Mr. Speaker, I am pleased to rise here this afternoon to speak to 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).
This bill amends the existing legislation in order that, in bankruptcy proceedings, the status of a preferred claim be conferred to the liabilities of the fund established for the purpose of a long term disability benefits plan and that such fund be used to continue the payment of benefits to the beneficiaries.
This bill was introduced in response to the situation facing former Nortel employees with disabilities, as my colleagues said earlier. Indeed, I would like to remind the House of the sad story involving these employees, whose disability benefits have all but disappeared. On December 31, 2010, nearly two years after seeking bankruptcy protection, Nortel emptied its health and welfare trust and cut off 360 people with disabilities, including over 50 Quebeckers. Like many large corporations, Nortel provided its employees with disability insurance. Those employees also had the option to pay higher premiums for better coverage. The employees with disabilities who paid their premiums to SunLife thought they were properly insured. The employees learned the hard way that Nortel was responsible for guaranteeing the disability benefits out of its own funds. SunLife simply managed the program.
By seeking protection under the Bankruptcy and Insolvency Act in January 2009, Nortel stopped putting aside money for its employees with disabilities. So, with Nortel's bankruptcy, people with hefty medical expenses lost a huge portion of their income. These people are desperate and are, by far, the most vulnerable of Nortel's creditors, since they have lost 90% of their benefits.
The group advocating for Nortel employees with disabilities has provided appalling statistics on the poverty inflicted on these people in early 2011. Under the final settlement, they receive an annual amount representing 27% to 33% of what they previously received. In concrete terms, this means that average income of $30,900 was reduced to $13,600 in early 2011. As for those who made optional disability insurance contributions, they saw their income fall from $43,300 to $16,900 a year.
Those not receiving disability benefits under the Canada pension plan, because they have never applied or do not meet the criteria for disability as defined by the Canada pension plan, are even worse off: their average income has dropped from $30,900 to $6,500 a year.
Suffering from mental illness, cancer, multiple sclerosis and other serious illnesses, these people are in an untenable position. Furthermore, the 360 people laid off in December have 160 children.They have families to support and medical expenses to pay.
Nortel's long-term disability plan was administered by Nortel's health and welfare trust, and funded quarterly by Nortel's general revenues. When the company went bankrupt, the health trust was no longer able to meet its commitments to disabled employees.
Two problems surfaced. On the one hand, in the event of bankruptcy, recipients of disability benefits are considered to be unsecured creditors, just like suppliers or bondholders. Given that Nortel found itself in a position where it was unable to meet its obligations towards all creditors, unsecured creditors were severely penalized.
When Nortel became insolvent, monthly benefits provided to employees on long-term disability were categorized as unsecured claims.
On the other hand, disabled Nortel workers appear to be the victims of misrepresentation. They believed that their disability benefits were guaranteed by Sun Life. Evidently, they believed they were insured by Sun Life. In fact, Nortel's disability plan was self-insured, and not backed by an insurance company.
In light of this tragic state of affairs, many employees with disabilities have asked that the bankruptcy laws be revised to ensure that disabled employees become secured creditors in the event of bankruptcy.
The bill has just one goal and that is to confer the status of a preferred claim to disability benefits plans in the event of bankruptcy or restructuring. An estimated 1.1 million people receive disability benefits in Canada through a self-insured plan. Currently, if their employer declares bankruptcy, they are considered ordinary creditors. If Bill C-624 passes, their disability benefits will be protected.
The Bloc Québécois feels that above all, we must ensure that these types of situations never happen again. More specifically, employees who are part of a self-insured disability plan should be informed of all the terms and conditions. In that vein, an obligation of transparency, like the one in Ontario and in Alberta, could be imposed on all self-insured plans under federal jurisdiction. If that requirement is not met, the officers could be held personally liable, as is the case for source deductions.
The Bloc Québécois proposes requiring all self-insured plans under federal jurisdiction to be drafted in very clear terms. The Bloc Québécois also proposes considering the feasibility of regulating self-insured plans more in order to better protect the insured. At the same time, and because there is still a risk that disabled employees will be wronged, it is necessary to ensure that in the event of bankruptcy, they are among the first to be paid, therefore before banks and not after.
We support Bill C-624 in principle, mainly because disability benefits are usually more important for people with disabilities than loans are for banks. Unlike financial institutions, people with disabilities do not have the same capacity to absorb a loss of income. People with disabilities generally do not have any way to protect themselves when their employer experiences financial difficulties. It is also difficult for an employee to assess the risks of working for a given company, particularly in cases where there is a risk of misrepresentation, for example, the case of a self-insurance plan.
For all of these reasons, the demands of former Nortel employees with disabilities must be heard. They have significant medical bills to pay and have very few resources for dealing with the situation facing them. We have to act quickly to help these people. Canadian bankruptcy laws are not fair to people with disabilities. Changes must be made quickly and the Conservative government has the responsibility to take immediate concrete action to remedy this situation. It is a question of justice and dignity. The Bloc Québécois therefore supports the idea of granting people with disabilities preferred creditor status.