Mr. Speaker, as I begin my remarks let me acknowledge the concern of the member for Winnipeg Centre for employees in bankruptcy company situations. When he speaks to this issue he is very sincere about it, but the issue of unpaid wages and pension contributions when a firm goes bankrupt is one considered by the House several times in the past. The member also alluded to that. I am confident members on all sides would like to see the most equitable solution possible.
Over the years different governments, as was stated earlier, considered many different options for wage earner protection that would be good for the economy and for workers. This is not a partisan issue. It is not an easy issue at all. Each option has its trade-offs and several times parliament has been unable to agree on the fairest course of action.
Industry Canada, which is responsible for the Bankruptcy and Insolvency Act, is aware of the need to protect wage earners whose employers face bankruptcy. As recently as 1992 parliament amended the act to extend the protection of unpaid wages. In particular, parliament found it appropriate to increase the protection for wages earned up to six months prior to bankruptcy. This represents a doubling of the previous length of time.
In 1992 parliament also quadrupled the maximum amount that could be claimed from $500 to $2,000. Further review of this important issue is currently under way. I am pleased to bring members up to date on the plans of Industry Canada to strengthen the Bankruptcy and Insolvency Act.
First, the department expects to release in the next couple of months a discussion paper which addresses wage earner protection. Second, Industry Canada officials will be undertaking cross-Canada consultations with stakeholders to help identify a fair solution. Third, the act will be referred to the parliamentary committee for review in the next year. The results of the consultations and the whole question of wage earner protection will likely be examined during the parliamentary review.
Notwithstanding, I certainly realize that wage earners sometimes face special difficulties when their employers go bankrupt, leaving their wages and pension contributions unpaid. They are vulnerable creditors that often cannot afford such losses and usually lack the information to assess the risk that their employers may not pay them.
To protect employees the current act gives preferred status of up to $2,000 in wage claims for services provided in the six months immediately before the employer's bankruptcy. It also protects up to $1,000 in disbursements for sales people, as mentioned earlier.
In the preferred ranking, wage claims are given priority over claims of ordinary creditors but wage claims rank behind those of secured creditors. Protection for pension contributions is provided in federal and provincial pension legislation, much of which gives secured creditors status to claim unpaid pension contributions.
Very few people would argue against the principle of protecting the claims of wage earners. Fairness weighs in favour of protecting them. In practical terms wage earners are more likely to have their unpaid wages claims satisfied than ordinary creditors because of their preferred status. In some circumstances as well, secured creditors may allow trustees to pay accrued wages to which the employees are not entitled, strictly speaking.
The issue raised by the member for Winnipeg Centre in Bill C-203 is apparently straightforward. The bill provides for a kind of super priority for wage claims and payments in respect of pensions. As we know from extensive past discussions on bankruptcy law, super priority, as with other options, raises various issues.
A difficult issue and one in which earlier proposals have foundered is that super priority could affect the availability of credit to companies. It could become an important factor in the risk assessment of commercial lenders, leading to a reduced amount of credit being available. The consequences could adversely affect the employment and interest of workers generally. Commercial bankruptcy law has an important role in the allocation of these credit market risks.
I ask hon. members not to misunderstand what I am saying. I am not saying that super priority should be rejected as a way of handling wage and pension contribution claims in bankruptcies, but I am stressing it is a complex issue that has a long history and involves certain trade-offs.
The basic principle of wage earner protection was established 50 years ago in the Bankruptcy Act, 1949. Since that time five committees have reported the possible changes: the Tassé study committee in 1970, the Landry committee in 1981, the Colter advisory committee in 1986, the advisory committee on adjustments in 1989, and the bankruptcy and insolvency advisory committee in 1994. None of their recommendations for wage earner protection were implemented.
Over the past quarter century no fewer than eight bills have been introduced in the House and in the other place to amend the act. Only one of these bills subsequently altered the provisions for wage earner protection, the bill involving the 1992 amendments to the act.
These committees and bills proposed or analyzed a wide range of approaches including wage earner protection funds financed by contributions from employers, from employers and employees, or by the government through general revenues. Some bills proposed super priority protection for wage claims. Some bills proposed raising the ranking of wage and pension contribution claims among preferred creditors.
There is a great deal of divergence on who should pay for the cost of wage and pension contribution claims. It was nearly impossible to obtain a consensus on better ways to proceed than what is currently in the Bankruptcy and Insolvency Act. That is why the protection of wage earners requires further examination and consultation.
I have sketched out these details to suggest various available points to my colleagues on all sides, and specifically the hon. member for Winnipeg Centre. There is great interest in the whole question of wage earner protection following bankruptcies, but finding a fairer solution than what is now available would require a good deal of hard and thoughtful work during the forthcoming parliamentary review.
As I said in my opening remarks, this is not a partisan issue. Several different governments have already grappled with the question. Each option for wage earner protection has its advantages and disadvantages. Industry Canada currently is working to identify a fair solution.