringing this bill forward.

I want to start by saying that I used to be a member of the provincial Parliament in Ontario when the Ontario government at the time was the Kathleen Wynne government. I was parliamentary assistant to the minister of finance at the time when we announced additional support for Sears pensioners when their pension fund fell short of the benefits those workers were to receive. As someone who fully supported that decision by the Ontario government at the time, I completely understand how important it is that commitments to workers be met, and that includes pension commitments.

In that vein, we know about the Sears story. I certainly know it intimately. I was trying to do a little bit of research in advance of this hearing about how broad this problem is. Just for the folks watching at home who are trying to understand how significant and widespread this problem is, do you know, more or less, how many bankruptcies proceedings or CCAA proceedings with defined benefit plans have happened over the years that have led to the loss of pensions? Do you have any sense of that?

4 p.m.

Conservative

Marilyn Gladu Conservative Sarnia—Lambton, ON

Yes, we did have some testimony from stakeholders like the Canadian Federation of Pensioners. They had identified that there were more than 100,000 Canadians who have certainly been impacted in this way to date—if that gives you some idea.

In terms of the number of companies going bankrupt, not all of them have the same impact. Huge companies like Nortel have way bigger impact than smaller businesses. The employees are much less able to be resilient than, say, creditors. If one of the companies they've invested in goes bankrupt, they have more flexibility to adapt than somebody who has all their eggs in the one basket of their pension.

4 p.m.

Liberal

Yvan Baker Liberal Etobicoke Centre, ON

Okay. Are you saying there are 100,000 people, more or less, who have had their pensions reduced or have completely lost their pensions? Is that what you mean?

4 p.m.

Conservative

Marilyn Gladu Conservative Sarnia—Lambton, ON

Yes, that's correct. With Eaton's, there were thousands across the country, and they got 40¢ on the dollar and no severance. For Sears, there were 23,000 across the country. Nortel and Indalex had a significant number. There are a huge number of companies in Quebec as well. My colleague Marilène would be much better informed on those.

4 p.m.

Liberal

Yvan Baker Liberal Etobicoke Centre, ON

Okay. Thank you very much for that.

I know we have this opportunity to ask you questions today, and officials are going to be here as well to answer questions, but it is a fairly technical topic, a fairly technical bill. One thing I'm looking forward to is hearing from witnesses. I guess I'm asking if you agree that it's important that we hear from witnesses outside of you and the officials who are here with us today, to make sure that we fully understand the bill, its implications, and whether it's serving pensioners in the way it should.

4 p.m.

Conservative

Marilyn Gladu Conservative Sarnia—Lambton, ON

Certainly, I think it's good to hear the voices from all camps, but I would encourage the committee to look to the testimony from when Marilène Gill's bill previously went to INDU, because they had lots of witnesses from all of the different places. Then, I would say that because there have been so many efforts, both on the Senate side and on this side, there are numerous documents of people's various opinions on this. I'm certain that department officials can give you some of that corporate history as well.

We were elected in October 2021 for this new session, and I've certainly been engaging with all the different parties and stakeholders during that time, so I think there's been quite a bit of discussion. I'd really like to see this get done in this session before an election is called, so that we can help those hard-working Canadians who have worked their whole lives and deserve their pensions.

4 p.m.

Liberal

Yvan Baker Liberal Etobicoke Centre, ON

I appreciate that, and I appreciate the need to work quickly. I agree with you on that.

What I'm asking is.... There are a number of witnesses I'd like to hear from. You've spent a lot of time as the sponsor of this bill and as a drafter of this bill—Madame Gill has, as well—but I'm thinking about some of us who may not be as close to the topic. I'm thinking about some of the witnesses. I'm thinking about the Canadian Federation of Pensioners. I'm thinking of CARP. I'm thinking of the Canadian Labour Congress. They're folks who represent workers and pensioners.

Are you supportive of making enough time to hear from those folks?

4:05 p.m.

Conservative

Marilyn Gladu Conservative Sarnia—Lambton, ON

Absolutely. Indeed, the Canadian Federation of Pensioners and CARP were the top two on my list, so I'm definitely on your page on that one.

The other thing I would say is that I know the finance committee is very busy. People send almost everything here, and you have pre-budget consultations and all kinds of things going on. You may want to ask for briefs if people don't have time to appear.

4:05 p.m.

Liberal

Yvan Baker Liberal Etobicoke Centre, ON

I imagine that you looked at how other countries and jurisdictions handle this issue. In the minute we have left, can you talk about whether you looked at that as part of your due diligence in preparing the bill? How does the way we manage things in Canada today compare to what other countries do today?