moved that Bill C-281, an act to amend the Bankruptcy and Insolvency Act, the Canada Business Corporations Act, the Employment Insurance Act and the Employment Insurance Regulations, be read the second time and referred to a committee.
Mr. Speaker,it is a great honour for me to speak at second reading of the bill I introduced, Bill C-281. I would like to begin by recognizing the contribution of my colleagues in the NDP caucus in the development of the bill, first, my seconder, the member for Hamilton Centre, who was instrumental in developing the content of the bill to the form it is in now, and second, my colleague from Ottawa Centre, who brought forward recommendations regarding the bankruptcy laws as they affect workers and employees in this country. I want to recognize and thank both of these colleagues for their contribution.
Every week in this country there are roughly 200 commercial bankruptcies, 1,000 bankruptcies a month, and roughly 10,000 bankruptcies per year, many of which leave behind employees who are owed back wages, benefits and pension contributions. The total figures we can only estimate. Over $1 billion per year is a figure that has been used.
It is workers who pay the price when workplaces shut down. This is especially true when these shutdowns are triggered by bankruptcy, because not only do the employees lose their jobs and their source of income, they also often lose wages that they have not been paid, as I have stated, and vacation pay, termination pay and severance pay.
The reason for this is the order of priority in which employees find themselves when it comes to the distribution of the proceeds of the remaining assets of the company. Workers find themselves at the bottom of the list. I argue that today in the House of Commons in 2004, the members congregated here should be putting workers first in the event of a bankruptcy.
My bill simply reverses the order of priority. Back wages and benefits owing to employees would be ranked at the top of the list when it comes to the distribution of the remaining assets. I urge colleagues to remember or to at least contemplate that big money has controlled things in Ottawa for so long, in my view, that it is no surprise that many of the laws are crafted in such a way as to look after the interests of big money better than they look after the interests of ordinary Canadian voters.
Working people in Canada send us to Parliament to put their interests first, I argue, and in this case, this is one thing we could be doing to look after the interests of Canadian workers as a prime concern, as a priority, by putting them first in line in the event of a bankruptcy.
Parliament has tried to address the inadequacies of the bankruptcy act a number of times in recent years. I am the first to acknowledge that both the House of Commons and the Senate have been seized of the issue and I think this illustrates a growing awareness in Canada that the bankruptcy laws are in fact unfair to workers or at least do not recognize their unique status in the event of a bankruptcy.
When I argue about putting workers as the first priority, we have to view workers who are owed back wages as creditors. I think there is a case to be made that if the company has been operating on or using back wages owed to employees to operate the company, the employees are in fact creditors. Maybe they are creditors against their will in that they certainly did not give any approval to use the back wages and pension contributions to operate the company, but that is in fact what they are.
This is what we are asking members of Parliament to recognize. Employees are justified in being viewed as creditors in the distribution of the assets. In fact, we are asking Parliament to entertain the idea that they should have superpriority, because the other aspect we should acknowledge is the unique trust relationship that exists between the employer and the employee.
Banks, should they take some loss in the event of a bankruptcy, are in that business, we argue. They mitigate that loss by charging interest rates throughout the period of the loan. Even if the order of priority were reversed and employees were paid first, our research shows that the banks would still get most of what was owed to them. They would not lose all of it if some went to workers. The inverse is true, too, in that employees are vulnerable creditors, more so than the banks or the other lenders because they cannot spread that risk over a number of investments. All of their eggs are in one basket.
In the case of a bankruptcy, it is not just the back wages and benefits that are left owing. More often than not in recent high profile bankruptcies, it is the contributions to the pension plan that have a lasting effect, with an underfunded plan leaving employees with far, far less for their monthly retirement than they had earned and were led to believe they would receive.
All of those points add up to a compelling case that the current Bankruptcy and Insolvency Act does not serve the interests of Canadian workers-Canadian voters as it should. We in the House of Commons should put as a priority the best interests of workers and employees, not the best interests of banks and financiers who would object to this reprioritization.
We tested the views of the Canadian public. I brought with me the results of a Vector poll that we conducted with the cooperation of our partners in the labour movement, specifically the United Steel Workers of America which represents a number of workplaces that have been affected by bankruptcy recently.
This nationwide Vector poll of 1,200 Canadians, conducted with what is called a plus or minus accuracy of 1.9%, asked the following question: “Under current laws usually a bankruptcy pays its debts in this order: first, taxes, followed by the banks and other lenders, suppliers and then employees. Do you think the current bankruptcy laws are fair or not fair to employees?” Eighty-four per cent of Canadians said that the current situation was not fair to employees.
When asked a more specific question: “Sometimes bankrupt companies do not get enough money from selling off the assets to pay everyone. Under the current laws, the first to be paid are secured creditors and lenders who have a guarantee. Employees, however, are not secured creditors and may not get the wages owed to them when a company goes into bankruptcy. Should the law be changed to provide more protection for employees' unpaid wages?” Eighty-nine percent of Canadians across the country said that the law should be changed so that it provides more protection for employees' unpaid wages.
I would think that if there was any need for further argument in the House of Commons or any question of whether this is the political ground that the government wants to take, this should give it some comfort that this is what Canadians want it to do.
I welcome any other polls to this effect but I challenge anyone to show us results that are dramatically different from what we have demonstrated here today.
Canadians want a fair shake for employees. We want to put workers first. This after all is the House of Commons and it is not called the House of Commons for nothing. This is where common people send their representatives to make laws that work for them. It is as simple as that.
Lobbyists for the financial interests have been so prominent that laws have been crafted in such a way that they do not look after our concerns any more, at least not in this one example of the Bankruptcy and Insolvency Act.
Bill C-281 would do three things. First, it would reverse the order of priority to put employees first in the distribution of the proceeds from the assets of the bankrupt company.
The second thing it would do, until we can add more fairness to the bankruptcy laws, is it would change the Employment Insurance Act. If employees were laid off due to a bankruptcy and were collecting EI, if they received some settlement for back wages owed to him, those back wages would not be viewed as income in the period of time they were collecting EI. If the wages were, they would be deducted dollar for dollar from their EI payments. Seeing as they earned those wages while the company was still open, those earnings when paid later on should not be viewed as income for the purpose of EI. This is a consequential amendment to the principle and the concept of what we are introducing.
Third, the bill would change the Canada Business Corporations Act to provide a more efficacious procedure by which former employees of a bankrupt corporation who are owed wages by the corporation can proceed with claims against its directors.
In other words, under the current law if the proceeds of the bankruptcy are not adequate to pay for the back wages and benefits, the employees are currently allowed to sue the directors of the corporation to make up for any shortfall. However the process is tedious. It can take years, and not all the employees involved have a union to advocate for them. The bill would expedite that process. The employees could still make a claim against the directors for any shortfall but it would be expedited by an arbitration board or tribunal which could fast track the claim against the directors.
The key principle I ask members to please keep in mind is that what we are trying to do is rejig the order of priority whereby employees would rank first in priority and not at the bottom. Canadians want this and expect it. When members of Parliament are given the opportunity they should be fighting for the little guy, speaking out for the person who is left in the wake of these corporate decisions that are far beyond their control or input.
We can point to dozens of recent examples of Canadians who have been impacted. When there are almost 10,000 commercial bankruptcies per year in Canada there is no shortage of empirical evidence to point to and to draw from. In one recent example in the province of Ontario, 1,300 unionized employees with Ontario Store Fixtures lost their jobs because of bankruptcy. Even though another company restarted the business for a brief period of time it too filed for bankruptcy. When the dust settled in that, over 1,200 employees had lost their jobs. They are owed roughly $12 million in back wages and benefits.
In the case of Ontario Store Fixtures, no money was in the bankruptcy estate to pay for any of these claims. Guess who got paid first? Any cash that was available at the time of the first bankruptcy went to the company's banker, CIBC. Assets from the auction of the property of the second bankruptcy automatically went to other secured creditors, who in this case were the shareholders of the Ontario Store Fixtures partnership.
Virtually everybody received their money except for the actual employees of the company. I ask my colleagues to consider the ancient trust relationship that exists between the employer and the employee.
I, and many people with whom I have spoken, would like to think that whatever assets remain after a bankruptcy and after the owners have walked away, that the company would like to see that money go toward paying some of the wages it owes its employees and then whatever is left could be distributed among other creditors on the list.
This is an idea whose time has come. In the interest of fairness and on behalf of Canadian workers everywhere, I urge my colleagues to allow the bill to pass at second reading and go to committee where we can give it a more fulsome review, submit amendments, craft it whichever way we want as long as the end result is that our number one concern is to protect the interests of employees in the event of a bankruptcy. We must put workers first.