Private Members’ Bills Seek to Amend Insolvency Legislation to Better Protect Pensioners and Employees
October 20, 2017
On October 17th, MP Marilène Gill of the Bloc Québécois introduced Bill C-372, a private member’s bill which would amend the Bankruptcy and Insolvency Act (BIA) and the Companies Creditors’ Arrangement Act (CCAA). The Bill would provide for priority status for claims in respect of underfunded pension plans as well as for claims arising as a result of an employer ceasing its participation in a group insurance plan.
Private member’s bills are bills that are not introduced by a member of the Cabinet. Such bills frequently do not become law.
In introducing the Bill at First Reading, Ms. Gill noted that “This bill seeks to correct the injustice faced by retired workers whose pension plans and group insurance plans are not protected when their company goes bankrupt or undergoes restructuring.”
Issues surrounding the priority of pension and group benefit entitlements have been front and centre in public debates around insolvency legislation for close to a decade. For many years, most legal battles over pension entitlements focused on whether it was the employer or the members who should enjoy the surplus that had accumulated in the pension plan. As economic conditions shifted and interest rates shrunk to historic lows, the focus shifted from fights over surplus to disputes over who should bear the cost of underfunded pension plans. High-profile insolvencies such as Nortel, U.S. Steel Canada and Sears have kept the issue in the public consciousness. The Wabush/Bloom Lake CCAA proceeding has seen major cuts to the pensions and benefits of retirees in Ms. Gill’s constituency and may have been part of the reason for the Bill’s introduction.
Bill C-372 is the first private member’s bill in this session of parliament to address this issue but it may not be the last. In September, the NDP announced that Hamilton MP Scott Duvall, a former steelworker, would introduce a similar private member’s bill this fall. At the press conference announcing the planned bill, Duval, the NDP’s pension critic, specifically referenced the Sears CCAA proceeding and has been reported as stating that the company’s decision to suspend monthly pension and benefit contributions is “the most ruthless, gutless, and unethical thing I have ever seen”.
It is difficult to predict whether these Bills will ever become law. Each of the provinces have already attempted to create a similar priority for pension contributions in the “deemed trust” provisions of their pension benefits standards legislation. While the specific nature of the deemed trust varies across the provinces, the basic premise is that certain amounts owing to a pension plan are deemed to be held in trust and do not form part of the estate of an insolvent employer. Unfortunately for pensioners and employees, the courts have been reluctant to give full effect to these provisions. It is hoped that these private members’ bills may make reliance on provincial deemed trusts unnecessary and ensure that pensions that are earned over a lifetime of work will actually be delivered.
Pension and Benefits