Mr. Speaker, I appreciate this opportunity to join in the debate on Bill C-501. I should point out I am not rising to speak just because I was challenged to do so by my colleague from Elmwood—Transcona. I have a legitimate and longstanding interest in the subject matter.
I want to begin by complimenting and thanking my colleague from Thunder Bay—Rainy River for bringing forward Bill C-501 on the subject of workers' pensions or the status of pensions in the event of bankruptcy.
We should start by recognizing the magnitude of the problem. There are more than 10,000 commercial bankruptcies per year in this country. In fact, that number is probably two or three years old. The number is probably higher, given the economic turndown we have seen happen in recent years.
Of those 10,000 commercial bankruptcies per year, there is over $2 billion in lost wages and benefits when employees are left holding the bag. In the current Bankruptcy and Insolvency Act, wages, back wages and pension contributions rank dead last in order of priority for those claimants waiting to be paid when the assets of the bankrupt company are liquidated by the trustees of the bankruptcy.
A lot of people were surprised to learn that working people, ordinary Canadians, would rank dead last in priority. In fact, if we can trace it back through the NDP, the origins of the bill actually germinated in the riding of Winnipeg Centre, I can say with some modesty.
A number of my constituents, in 2002, came to me with the details of a bankruptcy going on in Winnipeg at the time, involving Storm-Tite doors and the United Steelworkers of America. The bankruptcy was taking place and not only were a bunch of employees owed back wages but the pension plan was in deficit by tens of millions of dollars. They were not able to meet the actuarial promises to the beneficiaries of the plan.
They came to me, shocked to learn that they were ranked so poorly in terms of priority when the trustees of the bankruptcy liquidated the company and that their pensions would be cut. Not only were some pensions cut in half, but some 20-year members would have no pension at all even though, when the assets of the company were liquidated, there were tens of millions of dollars left in assets, more than enough to make the pension plan whole. In other words, other creditors were secured, but the workers were not.
This led to an initiative that we called the workers first bill. We took it to Parliament and we had some co-operation from the Liberal government of the day. We met at length with Joe Fontana, the former minister of labour, and we negotiated and negotiated to try to correct what we thought was a horrible problem with the Bankruptcy and Insolvency Act.
The push-back was not from business owners or the corporate community, because frankly if they are at the point where their business is bankrupt and they have walked away from the company, they do not really care what happens to the division of the remaining liquidated assets. In fact, many would be pleased if that money went to their employees rather than to other creditors. No, the push-back came from the banks. The banks said if they were not number one on the list of secured creditors in the event of a bankruptcy, if the debt to them was not prioritized as number one, they would never lend venture capital again. They were not going to lend money to business if they could not be guaranteed they would paid back first. That is where the push-back came from.
Again ordinary Canadians were frustrated, and we started to do a great deal of research around the country to find out the extent of the problem. We traced the origin of the problem. The real origin of the problem was the fact that so many Canadian pension plans are underfunded, as my colleague from Elmwood—Transcona was saying, not just by the 10% that is contemplated by the Bankruptcy and Insolvency Act, but by 30%, 40% and 50%, because there has been no aggressive and diligent policing of the enforcement of the legislation surrounding pensions. It was at the point where, as soon as private companies started getting into trouble, as my colleague pointed out, they were dipping into the pension plan as a last-ditch effort to try to find some operating capital to keep the company and the plant going for another year or two.
Again, if pensions had joint trustees, this would not happen. However, many of these pension plans are in the absolute control of the company and the company just cannot keep its fingers out of that pool of dough, especially when the going gets tough and it is has a problem. Conrad Black, with Dominion stores, is a classic example. He was taken to court because he took $80 million out of the pension plan of employees and never put it back.
I am proud we are at this juncture in Parliament today.
Some progress was made in the treatment of back wages owing to workers in this initiative. When we did raise the workers first bill, we did get the co-operation of the Liberal government of the day to put in place a special super priority fund for up to $3,000 for back wages payable to employees, so they would get super priority. That was a huge benefit. The $3,000 was adequate. If a guy has not been paid wages for two or three weeks or a month, he probably will quit the job anyway. About 95% of claimants were owed less than $3,000 and would get satisfaction from that fund. I am glad to say progress was made on that front.
The big problem remaining is not the guy who is owed $1,500 or one two-week back pay cheque. The problem is some of these pensions are underfunded by $10 million, $30 million and $50 million. When a company goes bankrupt, the pensioner, who has worked all his or her life in good faith and whose pension has been held as deferred wages on his or her behalf by the company, finds out the money is not there.
We had one example in New Brunswick. There were over $100 million in assets in the company when it was liquidated. It had a great deal of high-tech machinery and property and buildings that were of significant value. The pension shortfall was $40 million. We brought some of these people to Ottawa to plead their case with the government of the day. There was more than enough money in the assets of the company, when liquidated, to make this pension plan whole. We had examples of workers who had 32 years of service and they did not get one nickel in pension.
This was the tragedy in real terms. The effect is overwhelming when we consider 10,000 bankruptcies per year and over $2 billion in back wages per year that should have gone into the pockets of the employees in the company. I would argue that most business owners would rather the moneys realized from liquidating the assets go to their employees as a gesture of good faith as the company wraps up and is closed.
Bill C-501 would address this measure. I know there is broad interest and support from the other parties. If we do nothing else in this session of Parliament, we hope we make Canadian workers who suffer bankruptcies whole in their pension savings and in their retirement security by passing Bill C-501.
