Move forward quickly to protect workers in corporate bankruptcies.
That was the message from the Machinists Union to the Senate Banking Committee considering changes to Canadian bankruptcy and insolvency law. The IAM joined the Canadian Labour Congress and other unions at the Senate Committee hearings in Ottawa on January 31. The Committee is considering further changes to the recently-passed legislation (Bill C-12), which improved the standing of worker claims when an employer fails.
This legislation, which arose out of the NDP’s 2004 Budget deal with the Martin Liberal government, gives “super-priority” (a claim on corporate assets ahead of other creditors) for up to $2,000 of each worker’s unpaid wages and vacation pay in a bankruptcy, and creates a Wage-Earner Protection Fund to provide quick payment of up to $3,000 in wages and vacation pay owing. It also provides priority claims for unpaid pension contributions, and makes it clear that collective agreements can not be unilaterally amended during a corporate re-structuring under the Companies Creditors Arrangements Act (CCAA).
To be effective, these important changes still require some administrative action, and the IAM urged that these steps be taken as soon as possible.
The IAM stressed to the Committee the importance of maintaining the integrity of collective agreements during CCAA negotiations. The legal process around insolvencies is still heavily stacked against worker interests. Some employer groups are calling for U.S.-style provisions that allow judges to override collective agreements. Evidence from the U.S. is clear that, given the opportunity, employers will try to use insolvency legislation to attack workers and their collective agreements, going well beyond what is necessary to turn the business around.
The IAM told the Senate Committee that such judicial powers are unnecessary, since workers and their families already have a strong incentive to be flexible when bankruptcy threatens. They have the most to lose when their employer closes down. Canadian workers have consistently shown their willingness to do what it takes to keep their workplaces open in difficult times, without any need for unilateral coercive measures by employers and judges.
The Next Steps
The IAM joined the CLC and the other unions in urging the Senate Committee to take the next steps in protecting workers, families and communities hit by corporate insolvencies.
It is essential to raise the limits on the amounts protected by the Wage Earner Protection Program to approximately $10,000 (about three months pay at the average wage), and to extend coverage to short-service workers, who are among the most vulnerable. The Program currently will not protect workers who have been on the job less than three months.
The protection program should also be extended to severance and termination pay. The loss of earned severance and termination pay in a bankruptcy hits hardest at older, long-service workers.
The protection for earned pension benefits in bankruptcies also needs improvement. Pension windup deficits need to be given a priority claim on corporate assets, and a federal benefits guarantee fund is needed to protect pensions when the assets of the bankrupt employer are inadequate.
It was also pointed out the federal pension legislation does not even require a non-bankrupt employer to pay funding deficits for a wound-up pension plan. This overdue change requires only an amendment to the pension regulations.
The new legislation makes important strides in protecting workers in bankruptcies and insolvencies, but we still have further to go.
What the IAM Asked For:
- Protection for severance and termination pay
- Wage protection for short service workers
- Higher limits for wage protection coverage
- Pension Protection:
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- Employer responsibility for windup deficits
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- Priority Claims for windup deficits in bankruptcy
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- Pension Benefit Guarantee Fund
- Hands off collective agreements!
