The Stel Salaried Pensioners Organization wishes to
thank The Hamilton Spectator for permission to post the following article by
Business Reporter Steve Arnold published in the March 17, 2004 edition
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Mar. 17, 2004. 12:10 AM |
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Take a Number |
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In the bankruptcy shuffle, Canadian workers are
more vulnerable than those in U.S. |
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By Steve Arnold |
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Canadian workers left with unpaid wage bills when their employer goes bankrupt will continue to have less than half the protection of Americans under proposed changes to this country's bankruptcy law. Changes to the Bankruptcy and Insolvency Act tabled last year by a Senate committee propose giving those claims a "super priority" when the assets of an employer are divided up. While that amendment -- which hasn't been presented to Parliament yet and won't be before next year at the earliest -- would move workers slightly up the bankruptcy food chain, it still does nothing to ensure they get severance pay. Under Canada's current law, unpaid wages are protected in a bankruptcy claim to a maximum of $2,000, but the definition doesn't include severance or termination pay -- allowances which can put thousands of dollars into workers' pockets at a desperate time in their lives. Amendments to that law proposed last year by the Senate's Banking Trade and Commerce committee would give worker wage claims a "super priority" among unsecured creditors. That claim, however, would be capped at the lesser of $2,000 or one pay period. That means workers move a step closer to the head of the line of creditors to be paid after the banks have been sated. The committee recommended no increased protection for pensions in bankruptcy law. While that is an improvement over the current situation, where unpaid wages rank fourth on the list of unsecured creditors, it's still not good enough, said a top official of the Canadian Labour Congress. "Essentially there's no protection in the law for workers other than the basic wage protection," said Hassan Yussuff, secretary-treasurer of the CLC. "We should at least be on a par with the United States, if not better." Under their law, the unpaid wages of American workers are protected to a maximum of $4,650. A critical difference is in the definition of wages -- Canadian law restricts it to regular and vacation pay while the U.S. legislation includes severance pay, sick leave allowances and contributions to employee benefits plans. The latter is only included if the other amounts don't burn up the entire allowance. When the Senate committee held hearings on its proposed changes, the United Steelworkers of America and the CLC argued for a broader definition of wages to include termination and severance pay, for a cap of $20,000 and for wage claims to be ranked ahead of even amounts owed to secured creditors such as banks. They also supported an employee wage protection program similar to one established by the former NDP government of Ontario and cancelled by the Tories. The idea of a federal wage protection fund, and a raised priority for unpaid wage claims, has been around since a 1975 review of bankruptcy and insolvency law. It found its way into proposed legislation in 1991, but was never enacted. It has been re-proposed several times, but has always met stiff opposition from banking, legal and business lobbies. Detractors of the "super priority" idea argue it will inevitably mean less business credit in Canada. "I just don't believe that idea will work very well," said Wes Treleaven, secretary-treasurer of the Canadian Association of Insolvency and Restructuring Professionals. "The banks will just not support that and if it's implemented it will have a huge impact on credit-granting in Canada." Similar objections were raised before the Senate committee on the idea of a wage protection fund -- labour groups argued it should be financed through general tax revenue or a levy on employers while business lobbies say that simply penalizes employers with a low risk of bankruptcy or imposes a cost on all taxpayers. Neither current nor proposed laws in either country offer much protection for benefits coverage -- as 10,000 Weirton Steel workers in West Virginia learned this week when a bankruptcy court judge allowed the company to cancel their health-care benefits at the end of this month. That action was seen as a critical piece in allowing the sale of the company to Cleveland-based International Steel Group Inc. In business for just two years, ISG has catapulted to the top of the industry by buying bankrupt steel companies at bargain prices, cutting costs including retirees' pensions, and reinventing the companies so they can produce more steel cheaper. Pensions, in both the U.S. and Ontario, are partially protected by a government fund which replaces some of the benefits lost if an employer goes bankrupt with unfunded liabilities in its plans. sarnold@thespec.com 905-526-3496 |