Statement made on 30 March 2010 by Senator Art Eggleton
Hon. Art Eggleton:
Honourable senators, before I tell you what is in this bill and what it does, let me tell you what it does not do. First, it is not about pensions. It is about long-term disability, LTD, and that only. Second, the bill is not only about Nortel, although that situation precipitated this bill. It is about employees now and in the future, in similar circumstances with respect to LTD plans.
I appeal to all honourable senators, on an all-party basis, to support this piece of legislation.
The purpose of this bill is straightforward: To protect employees on long-term disability. While its focus is narrow, Bill S-216 speaks to larger issues, such as issues of fairness, justice and respect. It aims to correct the situation that leaves the most vulnerable of our workers in the most desperate of straits, and it reaffirms the simple principle that people who pay their dues and play by the rules have the right to expect that they will receive what has been promised to them.
At the moment, approximately one million employees in Canada have disability benefits that are self-insured by their employers. That is approximately 40 per cent of long-term disability plans. Approximately 60 per cent of them are actually insured through the normal insurance premium process, but 40 per cent are self-insured. If a company with self-funded, long-term disability benefits goes bankrupt, its employees who depend on these benefits are given the same standing as an unsecured creditor.
That is what the Bankruptcy and Insolvency Act provides. It says to the disabled: "Get in line behind the secured creditors, behind the bondholders, behind the preferred shareholders, behind the common shareholders, and then, if there is anything left, you might get something."
In 2001, Amy Stahlke, in Benefits Canada magazine, wrote about the impending problem:
In Canada, there has been little regulation of self-insured plans. There is no requirement that employers set aside adequate reserves to cover future liabilities arising from these plans. If reserves are set aside, there is no restriction on how those funds are invested. There is also no obligation to keep funds in trust to protect them from creditors. This means that a bankruptcy could spell the end of the benefits plan, including benefits for individuals already on disability.
Honourable senators, employees who are disabled and who cannot work should not be shunted aside. Their needs are not over when their employer goes under. They still need their medication. They still need treatment. They still need rehabilitation. They still need all of the things that their long-term disability plan would have helped to provide.
The bill proposes to protect beneficiaries under long-term disability plans by granting them preferred status. By bringing LTD claimants to preferred status, employees will continue to get their benefit coverage up to age 65 years, be able to pay their medical bills and continue to live outside of poverty.
Honourable senators, some may have concerns about the cost and the impact on credit markets. Some may have concerns about our overall competitiveness. However, when we look at the evidence, we see that not only can this can be done, but many countries around the world are already doing it.
Thirty-four of 54 countries studied by the OECD and World Bank already have either super priority or preferred status for employee claims and their bankruptcy laws. That is for all pension claims, not only long-term disability plans. They have properly functioning credit markets, and they are still competitive. Therefore, the two are not incompatible. We can protect our most vulnerable employees and retain dynamic credit markets and stay competitive.
At least 12 other countries, including Germany and the United Kingdom, require payment of insurance premiums by their corporations to fund their public pension plans and disability income insurance plans.
The United Kingdom's system goes even further. In 2004, they enacted the Pension Protection Fund that states if an insolvent company has underfunded their long-term disability fund, the government will compensate the scheme to protect employees. They are, therefore, protected before an employer goes bankrupt because the government requires their company to fund the LTD plans. If there is a shortfall, the government will step in to cover the shortfall. In essence, the most vulnerable are protected.
In the United States, long-term disability employers have protection through the Pension Benefit Guarantee Corporation. Employees also have legal recourse to go after LTD benefits after bankruptcy provided by their Federal Employee Retirement Income Security Act legislation. There is no such avenue for Canadians. They also have a more generous Social Security Disability Insurance Program that pays more than twice what the Canada Pension Plan Disability Benefit pays to the disabled in Canada. All of our major allies and trading partners have something that goes well beyond what our government offers to our disabled workers.
Honourable senators, nowhere is the inequity of the present situation more starkly illustrated than in the case of Nortel workers. As that company goes about the business of divvying up its assets, over 400 of its employees on long-term disability are being cast aside.
This comes on the heels of news that Nortel paid seven top executives U.S. $8.6 million in incentive bonuses last year as the company struggled through bankruptcy proceedings. What is shocking is that these bonuses were paid to many of the same people involved in decisions that put the company into trouble in the first place. These bonuses were paid at a time when thousands of former employees lost their jobs without severance and while hundreds may lose their LTD benefits.
These long-term disabled employees face a dire situation because Nortel has stopped making new cash contributions to its health and welfare trust. What is the result? Funds in the health and welfare trust are being depleted as the company pays out current long-term disability income, which means there will not be anything left to pay these employees in the future.
This exacerbates the enormity of the situation because the average age of the Nortel LTD employee is 42 years and he or she may need benefits for many years to come as a result of cancer, respiratory diseases et cetera. Many employees became disabled at younger ages. On average, they have they have lives frozen at 50 per cent of their income at the time of their disability, which is well below their earnings potential if they had not gotten sick. This means that these disabled persons have not been able to accumulate personal savings from their low disability incomes to ensure they can live outside of poverty in the future if their benefits are cut off.
Honourable senators, these people also face average health care costs of $12,000 per year. That is over and above public medical care, which is paid through medical benefits from the trust. Once the money in the trust is gone, what are they supposed to do? Current CPP disability income is only about $13,000 a year, well below the poverty line and barely enough to cover their health care costs, never mind leaving anything for food or shelter.
What will happen, of course, is that these employees will turn increasingly to social assistance and make greater use of social services. They will have to make the heart-wrenching decisions whether to buy medication or food, to get treatment or pay the rent.
Effectively, Nortel will have downloaded these costs onto taxpayers while the company walks away from its responsibility. Let me emphasize that the company will transfer its responsibilities, download them onto taxpayers through social assistance programs and the company, which still has billions of dollars in assets, will walk away.
Nowhere is this situation more illustrated than in the individual cases of Nortel employees. They are real people, not simply statistics. They stand to lose everything if nothing is done.
Josée Marin, a lab technologist at Nortel and single mother, has been in long-term disability since 2002. She suffers from Crohn's disease, an inflammatory bowel condition, and scleroderma, a chronic autoimmune disorder. She does not want to become a burden on taxpayers or her family. She wants to be able to live the remaining years of her life with dignity. As she so starkly stated: "I want to die in the comfort of my home, not in my car or on the street."
Then there is Peter Burns, an engineer and a father of three. In 2004, a tumour was found on his spinal cord. After surgery, he was left paralyzed below the T9 vertebra. Surgery partially corrected his paralysis, but some damage was permanent. He also suffered a post-surgical stroke that led to permanent short-term memory loss, extreme hypersensitivity, compromised mobility and severe chronic pain. Most of the time I talked with him, he could not sit because of the pain in his back and legs.
Like Josée, he was of the understanding that Nortel's long-term disability plan would support him until age 65 years. To ensure he would be covered, he made additional contributions to the plan to raise his LTD coverage from 50 per cent to 70 per cent of his income. He thought he had done everything right. He thought he took the responsible steps to protect himself and his family. Sadly, if nothing changes soon, his efforts may be for naught.
Nortel employees are not alone. There are workers in similar situations at the Pacific News Group, which is owned by Canwest. As CanWest goes through bankruptcy, their employees may see their benefits go as well.
The problem is not new; we have seen this kind of thing before. When Massey Combines went into receivership, many employees saw their benefits vanish.
Honourable senators, long-term disability plans are based on a simple bargain: if one pays one's fees, one will be covered should anything happen that makes it impossible for one to work. In the case of Nortel and others, that bargain has been broken. In the future, if no action is taken, similar bargains will be broken again. The taxpayers, I emphasize, will then end up picking up the costs.
The bill before honourable senators today attempts to end that practice. It declares in no uncertain terms that promising long-term support and then making short-term decisions to leave those promises in tatters is not just a matter of liabilities that are unfunded; it is a matter of practices that are unfair, unjust and unacceptable.
On March 11 of this month, the Government of Canada ratified the United Nations Convention on the Rights of Persons with Disabilities, and I applaud them for doing that. The guiding principles of the convention say that we must respect the inherent dignity and inclusion of persons with disabilities in society and that we must protect their right to an adequate standard of living. If nothing is done soon, honourable senators, then we will not be living up to our commitment by protecting Josée, Peter, and the other Nortel employees who currently and in the future will find themselves in this terrible position.
Honourable senators, there are times when it falls to legislators to speak up for those who have no voice, to help the powerless, to stand up for people because of the rightness of their cause and the unfairness of our laws. This is just such a time.
This bill will not only bring a greater degree of fairness in the bankruptcy process, but it will also help protect some of our most vulnerable citizens now and in the future.
As Josée Marin said:
These changes to the bankruptcy act are about human decency. They ensure a situation like the one I have been through for the last year never happens to any critically ill or disabled worker ever again.
Again, colleagues, I appeal for all-party support for these measures. Thank you very much.