“When a company in financial difficulties is giving $1.4 billion to shareholders and handing executives millions of dollars in bonuses, it’s ridiculous to claim that legislation to protect pensions will affect the ability of the company to survive. What legislation to give pension plans priority in bankruptcy proceedings will do is protect workers and retirees from greed and incompetence.” — Larry Brown, NUPGE President
Ottawa (27 Nov. 2017) — A private member's bill, Bill C-384, introduced by Scott Duvall, NDP MP for Hamilton Mountain, shows that it is possible to protect pensions when companies enter bankruptcy proceedings.
In the last few years there has been a growing trend where workers and pensioners are seeing significant cuts to their pension plans after the companies they worked for went bankrupt. Sears Canada is just the most recent example. US Steel, Nortel, and Can-west are the better known of the other companies where pensions were cut after the companies went bankrupt.
There are 2 reasons pensions are being cut when companies enter bankruptcy proceedings. When pension plans are under-funded, companies find it easy to delay making the payments necessary to ensure they are fully funded. Then, when companies enter bankruptcy proceedings, workers and pensioners are at the back of the line when the company is wound up or restructured.
“Current pension rules make it far too easy for companies to put off dealing with pension plan deficits. Then if the company enters bankruptcy proceedings it is retirees who pay the price,” said Larry Brown, President of the National Union of Public and General Employees (NUPGE).
Bill C-384 would put workers and retirees first
Bill C-384 would amend the Bankruptcy and Insolvency Act (BIA) and the Companies' Creditors Arrangement Act (CCAA) so that a company going through bankruptcy proceedings would have to make sure its pension plan was fully funded before other creditors could be paid. The bill would also prevent companies going through BIA or CCAA proceedings from cancelling benefits for workers or retirees.
Sears Canada liquidation an example of why Bill C-384 needed
People who worked at Sears Canada could see their pensions cut by 20 per cent because the pension plan was not fully funded when the company entered bankruptcy proceedings. Extended health and dental benefits were cancelled. People who have worked at Sears for decades are being laid off without getting the severance pay they are owed.
But while low- and middle-income pensioners will see their pensions cut, pensions they worked decades to earn, some select executives and senior managers are getting $6.2 million in retention bonuses. Existing bankruptcy laws protect retention bonus payments to executives, even though the company is being liquidated.
Excessive payments to shareholders in the years leading up to bankruptcy proceedings are also not a problem under current legislation. At the same time that the workers’ pension plan slid into deficit, Sears Canada spent $1.4 billion on payments to shareholders.
“When a company in financial difficulties is giving $1.4 billion to shareholders and handing executives millions of dollars in bonuses, it’s ridiculous to claim that legislation to protect pensions will affect the ability of the company to survive. What legislation to give pension plans priority in bankruptcy proceedings will do is protect workers and retirees from greed and incompetence. That’s why NUPGE is joining with other unions to support Bill C-384,” said Larry Brown, NUPGE President.
The National Union of Public and General Employees (NUPGE) is one of Canada's largest labour organizations with over 370,000 members. Our mission is to improve the lives of working families and to build a stronger Canada by ensuring our common wealth is used for the common good. — NUPGE