Are you worried about whether your company pension will be there for you when you need it? Millions of Canadians are feeling uneasy, especially following the dramatic collapse of Sears Canada.
When Sears filed for bankruptcy protection, thousands of workers were let go without any severance or termination pay, and those remaining lost all their healthcare, dental and life insurance benefits. Sears retirees lost all their benefits too, and now all former employees enrolled in the Sears pension plan will lose those benefits permanently. The company has officially folded, and retirees are waiting to hear how much their pension benefits will be reduced. Estimates suggest retirees could lose anywhere from 20 to 30 per cent of their monthly benefits.
Why is this happening? The simple answer is because Canadian law allows it to happen. Everything Sears has done is completely legal. The fact that Sears could let their pension plan be underfunded by $296 million is not just legal, but it’s common practice. And when a company goes bankrupt, they are not obligated to make up that shortfall. That’s because under Canada’s inadequate bankruptcy and insolvency legislation, secured creditors always get paid first, and monies owing to workers’ pension funds come second. In almost all cases, there is nothing left for workers after the secured creditors have been taken care of.
The Sears workers and retirees are not the first to be tragically impacted by the bankruptcy of a Canadian company. Many will remember the high-profile meltdown of Nortel. This Canadian high-tech company was once an industry giant, which famously flamed-out in 2009 — the largest bankruptcy in Canadian history. Thousands of Canadians lost their jobs, all with no severance or termination pay. Nortel was carrying a $2.5 billion deficit to their pension plan. After eight years of negotiations, Nortel employees learned their pensions would be cut anywhere from 30 to 45 per cent.
In many cases, while workers are losing wages and benefits during bankruptcy negotiations, company executives receive lucrative retention bonuses. In the case of Sears those bonuses amounted to $9.2 million and in the case of Nortel those bonuses topped $27 million. And why was this allowed to happen? Again, the simple answer is because Canadian law allows it to happen. It is all legal.
So what can be done? Well, we need to level the playing field by making changes to federal bankruptcy and insolvency laws so that worker’s pensions and health benefits are given the same consideration during bankruptcy proceedings as secured creditors. My colleague, Scott Duvall, the Member of Parliament for Hamilton Mountain and NDP Critic for Pensions, has introduced a Private Member’s Bill that would do just that. His bill aims to protect workers’ pensions and benefits first, and to force companies to provide termination and severance pay before paying off secured creditors.
To date, the federal government has refused to act. Companies like Sears, Nortel, and now Carillion, continue to fail our workers. It’s now time for the Liberal government to do something so that no Canadian workers ever lose their earned pensions and benefits again.
Alistair MacGregor is the Member of Parliament for Cowichan-Malahat-Langford.