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Viewpoint: Pensions and benefits require protection

Will your company pension be there for you when you need it? Millions of Canadians are not so sure, especially after the dramatic collapse of Sears Canada.

Will your company pension be there for you when you need it? Millions of Canadians are not so sure, especially after the dramatic collapse of Sears Canada.

When Sears filed for bankruptcy protection, thousands of workers were laid off without any severance or termination pay, and those left lost their health care, dental and life insurance benefits. Now retirees are waiting to hear how much their pension benefits will be reduced. Estimates indicate retirees could lose anywhere between 20 to 30 per cent of their monthly pension benefits.

Why is this happening? The simple answer is because Canadian law allows it to happen.

Everything Sears has done is legal. The fact that Sears was able to let their pension plan go underfunded by $266 million is not only legal, but common practice for big corporations. When a company goes bankrupt it is not required by law to make up that shortfall. Why? Because of Canada’s inadequate bankruptcy laws.

Under Canada’s bankruptcy and insolvency legislation, secured creditors always get paid first, and money owed to workers’ pension funds comes second. In almost all cases, there is never anything left after the secured creditors have been paid.

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 star of Canadian high tech famously flamed out in 2009, making it the largest bankruptcy in Canadian history.

Thousands of Canadians lost their jobs, all of them without any severance or termination pay. Nortel was carrying a $2.5-billion deficit to its pension plan. After eight years of negotiations, Nortel employees learned their pensions would be cut from anywhere between 30 and 45 per cent.

In many cases during bankruptcy negotiations, workers often lose jobs, severance/termination pay and their benefits, while company executives receive lucrative retention bonuses. In the case of Sears Canada, 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.

So what can be done? Obviously we need to level the playing field by making changes to federal bankruptcy and insolvency laws so workers’ pensions and health benefits are given the same consideration during bankruptcy proceeding as secured creditors. Pensions are, after all, deferred wages people work hard to earn.

My colleague Scott Duvall, MP for Hamilton Mountain, has introduced a private member’s bill that would do just that. His bill would protect workers’ pension and benefits first, as well as force companies to provide termination and severance pay before paying secured creditors.

To date, the federal government has refused to act. Companies such as Sears, Nortel and Stelco continue to fail our workers. It’s time the Liberal government acts. No Canadian worker should ever lose hard-earned pensions and benefits.

Rachel Blaney is the MP for North Island-Powell River and serves as NDP deputy whip and critic for seniors’ issues.