Mr. Speaker, I am very pleased to have an opportunity to participate in the debate on this government bill.
I am pleased to speak in support of Bill C-55 which proposes a comprehensive reform to Canada's insolvency system. The bill itself, as was just mentioned, is called the wage earner protection program act.
Insolvency legislation is a critical market place framework law. It influences the assessment of credit risks. It impacts on entrepreneurship and competitiveness. Insolvency legislation also enables resources to remain productive or to be efficiently redeployed. It preserves assets and permits a fair distribution among creditors. Insolvency legislation provides a mechanism for the restructuring of debtors' financial affairs.
In past years, however, insolvency issues have been getting increased public attention. A number of high profile companies, such as Air Canada and Stelco, have used the insolvency system to restructure, attracting considerable media coverage. Stelco, for instance, is the principal owner of a company in my riding which has been affected obviously by the use of the insolvency system that we have in place.
Insolvency stakeholders, including practitioners, labour unions and even judges, have publicly talked about the impact of insolvency legislation on the Canadian economy and keep drawing attention to these issues.
I am a lawyer by training and I can remember one of the courses that I had to take in law school was bankruptcy law and insolvency. While l found it to be quite dry, it ended up being one of the courses where I got some of my best marks, so I remember a little bit of it. I will not claim to remember a lot of it. Precisely because there have been a number of high profile companies that have used the insolvency system that we have here in Canada and because we have had stakeholders who have talked publicly about the impact that this legislation or our existing framework has on the Canadian economy, I have tried to educate myself a little bit more about it and try to remember some of what I learned in law school.
Indeed, business insolvencies have a sizable economic impact. Approximately 12,000 businesses use the Bankruptcy and Insolvency Act annually. This includes bankruptcies and proposals. Another 50 cases proceed under the Companies' Creditors Arrangement Act, CCAA. While smaller in number, the cases under CCAA typically involve large, publicly traded companies. The impact of insolvency proceedings are always significant for those involved whether it be shareholders, business partners, suppliers, customers, lending institutions and of course, the workers, the employees of those very companies that embark on insolvency proceedings.
There have been reforms in 1992 and again in 1997, but despite these reforms there is a broad consensus that another round of reform is required. The government needs to ensure that our insolvency system responds to the needs of the work market place and provides the necessary protection to those who are adversely affected by bankruptcy, namely, the workers.
At the forefront of Bill C-55 is a clear recognition on the part of the government that the present insolvency system lacks an effective way to protect workers whose employers go bankrupt.
The wage earner protection program act established by Bill C-55 would remedy this problem. It would ensure that workers receive compensation for the wages owed and the vacation earned but not paid, up to a maximum of $3,000 per worker. This program would ensure that these amounts are paid in a timely manner and are not dependent on whether or not there are sufficient assets in the bankrupt estate.
Under the current system, Canadian workers have to wait, possibly as long as three years, until the insolvency proceeding is completed and those with secured assets or interests have been fully paid prior to the workers receiving the pay that they have earned and for the vacations that they have earned but had not yet taken, and even then in most cases they wind up being paid only a fraction of the wages owed to them.
In fact, under the current system, three-quarters of workers receive nothing when their employer goes bankrupt. On average, those who do receive something under the insolvency proceedings, once the secured interests have been paid, that is, the creditors who have secured interests under the current law, only 13¢ on the dollar is left to pay the workers. That is it. For every dollar the workers are owed, if they are lucky they receive 13¢, but three-quarters of them receive zip, zero, nada, niente. If there are any other languages that someone in the House knows to say “nothing”, use it, because that is what the workers receive.
Often the most vulnerable workers are adversely affected. They are frequently in low wage jobs in small companies in sales, services and the construction industry. That is simply not fair. If there is one thing that Canadians pride themselves on, and if there is one thing that most if not all members of Parliament in this House pride themselves on, it is trying to be fair. We try to be fair when we review legislation to ensure that it is reasonable, justified, and that it actually does achieve most of the benefits that it is supposed to.
These workers never agreed to be creditors to their employers. They agreed to do a job for x number of hours for a specific amount of pay and to receive certain benefits, and if they maintained their side of the bargain, the employer had a condition and a bargain to pay them. Unfortunately, when companies go bankrupt, three-quarters of the workers receive nothing.
It is not part of the workers' contracts where they agree that if their company or employer goes bankrupt, they will be creditors for whatever wages or vacations they have earned and are owed. They did not sign a contract like that, so it is not fair that they should have to stand at the back of the line in order to get paid. Why should they run the risk of coming up empty-handed? They are not secured creditors. That is not part of the contract that they sign with their employer.
It is precisely for those reasons, among others, that the government has tabled Bill C-55, the establishment of the wage earner protection program act. It is about fairness and about helping Canada's most vulnerable workers. Bill C-55 will ensure that workers get their wages quickly when they most need them.
Under the proposed legislation, affected workers will be able to make their wage claim right away and should receive their money about six weeks later. That will be good news for these workers.
Another important step taken in Bill C-55 is to address the concerns over the lack of predictability and consistency in the application of the insolvency law, specifically the Companies' Creditors Arrangement Act. The CCAA has very few rules and has primarily evolved through judge made law.
I am sure that the Conservatives will be very happy to hear this, because they are always talking about judicial activism and that law making and rule making should be up to the elected officials and the House. I am sure they will be in agreement that there is a pressing need for increased legislative guidance so as to ensure that all players in the insolvency context are equipped to defend their interests.
The international insolvency context has also evolved in the last decade. An increasing number of Canadian companies have U.S. subsidiaries. They have significant assets in the U.S. and important U.S. creditors. More Canadian companies are filing currently under chapter 11 of the U.S. bankruptcy code as cross-border insolvencies are becoming more frequent.
However, there have been some companies that have filed primarily under chapter 11. This raises no policy issue if it is the result of a business decision by the company. The decision to file primarily under chapter 11 of the U.S. bankruptcy code should not be because there are gaps in the Canadian insolvency system. With Bill C-55 the government wishes to ensure that our insolvency system reflects the needs and reality of the Canadian marketplace. It seeks to ensure that our system is equipped to deal effectively with complex cases.
In conclusion, the reform of the Canadian insolvency legislation proposed in Bill C-55 is comprehensive and balanced. I believe it clearly serves Canadian interests. I would urge all members of the House to support Bill C-55 and to allow its reference to committee as quickly as possible.