June 5, 2003 (37th Parliament, 2nd Session)


Pat Martin

New Democratic Party

Mr. Pat Martin (Winnipeg Centre, NDP)

Mr. Speaker, I am glad that time allowed me to take part in this debate. I am very grateful to my hon. colleague from Churchill for bringing this issue to the House of Commons for us to revisit.
We have had this debate once before. In fact, I introduced a private member's bill along these lines about a year and a half ago and we had some interesting debate associated with that too. I for one learned a great deal during the process of developing my private member's bill and I have learned even more during this debate about the imbalance that exists, the basic issue of fairness that is lacking in the current Bankruptcy and Insolvency Act in this country.
I should start by pointing out our gratitude to the member for South Shore for his enlightening comments and history lesson as it pertains to bankruptcy. People would be interested to know that there are over 10,000 bankruptcies a year in Canada. I do not have the exact dollar figure with me at this moment, although I do have it somewhere in my office. I believe it is $1.8 billion in lost wages that are left on the table due to those 10,000 bankruptcies per year. I believe that is the figure. I could be wrong, give or take a little. It is a huge issue and it affects a great number of workers, so we are not dealing with an abstract esoteric issue here.
Most Canadians would be shocked to learn that back wages, pension contributions, holiday pay and other forms of compensation, such as a salesman's commissions, are often not recovered by the employees in the event of their employer going bankrupt. The reason this is so fundamentally wrong, and offends me and others, is that there is a trust relationship that is developed between an employer and an employee. Whether it is in a written contract or collective agreement or even if pen to paper never happens at all, that relationship and obligation exists.
The deal is that the employee performs a service for someone and that person pays the employee for that service, but all the power still resides with the employer. It is an imbalance in that trust relationship, which is all the more reason why, in the event of the employer finding itself in an insolvent position, that employer has an obligation in that trust relationship to live up to the contract, either written or implied.
The argument has been made that banks and other investors should have the status that they enjoy currently of being preferred creditors. I argue that the banks and other investors know full well the risk of investing in a company and they factor in that risk by charging interest. In fact, the banks and other investors are being paid for that risk throughout the life of the company and have been paid back at least in part for some of the money loaned. Often what remains is the interest on the loan, so whoever the financial backers of the bankrupt or insolvent company are have already recouped some of their investment. They knew full well the risk going in and may have enjoyed dividends throughout the life of that company prior to its going bankrupt.
It is a much different situation for the employee who, my hon. colleague from Churchill pointed out, is often living in a much more hand to mouth marginal existence. Two weeks of lost wages can make a significant difference in the life of a low income worker. The risk is quite different and the relationship is quite different. The relationship between the employer and the employee is unique in all the relationships being contemplated in bankruptcy. Certainly we argue it is the employee who should have first dibs on whatever assets remain.
The employer often does not care, frankly. In fact, if one were to ask most owners of bankrupt companies, they would rather that whatever assets they may have left after the bankruptcy went to their employees, I would like to believe that anyway, because they have already walked away from the company. They are not their assets that are being distributed any more. They are the remaining flotsam and jetsam left over after the employer, the owner, has walked away from the bankrupt and insolvent company.
Another point I would like to make is on the amount. In the current legislation the amount of $2,000 is the maximum amount that an employee can recoup, if there is anything left after all the other creditors have had their go at whatever assets are left of the company.
That $2,000 maximum is totally out of touch with the reality of today's wages and the possible amounts owing to employees. It was in 1992 that the figure was quadrupled from $500 to $2,000. It is now a decade later. Surely that figure should be revisited and I would argue increased dramatically.
In the case of compensation of commissions owing to a salesperson for instance, these are only sometimes paid out. It is unfair that employees should rank so low in the pecking order of who gets paid from the assets remaining in a bankrupt company. The maximum in the current legislation is completely unfair and should be increased in a very dramatic way.
The member for South Shore referred to a moral obligation to repay debt. I think he is mixed up. Even in the Bible there is no reference to the duty to pay back money. The only reference in the Bible is it is immoral to charge interest on a loan.
I would say the moral obligation is not an issue in this sense. The debt owed to investors is already dealt with in part by the interest and by the profits enjoyed.

Topic:   Private Members' Business
Subtopic:   Bankruptcy Legislation
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