That, in the opinion of this House, the government should amend bankruptcy legislation to ensure that wages and pensions owed to employees are the first debts repaid when a bankruptcy occurs.
Mr. Speaker, it is an honour to lead off the debate today on my latest private member's Motion No. 400.
I have had the privilege on a number of occasions to have my private member's motions or bills drawn and, quite frankly, I have had others made votable previously, very important issues related to what is often referred to as corporate manslaughter or the Westray legislation.
In the new process of private members' bills I had the opportunity for this motion to be drawn and I was extremely pleased, especially at this point in time when we do have the issue of employees' pensions and the risk of those pension funds not being there. It is very timely here in Canada, if not from a day to day basis with each member of Parliament, as we travel our airlines.
The issue we are debating today is an extremely important one for me as the member of Parliament for the riding of Churchill. What I am proposing with the motion is that the government amend the current bankruptcy legislation. The amendment I propose would ensure that wages and pensions owed to employees would be the first debts paid when a bankruptcy occurs.
Far too often in Canada we see employees being left at the bottom of the list when a bankruptcy happens. Far too often we see Canadians who have worked hard their entire lives having their pensions endangered by bankruptcy.
One can imagine working for a company for 30 years or more, retiring and looking forward to enjoying a pension for which one has worked hard, and then hearing that a former employer is going bankrupt and one's pension is in danger.
Certainly each of us as members of Parliament come here, serve a period of time, which a lot of Canadians feel is a very short period of time, before we are able to gain a pension from our employment. However, let us imagine sitting in this House for 20 years or 25 years. I have some colleagues who have been here that length of time. I believe the House leader from the governing party has been here a fair length of time.
I may have my issues with the Prime Minister but I acknowledge his dedication for 40 years to public service. One can imagine what it would be like if the Prime Minister could not receive his pension when it was all done. He has a doozy of a pension and he has had a good wage over the years. However let us imagine having a wage of maybe $40,000 or $45,000 a year and setting money aside for retirement, and then it is not there. We would not have had the benefit of a $150,000 or a $200,000 salary year after year to tuck money away.
We would have had enough to make a go of it, to put food on the table for our family, to pay for a home, the children's post-secondary education, hydro, gasoline or whatever and then something happens, our pensions are ripped away from us and we are left with nothing except possibly some OAS and maybe welfare. I can only imagine the thoughts and concerns that might come to the mind of an individual facing that crisis.
It is for that reason that this motion is so important. The motion is designed to highlight the inequities in our current bankruptcy legislation. The current process puts the needs of banks and creditors ahead of unpaid employee wages and pensions.
I would like to explain first the bankruptcy process with respect to employee wages, after which I will discuss the impact of bankruptcy on pensions.
When a company files for bankruptcy in Canada, the government is the first to be paid. These are called source deductions and they include the Canada pension plan, income tax and employment insurance payments. A company takes these items as deductions from the wages of employees and holds them in trust for the government to be remitted at a later date.
My understanding of it is that it is not to be that much of a later date. These payments are usually supposed to made on a monthly basis or every couple of months but we know there are companies that for some reason or other sometimes do not get those source deductions paid.
If there is a bankruptcy the Government of Canada makes sure it takes the money it is owed first. I am a little begrudging of this, especially when I see EI premiums being paid and there is a huge surplus. The government makes sure it gets its payments first and puts the workers at the bottom.
The next group to get paid are the secured creditors. These are institutions, such as banks, whose loans are secured by items such as company assets. These secured creditors have an arrangement similar to that of a home mortgage. If the company cannot make a payment on its loan the secured creditor arrives to repossess a company asset.
The third group in the list of claimants in a bankruptcy case are the preferred creditors. Within the grouping of preferred creditors the claimant list is prioritized: legal cost and the levy for the superintendent of bankruptcy comes before employees. In this prioritized list employees are listed fourth in order of importance.
Why are employees listed below all the others? These employees have worked hard for their companies. In many cases they have built the company, struggled through the hard times, given their sweat and, in some cases, given their blood and their lives, and they are put at the bottom of the heap. When a company goes bankrupt they are given the bottom position.
The issue of unpaid employee wages during a bankruptcy is not new. The government has known about this issue for many years. In a report prepared for Industry Canada in 1998, the problem of unpaid employee wages during a bankruptcy was addressed. The report acknowledged that employees were poor risk bearers, simply put, employees could not afford to lose out on their wages. They do not have access to repossessing the company's assets.
Unlike other creditors, such as banks, who are able to bear the impact of the loss of revenue, employees have no mechanism for disbursing the income of lost wages. As I said, many are from wages that are not $150,000 to $200,000 a year jobs where one might be able to stash some money away. They are from jobs where one might have made $20,000, $25,000 or $45,000. Even after all other creditors in front of an employee are paid, if anything remains the employee, under the current legislation, is entitled to a maximum of $2,000 in compensation.
What if employees are owed more? In this example I am only referring to wages, not to other items which might be of financial interest to the employees, such as vacation pay or severance pay. I am referring only to wages. Two thousand dollars seems a small amount to be paid for losing one's job plus the work that one has already provided to the company and not getting paid for it.
This is an issue of fairness and equality. Ensuring the unpaid wages and pensions are given first priority in a bankruptcy situation is only reasonable and it is time we made these changes. Workers in this country must come first.
The 1998 report shows that the Liberal government has had this information, has known about this problem and has decided to do nothing about it. Even in light of recent high profile bankruptcies, such as Enron and WorldCom, the government and the candidate for the leader of the Liberal Party, the former finance minister, continue to ignore an important issue.
We can pick from many examples over the years that illustrate the need for change in the bankruptcy legislation. With regard to pensions, Enron and WorldCom are just a few recent examples of where we have seen a significant impact of a bankruptcy on current and former employees.
In the case of Enron, while many top executives and their friends made millions of dollars selling Enron stock before the collapse, ordinary employees who on the average had 62% of their retirement assets invested in the company, lost a total of $1.2 billion U.S. from their pension fund. Many lost almost all their retirement savings.
In the case of WorldCom employees, they saw stark reductions in their retirement savings. Some 40% of the employees of the firm had invested in the pension plan.
Perhaps the example of Air Canada might better illustrate the importance of my motion. Air Canada's problems have provided a wake-up call on pension funds. Air Canada has not yet gone bankrupt. It has simply filed for bankruptcy protection under the Companies' Creditors Arrangement Act.
The act provides protection for Air Canada from the company's creditors while it attempts to restructure. In the case of Air Canada's pension, filing under the CCAA has revealed that its pension plan has a $1.3 billion deficit. Air Canada has 12 plans that it administers with some 50,000 employees relying on these plans for their retirement savings.
If Air Canada were to go bankrupt, why then in all fairness would the employees' pensions not be the first on the list to be paid ahead of the banks and creditors? These employees have earned the right, through their hard work, to see that their investment is insured. Simply, these employees have earned the right to see that their trust in the company's ability to manage their pension fund be repaid.
Even more telling in this case is the fact that the Office of the Superintendent of Financial Institutions has applied to amend specific elements of the court order in respect of Air Canada and its subsidiaries.
The OSFI is seeking to put Air Canada pensioners first. The OSFI wants to amend the court order so that amounts due or accrued to the pension fund are not subject to the CCAA restructuring proceedings. These amounts will move ahead in the list of prioritized creditors. That is the right way to do things.
I will not comment today on how the Office of the Superintendent of Financial Institutions allowed the Air Canada pension fund to accumulate such a large deficit by granting company contributory holidays at a time of industry-wide uncertainty. I agree with the OSFI that in the talks regarding moneys due from a company during bankruptcy or simply during restructuring that the employees' interests, whether they are pension plans, unpaid wages, holidays or whatever should be moved to the top of any asset distribution scheme.
Bankruptcies are difficult for all stakeholders but most difficult for employees. It is a time when employees, both current and former, worry about everything from mortgage payments to job security. They should not have to worry about the possibility of unpaid wages for their pension benefits.
The motion calls on the government to ensure that funds owed to employees are the first debts paid when a bankruptcy occurs. Employees are an integral part of any company and as such deserve the right to be the first to receive financial compensation.
Former employees who are receiving pension benefits have planned their retirement years around their investment in a company pension program. Do we not have an obligation to see that pension plans and employee wages are put first ahead of all other creditors?
We have an obligation to see that the interests of employees are fulfilled. Employees are often those who can least afford to incur such a risk as lost wages or diminished pensions. Employees are often the most vulnerable creditors and are unlikely to bargain for compensation due to the risk of non-payment.
Over the past three decades there have been many proposals to amend Canada's bankruptcy law in order to put employees first. Even with all the discussion that has taken place during that time little change has happened. Pension and unpaid wages continue to be placed behind the list of creditors. I think this says that the government does not value workers and it is time to change that.
I encourage my colleagues to support this legislation. It is right for workers. It is right for Canadians and it is right for our country as a whole.