Mr. Speaker, today I welcome the opportunity to speak to a private member's bill, Bill C-624, An Act to amend the Bankruptcy and Insolvency Act and the Companies' Creditors Arrangement Act (providing protection for beneficiaries of long term disability benefits plans), which was introduced by our esteemed colleague on February 11, 2011.
Bill C-624 proposes to amend Canada's insolvency laws. In particular, the bill would change the Bankruptcy and Insolvency Act to provide long term disability claims with a preferred claim in bankruptcy. This would mean that long term disability claims would be paid after secured creditors.
Furthermore, the bill proposes to amend the Companies' Creditors Arrangement Act to rank long term disability claims as a super-priority in restructuring, meaning that they would be paid ahead of secured creditors.
Last, the transitional provisions in the bill indicate that the amendments would be retroactive, in other words that they would apply to insolvency proceedings that were commenced prior to the coming into force of these bills.
Bill C-624 is essentially the same as Senator Eggleton's Bill S-216, which was reviewed by the Standing Senate Committee on Banking, Trade and Commerce. The committee heard from several experts on the possible effects of prioritizing long-term disability claims and these concerns remain relevant for Bill C-624.
After weighing the evidence, the committee concluded that Bill S-216 could generate claims that conflict with court-approved settlement agreements already in force, resulting in litigation that would be detrimental to the interests of long-term disability claimants, including the former employees of Nortel.
Second, the bill would cause companies to prefer liquidation to restructuring because it would confer lower status to long-term disability benefits in liquidations than the super-priority gives to similar claims in restructuring.
Third, the bill would reduce the amount that some creditors would otherwise hope to recover in bankruptcy proceedings, therefore increasing risk for investors and resulting in a higher cost of credit.
For those reasons, the Standing Senate Committee on Banking, Trade, and Commerce concluded that Bill S-216 would be detrimental to the growth of the Canadian economy. This is why the committee reported back to the Senate with the recommendation that Bill S-216 not be proceeded with further. The Senate adopted the report.
The Senate committee's recommendation is in keeping with practices from Canada's major trading partners, none of which provide a higher priority for future long term disability claims in insolvency. In fact, neither the United States, the United Kingdom, New Zealand or Australia provide a higher priority than Canada does to cover future long-term disability benefits payable after an employer becomes insolvent.
In many instances, insolvency legislation is not the best tool to better protect employees because, once a company is insolvent, it is already too late. By definition, an insolvent company does not have sufficient moneys to completely pay the claims of all creditors. Moreover, insolvency law is an economic framework legislation that has broad implications for Canada's economy, including economic growth and job creation. Any changes to the established priorities need to be carefully considered, as they could harm businesses and the economy through higher cost of capital.
That said, this government has taken action to better protect workers. In 2008-09, the government amended insolvency legislation to create a super-priority for outstanding normal pension contributions, such that these amounts are paid ahead of secured creditors. This government also created the wage-earner protection program in 2008, which pays up to $3,400 for unpaid wages for employees whose employer becomes bankrupt or subject to a receivership. In 2009, the government expanded the wage-earner protection program to better protect employees' severance and termination pay.
Furthermore, in the spring of 2009, the government engaged in a national consultation on the legislative and regulatory framework for federally regulated private pension plans. As a result of that consultation, the government announced in October 2009 an important reform plan to modernize the federal private pension legislative and regulatory framework.
Last, the government has undertaken a very serious and public discussion with Canadians on retirement income adequacy and security. A joint federal–provincial–territorial research working group was established with respected academic Dr. Jack Mintz as director of research. Based on the working group's findings, finance ministers agreed in December 2010 on a framework for defined contribution pooled registered pension plans and to continue work on options to improve the Canada pension plan, as well as to review the task force on the financial literacy's report, which is scheduled for release shortly, and to respond to the recommendations.
I understand that Bill C-624 was introduced in hopes of providing assistance to former Nortel employees whose long-term disability benefits ceased on December 31, 2010 as a result of a court-approved settlement agreement. However, as the Standing Senate Committee on Banking, Trade and Commerce heard, these amendments would not really help, but instead lead to lengthy and costly litigation, which would be detrimental to the interests of long-term disability claimants, including the former employees of Nortel.
The government understands and is very sympathetic to the challenges that Nortel's long-term disability beneficiaries are facing through no fault of their own. However, it should be noted that the hardship they are facing is primarily due to the fact that Nortel chose to self-fund its long-term disability benefit obligations rather than to purchase insurance.
Long-term disability plans are largely a provincial issue and, therefore, provinces are really better placed to look at developing a regulatory framework that would prevent this type of situation from repeating itself. Amending Canada's insolvency laws is absolutely not the right way to protect workers and, doing so, would have negative consequences for businesses and the economy as a whole. That is not in the interests of Canadian business, not in the interests of Canadian workers and certainly not in the interests of Canadian pensioners.
I welcome any input that any member from any party in the House has in terms of finding a solution to this difficult issue.