Industry Committee on May 25th, 2021

[The Chair, Liberal, Sherry Romanado]

I now call this meeting to order.

Welcome to meeting number 40 of the House of Commons Standing Committee on Industry, Science and Technology. Today's meeting is taking place in a hybrid format, pursuant to the House order of January 25, 2021. The proceedings will be made available via the House of Commons website, and so you are aware, the webcast will always show the person speaking rather than the entire committee.

We will be devoting the first hour to Bill C-253 and will then move in camera for the second hour to review the report.

To ensure an orderly meeting, I'd like to outline the regular rules.

Members may speak in the official language of their choice, as interpretation services are available for this meeting. You have the choice at the bottom of your screen of “floor”, “English” or “French”.

As a reminder, all comments by members and witnesses should be addressed through the chair. Please wait until I recognize you by name. When you are not speaking your mike should be on mute. As is my normal practice, I will hold up a yellow card when you have 30 seconds left in your intervention, and I will hold up a red card when your time for questions has expired.

Pursuant to the order of reference of Wednesday, May 12, 2021, the committee is meeting to begin its study of Bill C-253, an act to amend the Bankruptcy and Insolvency Act and the Companies’ Creditors Arrangement Act.

I'd like to welcome today Philippe Méla, our legislative clerk, who will be working with us on this study.

Thank you very much for being with us today.

I'd now like to welcome the bill's sponsor, Marilène Gill, MP for Manicouagan.

The floor is yours for seven minutes so that you can introduce your bill.

[Marilène Gill, Bloc, Manicouagan, QC]

Thank you very much, Madam Chair.

My thanks to the vice-chairs, to all the members, and to the committee's entire support team.

I am pleased to be before you today. I would like to thank all the members of Parliament who have worked to bring Bill C-253 before a committee today.

I must say that it has been a long haul. In that context, I would like to thank all the members of Parliament before me who have introduced similar bills in the last 20 or so years. It really was in the 2000s that the House of Commons first took up the issue. At least a couple of decades, therefore. But amendments such as the ones I am proposing today have never really been put forward.

I also introduced a bill along the same lines in the last Parliament. Unfortunately, it was not able to make its way through. Allow me to make a quick, critical comment on the legislative process here. Under our rules, some worthwhile bills that could well be in the public interest have no chance of being debated, let alone passed. They do not get through the process if they are not priorities or if, in the case of private members' bills, they simply do not get the luck of the draw.

So, of course, I hope that the government will not be calling an election anytime soon. Then this bill might go even further and go back to the House in order to pass another stage there.

Let me return to the background and the principles that informed the bill as it was being developed. It is basically very simple, despite its title that is almost as long as the bill itself.

In terms of the background, this is a grassroots bill. As members of Parliament, you know that we want to be close to the public and we listen to them. Personally, I make it a point of honour to bring the people's requests to the House. We are conveyor belts. Whether we are in government or in opposition, we are above all representatives of our constituents, not representatives of ourselves or of any particular body.

This bill, therefore, first saw the light of day on the Côte-Nord. But it could equally well have been born in the constituency of my colleague from Newfoundland and Labrador, a constituency also affected by the bankruptcy of Cliffs Natural Resources in 2015. Because of that bankruptcy, workers who had paid into a defined benefits pension plan for their entire careers were deprived of 25% of their pension funds and their insurance when the drama, I might almost say the tragedy, occurred. I will come back to that a little later.

The basic principle, on which a majority of members of the House were in agreement when we voted, is one of deferred salary. In the negotiations between the employer and the unions representing the workers, an agreement is reached that, at a certain point in their careers, they will do without some salary, in order to ensure that they have a pension fund when they retire. Simply put, it means that the money belongs to the workers.

Put another way, to repeat myself in the negative, just like in photography, I could use as an example a worker currently earning $20 an hour. Overnight, he sees his hourly rate dropped to $15. We could not accept that. We could not imagine depriving workers of 25% of their salary. A current salary and a deferred salary should be considered in exactly the same way. It's a salary; it belongs to the workers.

That is the very concrete principle on which the bill is based. Of course, as I am the one proposing it, you might agree that I may possibly have, or appear to have, a conflict of interest. But I completely agree with myself. All joking aside, there is still a principle behind this. Depriving people of a part of their pension fund has concrete and direct consequences in a number of areas.

Those consequences might be manifested in a lot of ways, with many examples, but I will simply talk about two major consequences.

The first consequence is a social one. I am talking here about the Cliffs Natural Resources case, which is really well documented. There have been many mental health issues, such as depression or suicidal behaviour. Of course, people were deprived of a lot. We must also think about the surviving husbands and wives. Women are also affected because they receive no benefits.

We must also consider the entire economic impact, of course.

I see that I have to move a little quicker, because I only have two minutes left.

So we also have the entire economic issue. We must not forget that people buy and invest in the communities where they live. The fact that they are not receiving their full pension deprives them but it also deprives the communities of resources. Individuals are affected by the situation, but so is the surrounding society.

I will really not have the time to talk about the two points that my bill seeks to amend, but I can address them very quickly.

The first is about the priority of the creditors. I deal with this in a very balanced, even very humble, way.

The second is about compensation for insurance, because that is what retirees face in the event of restructuring or bankruptcy.

Let me end with a thought that will surely find agreement among those who have hoped for this bill and the former parliamentarians who have tried to put forward solutions such as the ones I am putting before you today. We should be making legislation for our workers, because they vote. Large companies clearly do not.

[The Chair, Liberal, Sherry Romanado]

Thank you very much, Mrs. Gill.

We will now start with the rounds of questions.

We will start with the first six-minute round, which goes to MP Poilievre.

You have the floor.

[Pierre Poilievre, Conservative, Carleton, ON]

Thank you very much, Mrs. Gill. Congratulations for getting your bill to this stage.

First, I have to tell you that I once experienced a bankruptcy, with Nortel, in Ottawa. It was the biggest company in the national capital.

We learned that, in a bankruptcy, everyone loses. All the creditors lose. We sometimes think that bankers on the other side of the world end up as the big winners, but, in a bankruptcy, more money is owed to the creditors than is available to pay them.

Today, we are debating who will lose most in a bankruptcy. It is not always just a matter of good people against bad people.

With Nortel, for example, thousands of entrepreneurs were working on fixed contracts to provide services, including one plumbing company with 25 employees. When Nortel went bankrupt, those companies lost their money. They had done the work but they were not paid. Everyone had to go to court so that a judge could decide who would lose the most.

Under your bill, would the plumbing company with 25 employees that I just mentioned, be more of a priority, less of a priority, or the same priority as the people receiving a pension from the bankrupt company?

[Marilène Gill, Bloc, Manicouagan, QC]

Thank you for the question, Mr. Poilievre.

The first thing I would like to highlight is the premise of your question, in which you say that we are not talking about setting good against bad in a dichotomous or polarized way. That is not the intention of the bill. That's the first thing I wanted to say.

You also say that a bankruptcy involves losses for everyone concerned. That is true; it is in no one's interest for a bankruptcy to occur. Ideally, what people want, whether they are employees, retirees or even the banks, is for restructuring to be possible, because it's the only positive way out. No one wants to lose.

As for the end of your comment, I can only emphasize what you said, because I completely agree with you on those two points. My bill would change absolutely nothing in terms of what suppliers can currently expect. They would maintain exactly the same priority.

[Pierre Poilievre, Conservative, Carleton, ON]

At the moment, the creditors are almost of equal status. So the little plumbing company is now likely at the same level as the pension plan.

Currently, the judge has the power to decide how much each of the creditors, namely the plumber and the pension plan, will receive. If you are saying that the pension plan would be a priority, it means that the plumber would then be left behind, correct?

[Marilène Gill, Bloc, Manicouagan, QC]

No. Actually, there are a number of levels of priority and he would not be left behind. Earlier, in the introduction, I talked about the principle of deferred salary. Let me insist on that. You are telling me about the plumber. For me, a plumber is a worker too. He has the right to be compensated for the services and the effort he has provided. The same goes for pension plans. Remember what I was saying: this is deferred salary. For example, the salary of the plumber or—

[Pierre Poilievre, Conservative, Carleton, ON]

Yes, but he has no salary. He has a contract.

[Marilène Gill, Bloc, Manicouagan, QC]

You can see it like that, but the amounts are used to pay salaries. That could be the case for a plumbing company, but you said “a plumber”, so I was thinking of an employee. I'm sorry.

[Pierre Poilievre, Conservative, Carleton, ON]

Okay, I understand. You are right to say that employees have precedence. Salaries are paid before anything else. That is already a legal requirement.

When I mentioned a plumber, I was referring to a plumber from another company. Nortel was not a plumbing company, but it needed to establish contracts with companies that would provide those services.

What I am saying is that small companies provide services to big companies. If the big companies then go bankrupt, the small companies are creditors as well. So, if you give other creditors a higher priority, it means that the small companies will be left behind.

[Marilène Gill, Bloc, Manicouagan, QC]

No, the small companies will be in the same category. Clearly, a judge can decide, but, no, a company will not be left behind.

I understand that you are not talking about one plumber. We had some semantic difficulties. We are talking about a company, a contracted supplier. They should then be in the same category.

Quite clearly, as the priority level goes up, people share in it. That said, suppliers are ordinary creditors.

[The Chair, Liberal, Sherry Romanado]

Thank you very much.

We'll now move to the next round.

MP Jaczek, you have the floor for six minutes.

[Helena Jaczek, Liberal, Markham—Stouffville, ON]

Thank you very much, Madam Chair.

Thank you, Madam Gill, for your bill. There's no question that you have the best interests of many of your constituents at heart. The bill is extremely well intentioned.

The issue, I suppose, is the devil is in the detail, as is very common with complex pieces of legislation. This is no doubt why, as you related, it has taken many years of discussion and we don't seem to be any further ahead.

The issue is one of balancing priorities. One of the issues that I think has been raised is that your bill would make it more difficult for companies with defined benefit pension plans to access loans, because lenders would have to assume a higher level of risk as their claim would be given lower priority.

Do you see this as a real risk?

[Marilène Gill, Bloc, Manicouagan, QC]

Thank you for the question, Ms. Jaczek.

Certainly, we always want to do the right thing and protect people. You said that the devil is in the details. I actually always agree with that, but it must not stop us from taking action. As you said, the issue has been discussed for a number of years, but basically, the situation has not moved forward since the 2000s. For example, the Companies' Creditors Arrangement Act, the CCAA, has to be reviewed every five years. In 2018, a committee report said that something had to be done. Everyone agreed on that, but nothing was done. The same happened in 2010. This has been going on and on endlessly.

That answers the first part of your question.

In the second part of your question, you were talking about the risks that lenders incur. Actually, banks are very reasonable. Clearly, they also have their requirements. Of course, when they grant loans, they want to make sure that they will get their money back. Banks already ask for guarantees when they lend to a company. They already make sure that a company is financially healthy enough for it not to be too risky to grant them a loan.

Since banks already work in that way, I do not see it as a risk.

[Helena Jaczek, Liberal, Markham—Stouffville, ON]

Defined benefit pension plans, certainly here in Ontario, have become rarer and rarer. I am wondering, looking forward, as hopefully, post-pandemic, the economy recovers and we see some new businesses established and so on, whether there is a risk that this bill could discourage companies from even creating defined benefit pension plans for their employees in the future.

[Marilène Gill, Bloc, Manicouagan, QC]

I actually feel the opposite.

First, we must not imagine that companies are giving workers a gift by telling them that they provide, for example, a defined benefit pension plan rather than a defined contribution plan. The issue of pension plans must be negotiated between the employer, meaning the company, and the union. Certainly, companies might prefer to provide one type of plan rather than another type. But given that it must be negotiated, I would say that it could be the opposite.

That was the first part of my answer. I would like to add a second point.

As Mr. Poilievre said earlier, it is in everyone's interest, the companies, the banks and the workers, for this to work. This is why a bill such as mine can be helpful. I am trying to put myself in a worker's shoes. A plan of that kind would be looked after and protected, and would become an additional guarantee. In my opinion, a pension plan of that kind would be an advantage. So I actually feel that it will not only protect the pension fund itself, but it will also protect this type of plan, the defined benefit plan.

[Helena Jaczek, Liberal, Markham—Stouffville, ON]

Going back to the issue of lenders, you talked about the banks being reasonable. Perhaps with large businesses there's potentially more negotiation, but do you not think that perhaps your bill would have a greater impact on small and medium-sized businesses, which certainly have more difficulty securing loans at a reasonable rate?

[Marilène Gill, Bloc, Manicouagan, QC]

Thank you once more for the question.

In the current crisis, I feel that the government has already expressed its fears about companies having access to financing. Correct me if the figure is wrong, but I believe that the government has provided about $60 billion in loan guarantees. Of course, the government can act as guarantor for companies to restructure. You may know that, under the terms of the CCAA, SMEs must have debts of at least $5 million.

I see that our chair is now on the big screen. So I will stop here. I can come back to these questions later.

[The Chair, Liberal, Sherry Romanado]

Thank you very much.

Mr. Lemire, the floor is yours for six minutes.

[Sébastien Lemire, Bloc, Abitibi—Témiscamingue, QC]

Thank you, Madam Chair.

I'm going to take the liberty right away of introducing the motion that I previously sent out and that you all received via email. The motion is as follows:

That the Committee proceed immediately to the clause-by-clause consideration of Bill C-253 as referred by the House on May 12, 2021, without hearing witnesses.

I introduce this motion on the basis that this bill does not commit any money from the government. The bill is essentially ideological and does not involve responsible government, for example.

In the particular context of COVID-19, we know that many companies are being kept on life support, as it were. That's what the results of various surveys are showing. The government's wage subsidy and rental assistance programs are very generous. However, when those programs end, we could see a significant number of bankruptcies.

In addition, the election threat weighs heavily on us. An election campaign could be triggered as early as August. We know that if this bill is not sent to the House directly, given the time allotted for debate and consideration by the Senate, it may not receive royal assent before the House wraps up.

If these bankruptcies occur in the fall without us having passed the bill, hundreds or even thousands of workers may not be protected. That is what I'm afraid of. My colleague Marilène Gill's bill covers two areas: priority payment of preferred claims for employers, as well as compensation for the loss of group insurance.

I therefore move that we begin clause-by-clause consideration of Bill C-253 immediately, in the hope that it will be sent back to the House as soon as possible for consideration at third reading. I also hope that it will be sent to the Senate quickly so that it can be passed in the current Parliament. That will allow us to address the bankruptcies that may occur in many constituencies.

I want to point out that the motion to send the bill to committee was supported by the Bloc Québécois, of course, the NDP, the Conservative Party and 10 Liberal members, including our colleague Nathaniel Erskine-Smith. I am calling on our strategic political sense and compassion for the workers who may be affected by these bankruptcies.

[The Chair, Liberal, Sherry Romanado]

Thank you very much.

I invite the legislative clerk, Philippe Méla, to explain the rules surrounding this motion.

[Philippe Méla, Legislative Clerk]

Thank you, Madam Chair.

The motion is a bit unusual, but it is in order. It is up to the committee to decide whether to proceed with clause-by-clause consideration of the bill here and now without hearing further witnesses. It is possible to do that, if that is the will of the committee. The motion may be debated and amended.

[The Chair, Liberal, Sherry Romanado]

Is unanimous consent required?

[Philippe Méla]

No, not for this motion. If this were a motion to have clause-by-clause consideration of the bill deemed completed, that would be a different matter and it would indeed require unanimous consent. However, Mr. Lemire's motion simply asks that the committee proceed immediately with clause-by-clause consideration. If the committee decides to do so, then I will take five minutes to explain how that will work.

The committee must vote on all clauses of the bill, that is, the chair must ask the committee if clause 1 shall carry, then clause 2, and so on, through to the title of the bill. The chair will then ask the committee whether it wishes her to report the bill to the House and whether she should order the bill reprinted, in the event that amendments have been made.

This motion does not require unanimous consent. It may be debated and amended, if necessary.

[The Chair, Liberal, Sherry Romanado]

All right, thank you very much.

I see that a couple of hands are raised.

I will start with MP Masse.

Please go ahead.