CANADIAN FEDERATION OF INDEPENDENT BUSINESS
SOLARCHEM ENVIRONMENTAL SYSTEMS
LABOUR COUNCIL OF METROPOLITAN TORONTO AND YORK REGION
ONTARIO PUBLIC SERVICE EMPLOYEES UNION
INFORMATION TECHNOLOGY ASSOCIATION OF CANADA
CANADIAN UNION OF PUBLIC EMPLOYEES, ONTARIO DIVISION
CANADIAN BAR ASSOCIATION -- ONTARIO
STUDENT UNION OF LAKEHEAD UNIVERSITY
WORKERS' INFORMATION AND ACTION CENTRE OF TORONTO
NIAGARA REGION DEVELOPMENT CORP
CONTENTS
Thursday 1 August 1991
Employment Standards Amendment Act (Employee Wage Protection Program), 1991, Bill 70 / Loi de 1991 modifiant la Loi sur les normes d'emploi (Programme de protection des salaires des employés), projet de loi 70
Canadian Federation of Independent Business
Canadian Bankers Association
Solarchem Environmental Systems
Labour Council of Metropolitan Toronto and York Region
Ontario Public Service Employees Union
Information Technology Association of Canada
Canadian Union of Public Employees, Ontario Division
Canadian Bar Association--Ontario
Student Union of Lakehead University
David Williamson
Workers' Information and Action Centre of Toronto
Centre for Individual Rights
Niagara Region Development Corp
Adjournment
STANDING COMMITTEE ON RESOURCES DEVELOPMENT
Chair: Kormos, Peter (Welland-Thorold NDP)
Vice-Chair: Waters, Daniel (Muskoka-Georgian Bay NDP)
Arnott, Ted (Wellington PC)
Cleary, John C. (Cornwall L)
Dadamo, George (Windsor-Sandwich NDP)
Huget, Bob (Sarnia NDP)
Jordan, Leo (Lanark-Renfrew PC)
Klopp, Paul (Huron NDP)
Murdock, Sharon (Sudbury NDP)
Offer, Steven (Mississauga North L)
Ramsay, David (Timiskaming L)
Wood, Len (Cochrane North NDP)
Substitutions:
Haeck, Christel (St. Catharines-Brock NDP) for Mr Kormos
Owens, Stephen (Scarborough Centre NDP) for Mr Dadamo
Witmer, Elizabeth (Waterloo North PC) for Mr Jordan
Clerk pro tem: Carrozza, Franco
Staff: Luski, Lorraine, Research Officer, Legislative Research Service
The committee met at 1012 in committee room 2.
EMPLOYMENT STANDARDS AMENDMENT ACT (EMPLOYEE WAGE PROTECTION PROGRAM), 1991 / LOI DE 1991 MODIFIANT LA LOI SUR LES NORMES D'EMPLOI (PROGRAMME DE PROTECTION DES SALAIRES DES EMPLOYÉS)
Resuming consideration of Bill 70, An Act to amend the Employment Standards Act to provide for an Employee Wage Protection Program and to make certain other amendments.
Reprise de l'étude du projet de loi 70, Loi portant modification de la Loi sur les normes d'emploi par création d'un Programme de protection des salaires des employés et par adoption de certaines autres modifications.
The Vice-Chair: I call today's meeting to order. I believe circulated this morning was a motion put forward that the committee pay the expenses of Ian Middleton, president of the student union of Lakehead University, to attend the committee.
Mr Klopp: Since we are dealing with this issue, I would like to move an amendment to add the name of Patti Parsons to this motion. She was the young lady who came yesterday morning, July 31, as a private citizen to talk about what happened when she lost her job at Granny's Chicken Coop. As she pointed out, she is not too well-off right now. Would that be okay at this time?
The Vice-Chair: Okay, there has been an amendment to the motion put on the floor. Any discussion? I need to know who is going to move the first motion.
Mr Offer: Has the first motion not been moved?
The Vice-Chair: No.
Mr Offer: Why do we not move the first motion, and then you can move an amendment to the motion?
The Vice-Chair: Ms Murdock moves that the committee pay the expenses for Ian Middleton, president of the student union of Lakehead University, to attend the committee meeting.
Mr Klopp moves that the motion be amended by adding the name of Patti Parsons.
Mr Offer: Certainly we will be in support of the motion as amended. I think this also brings to light the point our caucus made just before the hearings commenced of the necessity for travel to meet with people across the province -- not only management, not only workers, but a variety of people. We stand in support of this motion, but I think in a very real way it says that this committee should have been travelling and should have more extended hearings on a very important bill which is viewed by both business and workers across this province. We stand in support of the motion.
Motion agreed to.
CANADIAN FEDERATION OF INDEPENDENT BUSINESS
The Vice-Chair: Our first presenter for the day will be the Canadian Federation of Independent Business: Mr Gray and Ms Ganong. We are ready whenever you are.
Ms Ganong: Thank you very much, Mr Chair. My name is Linda Ganong. I am the director of provincial affairs for Ontario of the Canadian Federation of Independent Business. This is Brien Gray, our senior vice-president for legislative affairs.
I am not going to read our brief; I will just highlight some of the points of it. Just to tell you a little bit about our organization, we have been here on numerous occasions and seen some of you before. The CFIB is a non-partisan political action organization. We are not affiliated with any political party. We do not take any money from government or any political party.
We represent about 88,000 independent, Canadian-owned and-operated, small and medium-sized businesses across Canada. About 40,000 of them are here in Ontario. Our members come from all sectors and all industries in the province. They pretty well represent the small business universe. We have about 15% or so in manufacturing and 12% in construction. If you look at the picture of small business and look at our membership, we are pretty representative.
We also represent a variety of firm sizes. Size is not a criterion to be a member of the CFIB. Independent ownership means being privately and independently owned and operated, which means they tend to be small and medium-sized. We have very few large members. They are also a variety of ages. Our members tend to be a little older than the general Ontario population of small firms because we do not find them until they are established and have been running for a few years.
The breakdown in terms of location in the province: about a third of them are in rural areas, about a third in smaller urban centres and another third in large metropolitan centres such as Toronto. So again they are pretty representative of the entire Ontario business universe. It works out that about one out of every eight Ontario small firms is a CFIB member. Again, we are able to speak on behalf of the small firm community generally.
With regard to the plight of unpaid workers, I do not think there is one member of ours who would not agree that it is just a tragedy if workers are left unpaid if their employer goes under. It is just a question of finding what the best solution is to make sure that those people get compensated.
We have been lobbying for the past 12 to 15 years to have the federal government make changes to the Bankruptcy Act to allow unpaid workers to have a superpriority, so that they would get paid out of the assets of the bankrupt estate first, ahead of the secured creditors and ahead of the banks. Needless to say, given the strength of the secured creditor lobby, we have not been too successful with that, but we still feel that this is the best solution, that a priority should be given to the wages of workers. It would be a fair allocation of payment out of the bankrupt company's assets and it would also mean that the cost would be borne by the people who have incurred the problem, for whatever reason, rather than by the successful companies and the other taxpayers who now have to subsidize it. So any wage protection program is basically starting from a second-best position. The best solution would be the superpriority.
Speaking about a couple of things the NDP government did right with regard to this wage protection program, the first was that it did not impose a payroll tax on the employer community to pay for it. We cannot speak highly enough about the beneficial impact that this decision is going to have on small business. It was a very sensitive policy choice, and given the development in the federal arena, it is in very stark contrast to what Ottawa has decided to do, because Ottawa has gone the other way and it is creating painful hardship for small businesses.
We have testified before as to the effect of payroll taxes on small businesses. They are much more burdensome on small businesses than large ones, because small businesses are labour-intensive. The costs of their labour are a much bigger proportion of their costs. Any tax on payroll is a tax on labour is a tax on jobs. The other thing is that payroll taxes are profit-insensitive. In times like these, recessionary times when the companies are not making money but still have to pay out on a payroll tax, it hurts a lot on the bottom line.
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So the government stuck to the principles that were voiced quite admirably by Mr Rae when he was opposition leader and he was faced with the employer health tax that was being imposed on the small business sector. He basically opposed that and said that a payroll tax is a tax on small business and a tax on jobs. We are really glad to see the government sticking to its principles there and not going the route of a payroll tax, and we completely support you in that.
The second action that the government took that has helped is the retreat from the original proposal to increase the liability on directors and officers. The fallout from that on the small business community would have been tremendous, and the fact that the government listened and backed off -- again, we commend you for that.
That still leaves a number of outstanding problems with the bill that we want to draw to your attention today. The first one is just the overall extent of the coverage, the fact that this bill, in contrast to the federal proposals, goes beyond assisting workers whose employers have gone under through a bankruptcy or insolvency -- basically a "gone out of business" situation -- and also covers workers who are in still-solvent, still-operating companies who for some reason or another have missed a payroll.
Basically, in a program like this, which is sort of an extreme situation, we think that to crank up the machinery of government for any number of reasons for which a solvent operating company should miss a payroll is really overkill and does not really accomplish the objective that this program should be accomplishing. The fact that there is a payout coming from a fund may also cause the creditors of that company to get overexcited and push the panic button. Knowing that workers have got the payout from the program may make everybody really nervous and they might put in a receiver or start pulling the plug when it is not really necessary. There could be a number of reasons why a payroll might be missed. Sometimes it is just a question of cash flow. The employees just need to hold on for another couple of weeks until a major payment comes in from a customer. So using it for solvent companies is, we think, unnecessary and unwarranted and not going to really further the purposes of the bill.
There is also the extent of compensation, and there are two aspects of that. One is the ceiling itself and the other is the compensation package. We understand from officials in the Ministry of Labour that average claims are running around $2,500 to $3,000. That makes us question, why have a $5,000 ceiling? If that is what the average claim is, why not set the ceiling around the nature of the average claim, $3,000 or $3,500? It just fits a little better with what is going on. Why start off with a $5,000 ceiling?
Also in terms of the package itself, it is a huge step forward from the current situation, where workers basically get $500 and that is it, to give them guaranteed coverage for their wages and vacation pay owing. Then to annex a layer of termination pay and severance pay coverage can just -- given that we are running a deficit in this province and we have to really watch what we are doing, it just seems again to be unnecessary right now. What we would propose is that the legislation include a sunset provision so that the entire package could be reviewed in, say, three years. If a lower ceiling of $3,000 to $3,500 and a compensation package of simply wages and vacation pay are not proving to do justice, then the whole thing can be reviewed in three years and revised.
There are some problems looming on the horizon with regard to harmonizing this particular bill with the federal bill. We know that there are discussions ongoing right now at both the political and the bureaucratic levels to try to work those out. Again we just want to alert you to a couple of the areas to which attention really needs to be paid.
One is to look at how the $5,000 Ontario ceiling, or whatever the Ontario ceiling is, and the $2,000 proposed federal ceiling work together. We have been told by senior bureaucrats in our Ministry of Labour here that the province will not pay out an additional $5,000 on top of the $2,000 federal payment. The Minister of Labour confirmed that as well when he was testifying before the estimates committee. However, we heard very recently from federal officials that they are not clear this is the case. They did not understand from their discussions with the provincial officials that it was not going to be an add-on. We would like to get that cleared up. The small business community really needs absolute, unequivocal, public confirmation by the minister, at the earliest possible moment, as to the fact that the programs are going to be folded in together and not cumulative. Soon, please. Let's not let this confusion go on. It may just be because the federal officials have not understood, but whatever, it needs to be cleared up.
The other possible area for problems is meshing the two delivery mechanisms in the most cost-effective way. I know discussions are continuing and the federal government is also speaking to Manitoba and Quebec about this. It looks as though what the province is putting forward is sort of a one-stop shopping location, where all the workers would come in through the employment standards branch and then the employment standards branch would verify the claims and bill the federal government for its share. That is a very appealing concept in terms of simplicity and the fact that workers know just where to go.
The one caution we raise about it is, how much is it going to swell the payroll of the Ministry of Labour? How many more people need to be added on and is it going to be cost-effective? We understand, and we are a bit appalled at hearing, that the Ministry of Labour is contemplating adding another 131 staff to the employment standards branch for the wage protection program, and 57 of them would solely be doing this intake verification work. One of the reasons the federal government said it liked this idea was, and it was looking at Manitoba in particular, that there was a core there of already trained, experienced employment standards branch people who have been running the Manitoba program for a number of years. But if we are looking at taking on another 57 inexperienced, unknown people, there are going to be mistakes, there are going to be problems. Is it really going to be the most cost-beneficial way to do it? We want to alert you to that problem.
We are quite concerned about the fact that the bill contemplates using the regulatory authority for any subsequent increases to the program ceiling, for any additional components to the compensation package. In a bill like this, which is coming out of the consolidated general revenue, the taxpayer and the public really deserve the full accountability of the Legislature. We think that is a misuse of regulatory authority. It should be an amendment to the bill and it should be subject to full legislative debate. It should not be sneaked off through a regulation when we are talking about a substantial component of the bill.
In terms of directors' liability, we just want to reiterate that those initial decisions that were taken on extended liability did seriously damage business confidence and trust. It sent out a signal to the business community that was not a good one, especially considering the current economic climate. That damage is not undone right now. It is great that the government has moved back, but the damage was done. It is really to highlight some of the dangers of trying to get things done quickly. There is a lot of pressure on government to move quickly, and we understand that, but you are not going to hear that kind of pressure from us. We are definitely going to be advocating, "Take your time, do the work, do the research, do the consultation, get the best possible advice before you move", because it does cause damage to small business confidence when governments move precipitously and send out the wrong signals.
The fact that the liability provisions have been revised is great, but there are still these new procedural changes that go along with the fact that they are now in this bill. The fact is that collection proceedings for unpaid wages can be instituted against directors under the new provisions of this bill, under the employment standards branch, before the employer is found to be completely unable to pay, whereas under the Business Corporations Act, generally they do not move that precipitously. They do not have this new, administrative way of proceeding.
We would like to see an amendment that provides that the directors' liability would not be triggered until the debt is found to be uncollectable from the employer. Again, it will just save a lot of expense, cost, problems for directors, and remove part of the disincentive for being a director that these new onerous provisions are doing. That is what I really want to focus on right now with regard to directors' liability.
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It still is a disincentive to be a director because of this new burden. It is a particular problem for small firms. Small firms are often criticized for lacking management expertise. You hear it from the banks, you sometimes hear it from governments. Even the Ministry of Industry, Trade and Technology talks a lot about, "Small firms just don't have the management expertise and that's why there are problems." One of the ways they can get that management expertise is to bring outside advisers on to their boards of directors. They can bring on lawyers, accountants, other business advisers, other retired business people who have experience in their particular field, have them sit on the board and contribute to the management of the company in that way.
If you set up a program that acts as a disincentive for people, because they are worried about their own personal liability, the last place they are going to want to go is to a small firm which is, by definition, a more risky place anyway. It is a more risky, precarious enterprise by virtue of the fact that it is small, and sometimes new. The kind of disincentive directors' liability creates is going to be felt more strongly by the small firms which are most in need of that management expertise. That is part of the impact of having directors' liability. It is going to have a heavier impact on the small firms and deprive them of the management expertise they really need to make it.
The government points to, and I actually did not see this in the bill and I do not even know if it is still being considered, but initially there was talk about a three-month proclamation gap. The provisions for directors' liability would be held off. They would not be proclaimed in force for three months after the rest of the bill was proclaimed, in order that businesses could put in place directors' liability insurance. Especially from a small firm's perspective, what that does is there are a lot of assumptions going on there on the part of the government about how available and affordable directors' liability insurance really is and how sophisticated small firms are in going about getting it. We would like to blow that up, right here and now.
The first presumption seems to be that there is existing directors' liability insurance out there and it is adequate to cover this new risk. That is not clear cut, that is not black and white. Directors' liability insurance is a malpractice type of insurance and it was meant to cover "wrongful" acts. It is unclear whether the particular policy wording that now exists in some policies would be apt to cover directors' payouts to employees or to the compensation program. It is going to take a legal review.
Companies are going to have to look at their own policies, probably with their legal counsel, and make sure the wording is apt. Some of it will be, but some of it might not be. In any case, you cannot be sure. You are going to have to undertake a review of it. That gets into that kind of expense, and also the ignorance factor of whether companies are going to be aware they are going to need to do that. Otherwise, they could think they are covered and not be. Some insurance companies have actually indicated that their traditional directors' liability insurance policy is not indeed apt to cover this new risk and that they are going to have to either revise their policies or people are going to have to get different kinds of coverage. What is out there might not be enough, as it stands.
The second presumption, that three months is enough time to put insurance coverage in place, ignores the underwriting practices for this particular kind of insurance. This is not standard, easy-assessment insurance. It really requires an individual assessment of risk. Every single company needs to be looked at individually. There are not any book rates for this. It is really based on the size of the company, the range and scope of its business and the overall financial health of the company. It takes an individual risk assessment.
There are some fairly extensive underwriting requirements. There is a detailed application form that a firm needs to fill in. It usually needs to submit copies of its bylaws, it needs to submit financial statements, sometimes a track record of financial statements for the past four or five years, and then the underwriters themselves have to look at all that material and make an assessment.
The Vice-Chair: I just want to let you know that you are about 20 minutes into it. We have allowed one half-hour.
Ms Ganong: I am sorry. I am nearly done. This is sort of the meat of it, just the tricky parts of it. Because it takes an individual assessment of risk, oftentimes the underwriting function is centralized at head office. So you are going to get a bottleneck there too, with all of the applications flowing into the most skilled underwriters. It is going to take time for them to do it. Three months just might not be enough. It is too tricky. It is not like, "Oh, here's the application. Let's just stamp it and send it on."
Also, for new companies some insurance companies may require audited financial statements. Small firms do not generally have auditors. They cannot afford them. It is not usually necessary. They are privately owned. But for this kind of insurance, the insurance companies may want audited financial statements, so then they will have to go through the whole business of getting an auditor and going through the audit and the time it takes to do that and the expense it takes to do that, just to get this insurance coverage. It could be quite a nightmare.
Once you go through all those hoops, you have to look at whether you can afford it. Can you afford the cost of the audit? Can you afford the cost of just legal counsel reviewing whatever you have, if you have anything? Can you afford the premium? The current premium right now runs around a minimum $2,000 a year, and that is not taking into account the extra risk. That is anybody's guess too. There is not a lot of competition in this market.
Finally, even if you can get through all that, the insurance company could turn you down. The insurance company could decide, "Too big a risk and we're not going to cover you." The companies that are most in need of coverage will be the ones that will probably be least likely to get it, because they will be the ones that are brand-new, with no track record or financial statements. They may be struggling right now trying to readjust to the economy and to the structural changes that are going on and trying to see their way through, but because they are shaky, "Too big a risk." Maybe they have not made a profit yet. Those are the problematic ones and those are the ones that are creating the jobs right now. It is those brand-new, get-off-the-ground starts that are the job creators, and you could be setting them up for a real fall.
I will leave time for questions. Our recommendations are all listed at the back of our brief in a really easy-to-see format, so I will not bother reading them. Thank you very much for your patience. I am sorry I took so long.
The Vice-Chair: We will start the questions, Ms Murdock, with your caucus.
Ms S. Murdock: Just to allay some of your concerns, I know that when the deputy and the minister came on Monday, the negotiations with the federal government were occurring, have been going on for quite a while. In fact, we have a meeting with our federal counterparts on Wednesday of next week to continue discussions on this. Yes, it is not $5,000 plus $2,000. The federal side may not know it, but we will make it clear to them, I am sure.
Our hope is that we would be able to work out one-stop shopping, as you had suggested, at the provincial level and then the province would go and get the $2,000 in bankruptcy situations or insolvency cases from the federal side and have it refunded back into the consolidated revenue fund, so that the worker or the applicant would not be out waiting for two different agencies to be making decisions. I think that answers one of your concerns.
Ms Ganong: Could the minister make that clear? Could the minister make some kind of public statement?
Ms S. Murdock: It has not been decided yet, but that is what are negotiating for and that is what we want, that there be one area of application.
Ms Ganong: And that it not be cumulative, that the provincial ceiling be the ceiling?
Ms S. Murdock: No, there will not be a double payment.
Ms Ganong: Right. That is what needs to be clarified
Ms S. Murdock: No, that just does not make sense anyway.
Ms Ganong: We agree. It just needs to be said.
Ms S. Murdock: I know some people think we do not think, but we do.
Rather than questions, because this is extremely well done and I have to compliment you on your presentation, with regard to the concern you expressed for workers applying to the fund -- I cannot remember; it was right at the beginning of your presentation -- the employment standards officer would determine whether or not wages were warranted. If it was just a case of a solvent employer who had the funds but for some reason was unable to meet payroll that week, that case would not, as it does not now in the same situation -- these are amendments to the existing Employment Standards Act. So it would work now that if it was just that kind of case, then there would not be wages owed. There would still be that employment standards officer intervention to determine whether the case did warrant going into the fund or not.
Ms Ganong: It is just that the provision for the fund does allow that if the employer is solvent but for some reason the worker has not received wages, the worker can still make a claim on the fund.
Ms S. Murdock: The worker could make the claim on the fund, but if the employment standards officer determines that it is just a matter of a minor delay or that he can get it from the employer -- the primary payer is the employer, even before the fund, so you go to the employer first. That is who owes the money; that is who should be paying it.
Ms Ganong: That is great. We would just like to see that provision taken out of what is being paid out of the fund and that the fund is left to cover the cases of real hardship, the insolvencies and bankruptcies.
Mr Gray: Could I just add a point here? If you were to ask most businesses and small businesses out there whether they felt that agencies of the government were penalty imposers or rehabilitation experts, they would probably say penalty imposers. My appeal to you is that with regard to the labour standards and employment standards administration and enforcement and that kind of thing, you really impose on those people a mindset of, "We're trying to save this firm; we're trying to keep jobs; we're trying to see that wages get paid on an ongoing basis," and not focus unduly on the penalty side.
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Mr Offer: I recognize there is not a great deal of time remaining, and you have covered many subjects for which there are a number of questions. Unfortunately, I have to limit to one area. We have heard concern about this whole question of directors' liability, especially in terms of its impact on small business. We all know that small business is a major creator of new jobs.
Under this bill there are enforcement procedures attached to directors of all companies. What would your reaction be if the bill were amended so that directors of small business, however that would be defined, would be exempt from the enforcement provisions of the bill? In other words, the personal liability they face now under the Business Corporations Act and the Employment Standards Act would remain basically unchanged, therefore relieving them of the necessity, for instance, of obtaining insurance, if that is even possible, and all of those things.
Mr Gray: It is a novel concept. I do not think small business is saying it does not have any obligations. They do recognize they have obligations as employers and as, if you will, trustees of the workplace. I think the issue here is that as long as the obligations and the duties are appropriate, in other words, if the obligations are appropriate to the nature of the firm, its resources, its sophistication and so on, it can cope with that.
What we are bringing to the table is that it may well be that there is not in place a regime that can handle what you are trying to achieve with this bill. What may be perfectly all right for a major corporation in terms of its obligations is simply inappropriate for a small firm. They do not have the financial or human resources or the advice to be able to respond. I cannot take an absolute position on this simply because we have not asked our members about it and we really do a democratic process.
I do not think they are asking to be totally absolved from obligation, but I think they are asking to have some sensitivity as to the differential impacts these kinds of obligations can have on different-sized firms.
Mr Offer: How would that be addressed, though?
Mr Gray: You need not necessarily go as far as we are trying to go with this legislation. You deal with the bad actors on a bad-actor-by-bad-actor basis. I think you can do it that way, rather than having to do a broad-brush and touch everybody in the economy. One of the reasons we say superpriority is a preferable route is that you touch those firms that really are the ones causing the difficulty. But when you go into broad plans -- for example, at the federal level, tax everybody because they assume you are going to fail or assume you are going to mistreat your employees -- to me, that is coming from the wrong premise. You have to come from the premise that this will be an exceptional thing and let's deal with the exception, rather than having a broad brush and do everybody in.
Too often we come at legislation in this country from the point of view that we have to deal with every eventuality that might happen out there, even though the vast majority of firms or people do not get caught in these situations.
Mrs Witmer: I realize we are running short of time. Actually, my question related to Mr Offer's. I have been concerned about the availability of this insurance. We have done quite a bit of investigation. In fact, we heard from a gentleman yesterday who finally got liability insurance for his company this year but could not get it last year, and he has numerous business colleagues who are unable to obtain insurance. Have you done a study of your members to determine who has this insurance, who has tried to get it and cannot? Do you have any of those data?
Ms Ganong: No, we do not have those data. We have talked to those of our members who are in the insurance brokerage industry -- we have a number of them -- just to get a feel of what the environment is out there, what the problems are.
One of the problems is that there are basically only about six insurance companies that do provide this to the for-profit sector, so there is not a lot of competition. Insurance companies are in the business of risk assessment, and if something looks too risky for them, they do not want to cover it. That is their business; you cannot really fault them for that. Unfortunately, the smaller businesses are the riskier ones. They have just started up and cannot say, "Here's five years of our financial statements where we've been making a profit every year." That is very rare for a small business anyway. For the first few years they are not going to be making a profit, so they are the ones that are going to get cut in the squeeze.
Mrs Witmer: I think you have raised a very important point, and we have heard it from people. No one is going to create a business and create new jobs in this province if they cannot get the insurance.
Ms Ganong: It is going to make it more difficult for them to get directors to serve on the boards if the directors feel they cannot be covered. That is a commonsense decision. You can understand that. If indeed the extra management expertise is sometimes what makes the difference in a small business succeeding and it is deprived of that, what have we done? Have we helped our economy? It is a tragedy when workers lose their jobs, and you want to make sure they do get paid their wages, but you also want to make sure they have another job to go to.
Mrs Witmer: And I guess that is the key.
The Vice-Chair: I am going to have to cut in here. I hate to be the ogre, but that is part of my job. Thank you very much for your presentation. In particular, I found your detail on the directors' liability quite interesting. You seem to have gone into more detail than a lot of presenters. Thank you very much for that.
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CANADIAN BANKERS ASSOCIATION
The Vice-Chair: Could the Canadian Bankers Association please come forward for its presentation. Welcome to the hearings this morning.
Ms Cannon: I would like to apologize in advance. I have come down with some sort of sore throat, so I am not in my best voice today.
I am Louise Cannon. I am a senior vice-president for the Bank of Nova Scotia in the area of commercial lending, and I also serve as chairman of the CBA task force on bankruptcy reform and issues involving creditors' rights. Accompanying me today is Mr Bill Randle, who is a senior member of the CBA's legal staff. On behalf of myself, Mr Randle and the CBA, I would like to thank the committee for this opportunity to appear.
I know all of you have received the brief we wrote in May on the basis of the consultations we had with the Ministry of Labour, two of them at that time, as well as the original bill. I might add that we found those consultations to be very worth while.
Since that time, of course, we have seen the minister's announcement of June 5 that there would be significant amendments, and in the last couple of days we have seen the amendments which were tabled. While we have not had an opportunity to have a lengthy study of these amendments, we are pleased to see that a number of the issues which we raised previously in our brief appear to have been dealt with and some of our concerns have been allayed.
We had been particularly concerned with the inclusion of officers as persons liable to pay and the expanded liability-to-pay provisions imposed on directors. As creditors, banks were particularly concerned that bank officers, their agents and receivers might be construed to be officers and thus become liable to pay.
It was our firm position on the original bill that the expanded liability of officers and directors would have a dramatically negative effect on the competitive position of Ontario industry. Consequently, we are pleased to see that the officers' liability has been deleted; that the directors' liability has been cut back and no longer covers termination and severance pay; that the director's liability will be for unpaid wages coming due during the tenure of his directorship as opposed to one year after the fact; and that there have been a number of other technical amendments made, for example, directors being able to seek contribution from other directors for amounts for which they are found liable.
Therefore, to begin with, as an industry we can say that the provisions which most directly impacted banks adversely have been amended in a manner which resolves most of our concerns. However, there are a number of other areas where we still have broad general concerns as they impact business because, as you can appreciate, from an indirect point of view, how fare our customers, fare us.
The areas I would like to speak on now are basically federal-provincial harmonization, scope of coverage and the related issue of amendment by regulation rather than legislation, retroactivity, and then perhaps a few minor technical points at the end of my presentation. I know you have read our brief, but I would urge you to re-read our brief, because I think we do cover many areas in great depth and with clarity and it will be beneficial to the members of this committee.
Dealing first with federal-provincial harmonization, as you will know from our brief, the CBA has consistently supported the concept of protecting wages of employees. However, we have always held the firm position that the protection of employee wages should be provided by a federal program through amendments to the Bankruptcy Act, as we have always believed that the federal fund is the best means of uniformly protecting the wages of employees throughout Canada.
As we understood it, part of the rationale for Bill 70 was a perceived slowness on the part of the federal government to introduce the long-awaited federal legislation. However, the federal government has now announced Bill C-22 and made it clear that its intention is to have a wage protection plan in place by January 1, 1992. To our mind, this goes a long way to obviating the need for a provincial plan.
We are concerned that the establishment of an Ontario plan may in fact lead other provinces to establish similar, but probably not identical, programs. There are some programs in place, for example, in Manitoba. Banks, as institutions with a presence in every province, are very conscious of the increased administrative costs and the burdens that are created by the absence of legislative harmony across Canada.
Therefore, we suggest that only a federal program can ensure uniformity of wage protection. Moreover, to the extent that wage protection programs do vary from province to province, it seems to me that this will inevitably impact on the competitive position of regionally located industries, particularly those in labour-intensive sectors.
For example, we note in even the revised bill that the directors' liability is different for directors of firms incorporated in Ontario versus firms incorporated in other jurisdictions. We are concerned that Ontario and other provinces may find it difficult to attract or maintain business.
We are also very much concerned about the possibility of double-dipping by company employees if we have both provincial and federal programs. We are aware that Bill 70, section 40q, contemplates and provides for efforts to harmonize with the federal government. For that matter, Bill C-22 under paragraph 18 of the proposed Wage Claim Payment Act provides for efforts to harmonize with the provinces.
This is not to say that such harmony has actually been negotiated, thought through and is in place. There are numerous differences between Bill C-22 and Bill 70 with regard to scope of coverage, means of funding and the mechanics of payment. There is no clear guide as to which plan pays first.
We can easily see a situation where unpaid wages, in the narrow sense of wages, will be paid under the federal government proposal, and then employees will claim severance and termination under the provincial plan because these amounts are not covered under the federal plan. As a comment, because directors will not be liable for the severance and termination, the province will be in a position of paying out vast sums of money with no recourse to anybody. Our view is that the plan is going to be quite expensive for the provincial government.
Ideally we would like to see the provincial government withdraw Bill 70, but if this is not to be, we would urge the provincial government not to bring Bill 70 into force until the means of legislative harmony have really been thought through and negotiated and are clear and have been open to public scrutiny so that the problems or pitfalls can be addressed by interested parties such as creditors, receivers and small business.
Through our discussions with the federal government on Bill C-22 we are aware that there is dialogue between your two governments at this moment, but the fact is that this harmony is not yet in place, not clearly thought through, and we urge you not to introduce the bill until these matters are covered.
The next thing I would like to address is scope of coverage. Under the employee wage protection program, section 40b, wages are defined as "regular wages, overtime wages, vacation pay, holiday pay, termination pay and severance pay," and, as I will get to later, such other amounts as are prescribed. In our view, the coverage of these wages by the employee wage protection program is inappropriate, fundamentally flawed and will be unnecessarily expensive. Wage earner protection for employees, to our minds, should be restricted to regular wages, overtime wages and vacation pay. We are opposed to the proposed coverage which would cover termination pay and severance pay.
It seems to us that the fundamental rationale for any wage protection program is to give employees protection for their immediate needs, and protection of regular wages, overtime wages and vacation pay is consistent with this rationale. However, it seems to us that the inclusion of termination pay and severance pay means that the program is going to be covering amounts that are not actually earned, and it will significantly increase the size of claims on the program, particularly if you do not have this federal-provincial harmony in place as I have mentioned.
In general, termination pay, when it is paid by a solvent firm, is given in lieu of notice. It is intended to compensate the employee for the delay in finding a new job. Severance pay operates as a recognition for past service. Both severance and termination pay are payable to an employee when that employee is released by the company pursuant to a decision to terminate his services. When a company becomes insolvent, decisions go by the board. There is no deliberate decision on the part of the company to release any of its employees.
Therefore, we do not think this fundamental rationale for severance and termination pay applies in an insolvency. A number of people lose. Every stakeholder loses when a firm becomes insolvent: the shareholders will lose their capital; creditors often lose their funds which have been lent; the customers of the company may lose because contracts do not get fulfilled, and the suppliers of the company lose because trade does not get paid. It seems to us that employees are simply another stakeholder in the success of the firm, and that they should be made essentially fully immune to the effects of failure is inappropriate.
That leads me to amendment by regulation. We are opposed to a number of the provisions in Bill 70 which allow for potentially major changes in scope of coverage and liability to be effected by changes to regulation. We refer to section 40b where the definition of "wages" has a little add-on, "and such additional amounts as may be prescribed"; to section 40i, which is the amount of $5,000 or as prescribed; and in particular to subsection 40s(3), which covers the directors' liability for wages but specifically excludes termination and severance and then says, "and such additional amounts as may be prescribed by regulation." I am not sure what is contemplated by that "as may be prescribed."
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Dealing with the first part, the definition of wages, "amounts as may be prescribed," not only allows for the definition of wages to be, pursuant to this bill, expanded upon without public scrutiny -- that is a direct expansion -- but we already draw your attention to the fact that, given the current definition of wages, you have an indirect possibility of expansion of coverage right now if you have changes to the Employment Standards Act. There was a bill, Bill 116, a private member's bill that was introduced. By changing one act, you expand the coverage under this one significantly. So with your definition of "amounts as may be prescribed," we feel there should not be direct enhancement of scope of coverage without public scrutiny and adequate notice, and that can only be done by legislative amendment.
With section 40s, the directors' liability, as I say, I do not know what is contemplated by this additional "as may be prescribed." In our brief, which you have, we noted the problems of getting directors to serve if the liability on them is too onerous. The last presenter I listened to was dealing with that issue at great length, so I will not expound on it too far, but if that amount "as may be prescribed" becomes some other more significant liability, I think you will be back into the same problems of getting people to serve as clearly came to the fore with the consultations on the original bill. There is some potential to impact creditors there, as there is a garnishee provision in the Wage Claim Payment Act here, section 52. If the liability on directors is significantly expanded and you have this garnishee provision, it does have an impact on creditors, which is dealt with in our brief.
Therefore, we believe any of these items should require legislative amendment and therefore the public will be afforded adequate notice to properly scrutinize and comment.
The last major area I would like to deal with is retroactivity. Under section 16 of Bill 70 it is proposed that the employee wage protection program be retroactive to October 1, 1990. As a matter of principle, the CBA has always been opposed to the use of retroactivity by any government. We see this as an abuse of the parliamentary system. In addition, if you apply the employee wage protection program retroactively, you are going to create a number of practical problems for creditors, trustees, debtors and employers. I expect if you have a submission from the Canadian Insolvency Association on the receivers, it will probably go into this in greater detail.
For any of the companies that go out of business between October 1, 1990, and the date the legislation is finally passed, it is going to create problems. For example, banks quite regularly do pay final payrolls and wages. I admit this is done often in self-interest, because you have not taken a judgement as to whether or not the business may be able to be restructured or your receiver might be able to sell it as a going concern and preserve the jobs. Therefore, the wages are paid so that these businesses will go on for a while. If you know they are going to be covered under another program retroactively, you introduce a fair amount of uncertainty into this process. Again, we oppose the retroactivity.
I think that is basically all I would say at this point in time, because most of what I have said is covered in far greater detail in our brief, which I do urge you to re-read. Bill, do you think there is anything I have missed there that you would like to address?
Mr Randle: No.
Ms Cannon: Then thank you very much for hearing us.
Mr Offer: Thank you for your presentation. It covered a number of areas. I think I would like to talk first about the directors' liability issue. I have just spoken to ministry staff to verify this. Though the bill is effective as of October 1, even in so far as wages and vacation pay are concerned, directors will not be liable until, I believe, three months after this bill is proclaimed. I do not know if that meets the concern you raised, but my understanding from the ministry is -- and I would share your concern, by the way -- that there is no liability on directors under Bill 70 until three months after the bill has been proclaimed for debts incurred at that point forward. I do not know; it might be better for you if that were in the legislation, but that is my understanding. I am wondering, as a first question, whether that comes to grips with that one concern you have.
Ms Cannon: Directors no doubt will be happy to hear that, and I am sure they would appreciate having it in the legislation. But no, my concern with retroactivity is that between October 1990 and whenever the bill comes into being, time passes. There has been a poor economy. There have been a number of insolvencies, some of which are already wound up. The assets of those companies had been distributed pursuant to current legislation. If you make it retroactive, you potentially create a nightmare of unravelling past actions. That is one example of the problems that can come about, and it has nothing really to do with directors per se; it has to do with just the whole distribution of the insolvent company's assets.
Similarly, as I say, if you make it retroactive, you do put a lot of people in a quandary about, "What do I do today, knowing that something is going to be retroactive but it isn't in force yet?" It does create that problem of, do you make an immediate payment of wages to keep something going?
Mr Offer: I understand. I would like to put aside the federal legislation, because we have no control over it. We do not know how it is going to proceed and we do not know how it is going to be amended, so in that respect I put aside the harmonization aspect, as desirable as it is. Is it your position that the wages and vacation pay of workers in bankrupt situations should be protected?
Ms Cannon: We have always held, the CBA, and we have been on public record many times as saying, that to a limit, yes, workers are vulnerable. We think they should be afforded some protection, and wages and vacation pay -- when I say "wages," I mean wages for work actually done; I am not --
Mr Offer: In "wages" I am excluding termination and severance.
Ms Cannon: "Wages" in the narrow sense of wages and vacation pay, to a limit, yes, we have always felt that they should be afforded some protection. We are on record. We have always thought it should be afforded through a fund, but we have always also held very specifically that it should be at the federal level, because in the vast majority of cases unpaid wages arrive out of an insolvency situation, and that is a federal jurisdiction.
Mr Offer: Is it also clearly your position, bringing back the federal bill -- the $2,000 and the $5,000 -- that it should not be $7,000 but rather a total of $5,000 --
Ms Cannon: No. Our brief will state quite clearly that we think $5,000 is excessive, and we believe the provincial program, the scope of coverage and the amount, is excessive. Our position is that ideally we would like to see the legislation in place at the federal level only. That is probably not politically feasible -- I can see that -- but that is why we feel this harmonization issue is so crucial.
Mrs Witmer: I appreciate the thoroughness of your brief. You have raised some points that have not been made before, and I look forward to re-reading it. What comments would you make about the financing of the fund?
Ms Cannon: The fact that it is out of the province's consolidated revenue fund?
Mrs Witmer: For at least the first 18 months, but after that there is certainly no guarantee.
Ms Cannon: The CBA's position has always been that funding from the consolidated revenue fund is probably the most expeditious way of doing it; otherwise you create a large bureaucracy. Because of the scope of coverage and the fact that this bill can even be indirectly increased by changes to other bills, we believe this is going to be very expensive to the province.
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Mr Wood: I notice in your brief you suggested that Bill 70 be withdrawn and that we wait for federal legislation to be brought in. I do not know if you are aware that over the last 24 or 25 years we have had four different prime ministers -- Trudeau, Clark, Turner and Mulroney -- who have brought in legislation six times. This is the seventh time; previous bills were left to die on the order paper. I am wondering if, in your opinion, the new government that has been in office for about 10 months should depend on the federal government to protect the workers of Ontario.
Ms Cannon: In answer to your question, "Am I aware?" -- yes, I am fairly well versed in bankruptcy matters because of my work with the CBA. The fact of the matter is that Bill C-22 is out now. It very clearly states that it is the intent to have it in place by January 1, certainly the wage protection plan part of it. To the best of my knowledge, there has been no major opposition to the wage aspects of that bill.
Mr Randle: And the way it is structured, it would also be possible for the federal government to detach the wage protection program from the other amendments. We are not aware of any group that has opposed the principle, and any opposition to some of the details has not been overwhelmingly significant. So, to answer your question, we are aware that there have been no real major amendments to the Bankruptcy Act at the federal level since 1949, but there have been numerous attempts.
I think it is significant that this time they tried to make a limited number of amendments to the Bankruptcy Act. They have had substantial consultation with a wide range of groups, including ourselves for a number of years, and they certainly feel they have a consensus on most of the major issues.
There is obviously going to be opposition from different groups to different parts of it, but it is probably further along than any of the previous bills in terms of its prospect of passage. The minister seemed very determined to get it passed, and the cabinet seems to wish to get it passed. I think this is an important change from previous attempts, but the most important for this particular bill is that the wage program is not part -- technically it is to some extent, but as a practical matter it is not -- of the bankruptcy amendments per se. It would be very easy simply to deal with that as a separate issue and pass it, without having to pass the Bankruptcy Act amendments in other areas, if they were to present any problem.
Mr Wood: The point I wanted to make is that we are getting into the third year of the federal government. Next year is in all likelihood an election year, and it has happened on previous occasions that the bill was left to die. I just wanted to raise that point.
I wanted to hear your opinion on the liability of directors under the Corporations Act. The liability of business corporations is substantially different than that of non-profit organizations or companies. This is the proposal that we have brought forward. I am just wondering if you had any comments on that.
Ms Cannon: As we pointed out in our briefs, if you were to have a substantial directors' liability for charitable and non-profit organizations, I do not know how you would ever get anybody to serve on their boards.
Mr Randle: I myself have served on the boards of charitable, non-profit organizations for free. If this legislation had been passed then, I would have resigned the next day.
Ms Cannon: I also serve on a number of volunteer boards, and I would not carry on.
Mr Wood: We are all aware of the hardship in the community when a number of employees lose their jobs and all means of income as a result of bankruptcy or receivership. Is it the feeling of your group that these people should be compensated, rather than the community having to pick up the burden?
Ms Cannon: I am not sure I understand.
Mr Wood: There is a real hardship on the municipality when people are thrown out of work as a result of bankruptcy and receivership and do not get the wages they are owed, whether it is for a month or two months or whether it is vacation pay. The trauma shown in the examples that have been brought forward to us in the last two and a half days is just unbelievable.
Ms Cannon: We have always gone on public record as being in favour of some protection for unpaid wages, with a cap, to be paid from a special fund.
The Vice-Chair: I have to cut you short because we have exhausted our time. I thank you very much for your presentation. It is a different point of view coming from the banking industry and we have not heard it before, so I thank you for that. It really helps us round out our deliberations.
Ms Cannon: Thank you very much for your time.
SOLARCHEM ENVIRONMENTAL SYSTEMS
The Vice-Chair: Our next presenters will be Solarchem Environmental Systems.
Mr D. Lorriman: Could I ask an administrative question? It was unclear to us whether we had a 15-minute slot or a half-hour slot.
The Vice-Chair: A 15-minute slot has been scheduled.
Mr D. Lorriman: That is fine. I would like to introduce myself. I am Doug Lorriman. I am chairman of Solarchem Environmental Systems. Beside me -- and the relationship is a little hard to hide -- is my brother Scott, and he is president of Brolor Investments Ltd, our prime investor in the company.
I would like to thank the committee for inviting us to make this presentation. I am sorry we did not submit a brief beforehand, but it was less than two weeks ago that we received the invitation. I am sure you can appreciate that those of us in small business have many demands on our 26-hour days and we did not have time to prepare written material, although I know some of you around the table will have been recipients of a letter we sent to Mr Rae outlining some of our concerns.
Who are we? Solarchem is a small new business dedicated to the design, manufacturing and selling of environmental remediation equipment. We were founded in 1984. We are 100% Canadian owned. Over 80% of our investors are based in Ontario. We had an investment of more than $4 million in the company and more than 60% of this was spent in research and development, developing our product from scratch. We have developed what we and others consider to be world-class technology in environmental remediation.
We have attracted interest in this technology in the United States, Europe and Australia. Our sales are increasing by more than 100% a year. Greater than 70% of our 1991 sales will be exported to the US. We have a US office now in the southwest part of the states to facilitate our marketing there. Some of our key customers include Domtar, Mobil Oil Corp, Uniroyal Chemical, ICI -- formerly CIL -- and Nestle.
We employ 40 people in this province. We consider our employee relations are good, and we have a plan set up so that our employees will benefit in our company's success.
We have been very fortunate in attracting a board of directors that includes people versed in accounting. We have two retired CEOs of similar organizations, two people with MBA credentials, two current CEOs of similar organizations, and a PhD in the science that we are involved in.
To date, none of our directors has received any remuneration for service provided and none of our investors has received any return on investment. We are currently trying to raise new equity to expand our business. As part of this process, we have canvassed our existing investors and at least one of them has said, yes, they are interested in investing but not in Ontario. That is not a political statement on my part. That is what we are up against.
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Why are we here? The list of witnesses we had seen for this committee included many organizations, and we agree with a lot of the points they are making, but we did not see too many small businesses represented. We feel the point should be made since we are the ones that are actually in the trenches.
We appreciate the reasons behind the proposed Bill 70 and we sympathize with a lot of the undeserved hardship that falls upon employees when they are out of work, but thinking about the welfare of workers at an unfair cost to those responsible for the startup and financial support of companies is more damaging to the workers' interest in the long run. Although the short-term gains for workers may look attractive, I think the long-term implications could be devastating.
Solarchem is unique in Canada because of the unfavourable environment for risk investment, but it should not be unique. In fact, if you read many of the economists' papers, we should be a model company. This is the kind of company Canada seems to want. We are expanding. We are exporting technology. We have developed a world-class technology through our own internal R&D and we have created new jobs. Those seem to be all the buzzwords these days.
In terms of our comments on the bill specifically, we do not know where it stands. The last presenter said, "The amendments have now been tabled." When we last heard, they had not been tabled, so we did not know how they read and it was difficult to provide detailed inputs. We do not have the resources to monitor the actions of Queen's Park on a daily and hourly basis.
We would like to address some fundamental concerns that underlie the bill. In spite of the remarks made by the minister, it is hard for us to believe that there was any consultation with the business community prior to the introduction of Bill 70 or, if there was, it was totally ignored. We feel there is a great lack of understanding among those who drafted and supported the bill of how small business works and grows in this province. We certainly find unacceptable and offensive the implied selfishness and dishonesty on the part of boards of directors and officers that seem to be contained in the bill.
Blaming investors, directors and officers solely for the failure of any company is an unacceptable and unfair basis for any legislation. There are many things that make a company fail, many of them out of the control of anybody who is in charge of the company. Under the bill, as we see it, even if the directors do a responsible job, the liability is still there and there is little defence or recourse.
We are concerned about the alarming signals that underlie this bill and what they could become in other bills. The thinking just scares us, so we thought we had better outline what risk we take in starting a new company in Ontario. Canada and Ontario need entrepreneurial development of technology, not discouragement.
Business uncertainties are already substantial even for profitably operating businesses; we do not need additional barriers from government. It is hard enough to attract investment for any company in Canada these days and especially difficult for those of us in a new technology field, taking technology from laboratory to market.
We understand that governments want to be progressive, but if they become too progressive and get us too far ahead of competitive countries then the business risk increases immensely. I will just outline some of our personal and company risks. They include the odds of survival from startup of any small business, and the ultimate successes are remote. Just look at the record.
Will our technology work? We do not know until we have tried it and marketed it. Can it be adapted to commercial use? Again, we do not know; we have to find out.
We are a small company. We have new technology. That raises great barriers when we market to large corporations. They do not like either of those features. We have to overcome that problem. We have to plan and hire in anticipation of orders because we cannot wait until they come in to get our staff up to speed.
Forecasting is difficult at the best of times and under recessionary conditions it is even more difficult and practically impossible. Our company and others must be competitive, not only domestically but on an international scale, not because we market internationally but because we are up against competitors coming into this country and this province.
On top of that and on top of the investment we have put into the company, many of us must make personal guarantees for leases and loans that the company assumes. In Bill 70, there is an apparent assumption that the natural result of risk is reward. Clearly this is a desirable result, but it is certainly not a natural result. If our company fails, we as investors and directors stand to lose a great deal along with the employees.
Now the odds to improve our chances of success are being able to attract a good board of directors and good officers. We need to depend on this good board of directors, both for the protection of the investors and ultimately for the protection of the employees, because it is their good advice and good service that will keep the company alive and thriving. We cannot afford to purchase this type of advice through consultants and others.
Where Bill 70 comes into play is that we are asking these directors to assume an unknown magnitude of liability. We are asking them to assume retroactivity. In other words, they have to accept responsibility for things they no longer can change, and there is a carry-forward responsibility for things they cannot predict in the future.
What are the likely consequences for Solarchem? First of all, a number of our good directors will resign. We have been put on notice to that effect and that will be a major blow to the company.
The options, then, for the company: One would be to close up shop. That is rather drastic, but we may have to do that if we lose all the advice and we lose our confidence. Two would be to find insurance to cover this. First, only insurance companies win in that kind of game, and second, right now we cannot even afford directors' liability insurance, let alone additional insurance to cover these eventualities.
The only other option then would be to move our company to a more favourable business environment. Now we are located in Ontario because it was natural for us. We are Ontario people. We believe in Canada. We believe in Ontario. We thought we could make world-class technology in this province and make it work. However, moving is now an item on the agenda at our board meetings. We do not want to move. It is expensive. It would cause a lot of disruption. But we are being both pulled, because our major markets are elsewhere, and we are being pushed by certain things that are happening in Canada.
It would be wrong to suggest that Bill 70 alone would be the single reason that would make us move, but it might be one of the last straws. We must encourage initiative at all levels, not just for employees and managers of companies, but investors as well. There are a number of programs that have been introduced by the provincial government that pretend to help small businesses and research and development. However, if we bring in legislation such as Bill 70, that is working at countermeasures. It is not encouraging the development of the company itself and investment in it.
We must have an environment where companies like ours can grow and flourish, and we do not believe the basis behind Bill 70 is the kind of environment that will create that.
That is the end of our formal presentation. We would entertain questions.
The Vice-Chair: Due to time, because we will overrun the time, I will allow one question from each caucus, and we will start with Miss Witmer.
Mrs Witmer: I very much appreciate hearing how this personally is going to impact on you and you are certainly echoing the comments made by many other business people. They, unfortunately, seriously have to consider moving south of the border in order to make a go of it. What particular aspect of the bill are you most concerned about?
Mr D. Lorriman: I will not comment on particular aspects of the bill because as I said, we did not have time to study it to the degree that we could answer those types of questions. It is the underlying fundamentals that concern us most, not just with this bill, but things that could come downstream. If we accept this, then it could get worse.
Mrs Witmer: So you are looking ahead to the other bills that are being proposed.
Mr D. Lorriman: That could conceivably be proposed.
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Mr Owens: One of the things that concerns me about your comments and the comments of other presenters is that the wage protection plan is designed as the last step along the road and is designed for workers whose companies are unable to pay for whatever reason. I cannot see how that is a disincentive to invest. The other market problems you have described I think are far more of a disadvantage, along with federal tax issues and interest rate policies and high dollar policies, than the wage protection policy would be when it is implemented.
Mr D. Lorriman: That could require a long answer, which I will not give, but I think a great disincentive to investment is for an investor to see no or a very inactive board of directors. If we cannot have a good board of directors we are not going to attract good investment.
Mr Owens: If we can arrange to get the amendments, I think you will find them instructive.
Mr D. Lorriman: I do not believe so.
The Vice-Chair: I have to got to interject here. I am sorry, but I said one and I am going to hold everyone to it.
Mr Offer: Thank you very much for sharing if not the particulars of the bill, at least some of the feelings behind the presentation which are important. I guess I would like to carry on with that and ask you a very simple question. I know there are all these other things that are also in the offing. If it is not changes to the Labour Relations Act, it is discussion around the Employment Standards Act as well as this. You are a small business person, and as you said you fall within all the buzz words. What is the message you are hearing?
Mr D. Lorriman: From government?
Mr Offer: Yes.
Mr D. Lorriman: I am talking from an investor-director perspective now. It is that it is creating an environment in which if we meet and live within that environment, we are likely to be uncompetitive and the company will not survive.
The Vice-Chair: Once again I think you have reaffirmed some of the concerns that have been brought to us by the small business people who have come in on an individual basis. There have been a couple, and you reaffirmed their concerns and I thank you for that.
Mr D. Lorriman: Could I just make a final point, not related to this but in terms of the way your committee operates? We are from out of town. We had to come into Toronto today and in doing our research to develop our presentation we were not able to get a copy of the Employment Standards Act. The only way we could get it was to go down to the government bookstore on Bay Street and pick it up. Being from out of town, we just cannot do that, so the government information process does not make it easy for people to input into your committee without that information being freely and easily available.
The Vice-Chair: I thank you for that and I know they can be ordered, but in the past --
Mr D. Lorriman: Not in two weeks.
The Vice-Chair: In two weeks it is difficult.
Mr S. Lorriman: They are out of print.
The Vice-Chair: I ran into that out-of-print scenario myself in the past and I thank you for your suggestion we look at that.
LABOUR COUNCIL OF METROPOLITAN TORONTO AND YORK REGION
The Vice-Chair: The next presenter is the Labour Council of Metropolitan Toronto and York Region. Perhaps you could come forward and introduce yourself for the sake of Hansard.
Mr Clancy: We want to thank you for the opportunity of being able to come and make representations to a government we have confidence in. My name is Pat Clancy and I am the vice-president of the Labour Council of Metropolitan Toronto and York Region. With me is Brenda Wall, who is the executive assistant to the president of the Labour Council of Metropolitan Toronto and York Region, and Janet Dassinger, who is the assistant executive director of our Metro Labour Education and Skills Training Centre. I am going to ask Ms Dassinger if she will read our brief.
Ms Dassinger: The Labour Council of Metro Toronto and York Region is pleased to have an opportunity to appear before your committee to discuss the employee wage protection program. The Labour Council of Metro Toronto and York Region represents approximately 180,000 members in over 400 affiliated local unions. Since September 1987, the labour council has sponsored a worker's education centre that provides education and assistance programs to both employed and unemployed union members. In September 1987, the labour council, through the Metro Labour Education Centre, initiated a service specifically targeted at assisting union members who experienced job loss through workplace closings and layoffs. Since that time, the skills training program for unemployed workers has assisted over 2,000 workers who have lost their jobs. Many of those workers have been doubly victimized by employer bankruptcies and insolvencies.
Experience with bankruptcies came early in the life of the centre. In March 1988, several months after the skills program began, workers from two bankruptcies came to us for assistance. Marshall Industries, which was organized by the United Steelworkers of America, closed for the second time due to bankruptcy, this time permanently. At the same time, Transport Route Canada was declared insolvent, throwing thousands of workers across the country out of work, represented by the Canadian Brotherhood of Railway Workers. Only months before, that company had been privatized with the consent of the federal government.
In a letter written to the Prime Minister, a worker from Transport Route Canada wrote bitterly at that time: "After 33 years of faithful service to the company, I wound up on the street without any security at all; no separation pay, no severance pay, no pension, only partial holiday pay.... I hope to repay you in some small way for your kindness -- perhaps at the ballot box in the next election. God save us from you and your government's kindness."
As Transport Route Canada and Marshall Industries workers struggled to put their lives back together, they were studying math and English at the centre. One of their classroom exercises involved calculating the money that was owed to them. Collectively six workers had 185 years of service and were owed over $60,000 in vacation pay, severance pay and pension money. Not one of them was entitled to less than $8,000.
Over the past four years many more bankruptcies have occurred in Metro Toronto. The garment industry is particularly vulnerable. Immigrant women are frequently thrown out of work from the garment and textile industry with out any notice at all, often arriving at the company to find the doors locked and the machinery gone. Companies like the Sigal Shirt Co Ltd and Russill Morrin were early closures. More recently, Fine Art and Arrow Uniform have closed.
There is no question that the economic picture in Metro Toronto is a reflection of what is going on in the province as a whole. As the Ontario Federation of Labour has documented, job loss in the province has totalled 214,000 during the recession, with the most severe losses occurring in manufacturing. As well, these job losses, unlike those of the recession in 1981 and 1982, are permanent. Bankruptcies have increased by 73% in 1990.
In March 1991 the unemployment rate in greater Toronto reached 10.1%. Job losses due to layoffs, partial closures and closures increased from 4,965 in 1989 to 27,317 in 1990, which is a phenomenal increase. Between January and March of this year another 19,289 jobs were lost. Clearly the haemorrhaging of manufacturing is much more than a temporary phenomenon, and economic recovery will therefore take much longer. From our own records at the labour education centre we can attest to the displacement of 21,819 unionized workers from over 110 plant closings since we opened our doors in 1987.
I would like to describe to you a picture of the laid-off worker we have assisted at MLEC, because we really want to see this issue put into human terms as well as economic ones. The level of demand for services and assistance among the unemployed has matched the intensification of job loss, as demonstrated in the statistical summary you will find at the back of this brief. While workers have expressed many needs in the area of assistance, the following have been consistent:
Of course the very first one is always income support. There is no more compelling argument for a generous wage protection fund than the overwhelming and immediate need among laid-off workers to have their income maintained. Many workers who are affected by bankruptcies come from low-paying, labour-intensive industries like garment and textile. They have little, if any, personal savings in many cases. When wages are abruptly cut off, workers risk being thrown into immediate poverty. In order to successfully adjust to job loss, workers have to be able to meet their basic needs for shelter and food. A wage protection fund would provide for these immediate needs until more stable income support was available.
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As well, workers need information about basic skills and job training programs. They accurately perceive that manufacturing jobs are disappearing and they express an interest in training, but for the majority of laid-off workers, information about available programs is difficult to find and understand. For workers whose first language is not English, the problem is magnified a hundredfold.
Workers need access to adjustment programs and train-ing. Those who are fortunate enough to find accurate and up-to-date information about adjustment programs, such as the program for older worker adjustment, which the province participates in, and the Transitions program for older workers, are likely to find access severely restricted. Rigid criteria in the vast majority of programs make it very difficult for workers to get into them. This is even more true for immigrant workers, who also face systemic racism, sexism and agism when attempting to access programs and services.
The typical worker at MLEC, if you were to look at a snapshot, would basically be described in this way: Many laid-off workers are age 45 and over. Well over 60% of the workers we see at MLEC are in that age group. Their plight has been well documented. Older workers experience longer periods of unemployment, and in fact there is a survey at the back which will show you that when we surveyed a group of workers who had been affected by job loss, the group that was still 75% unemployed was over 45. Clearly, it is the older worker who is affected most seriously.
Immigrant workers and visible minority workers are the majority of those affected in the workplace closings that MLEC deals with. This holds true in both higher-paying, capital-intensive industries such as steel, auto and rubber and the lower-paying, more labour-intensive sectors like garment and textile. Immigrant and visible minority workers face greater systemic barriers to re-employment and retraining and are often disadvantaged by their need for literacy and language training.
Finally, workers displaced from manufacturing have few transferable skills. They have often worked in unskilled and semiskilled jobs, with little opportunity to upgrade or learn new skills. This means that accessing meaningful re-employment is very difficult. Similarly, job training is difficult because they have lacked the opportunity to learn generic and portable skills.
The vast majority of workers laid off that MLEC assists are displaced from manufacturing and have had little opportunity to gain transferable skills. Consequently, they risk being trapped in low-wage, low-skill employment. For those who need to improve basic skills in order to find new employment or enter training, there are even more serious barriers.
Income support is a key element in successful adjustment to job loss. For workers to access information and then programs and services, income support is a critical first step. Without being able to meet basic needs for shelter and food, workers cannot properly decide on the training and employment options available to them. Income support must be viewed as a right for the unemployed, not a privilege. Without adequate income support, it is not possible for workers who are displaced to have choices.
A wage protection fund should assist workers least likely to have access to information and services: workers displaced suddenly through bankruptcies, and specifically those workers displaced from low-paying, labour-intensive industries like garment and textile. Through our experience, it is very evident that workers in these industries rarely benefit from the usual adjustment mechanisms such as workplace adjustment committees. There is no reason why a worker who has been displaced from a job ghetto should have any less access to government programs and training than one who has lost a job in a large company and will likely receive a generous severance package. Ensuring that workers who are victimized by bankruptcies, particularly in job ghettos, have access to wage compensation is an issue of equity, not a privilege.
Access to such a fund must be swift and non-bureaucratic. Workers who do not speak English in particular face great barriers in accessing written and verbal information about programs. Workers must have access to information about the wage protection fund through their union, through community agencies which serve them and through government adjustment programs. As well, there should be a great effort to expedite access to money so that workers can begin to make significant decisions concerning employment and training options.
We submit that the level of compensation available must be generous. As we noted above, long-term workers particularly, who constitute the majority age group at MLEC, often have huge sums owed to them. While the current sum of $5,000 is a good minimum, we strongly feel that a greater amount should be available to more properly compensate long-term employees. Specifically, we feel that the program must be indexed to the CPI in order to protect the purchasing power of recipients.
Finally, we propose that the program be funded not from general tax revenues, as currently proposed, but by a payroll tax so that the employer bears some of this responsibility. Our estimates would place such a tax at approximately one tenth of 1%, and this level, we submit, would neither be onerous for employers nor adversely affect Ontario's economic recovery.
In conclusion, we congratulate the government for having introduced this long-needed program. While it does not represent a fulfilment of all the objectives we have outlined in this and previous briefs to the government on the issue, it will serve the working people of this province well.
The Vice-Chair: We only have about four minutes, so I will start this time with Mr Owens.
Mr Owens: I would like to thank the folks from the MLEC for presenting today. I know from personal experience with the organization that you folks do extremely good work and have been of great service to many workers in this city.
I am concerned about your recommendation with respect to funding the plan with an employer tax. It seems that one of the difficulties we have encountered around the economic situation is tax problems, and putting another tax on employers I do not think is the best way to go.
A supplementary question around fixing the funds to the CPI: Would you then be in favour of a sunset review, say a three-year review period where the government could review where figures are with respect to CPI, or would you just want to see that on a floating basis to be fixed periodically throughout the year?
Mr Clancy: I think that really the indexing, which we will deal with first, does not necessarily have to be the CPI, but it has to be some kind of indexing that is going to guarantee that with the increased cost of living, the wages workers are going to be paid are going to be maintained. The $5,000 today, in three years or two years or five years in this economy, can be very --
Mr Owens: Presumably workers are going to make advances as well.
Mr Clancy: That is right. I noted that the federal government is talking about $2,000. With great respect to that $2,000, I can remember when we were making representations to the federal government from the union I worked for and $2,000 was the amount at that time, and that is somewhat longer than five years, six years ago that those were the numbers. They really have not grown in their concerns about protection of workers' wages.
As far as how the money is collected is concerned, I think that fundamentally, the way we see it, it is a responsibility of corporations to be able to provide security to their workers with regard to the wages they have at least earned, the benefits they have earned -- not necessarily that it is going to be some kind of gift to them, but the things they have earned, either because of the legislation or because of the fact they are working for wages and benefits and they are the things that they are entitled to get.
Those corporations should be responsible to provide that kind of protection. It should not just go back to the general taxpayer to have to provide that protection. It is really another part of the cost of doing business in the province. We think it is part of doing business and the cost of that is really not extremely costly to the corporations. We think it is their responsibility. There is no real need to downshift it, as they have been doing for years, downshifting that responsibility to the general public.
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The Vice-Chair: I made a slight error on time, so if you have a very quick one.
Mr Owens: I guess another proposal that has come up is with respect to making the worker a super-secure creditor in a bankruptcy proceeding. How do you view that?
Mr Clancy: The thing about workers is that workers do not go out to go to work and risk their investment. What is their investment? Their investment is their labour. They do not go out to risk that investment. They go out there to make that contribution of their labour and they expect to be paid for that contribution of their labour. If there is a successful business, the successful business is still going to make that money. If the business is not successful, the people who went into that business went in there taking a risk.
I have a problem where we say that workers should have to get placed behind all the risk-takers. I think the worker should be in front of all the risk-takers, the banks, the investment corporations and all of these people, plants, corporations. I think all of them should be secondary to the worker, and I do not really care what order they necessarily come in, but I do think workers have an entitlement, a positive entitlement, in fact a right, to be the first to get their wages and what they have already sold their labour for, because if they do not get that, then they very seldom ever make a recovery.
Mr Owens: I guess as a comment --
The Vice-Chair: I am sorry. I have to cut you off there. You have exhausted it. Mr Offer.
Mr Offer: I would like to carry on with that previous line of questioning. I imagine if it were possible that we in this Legislature could determine the priorities under a bankruptcy or whatever, this piece of legislation might not be necessary. Unfortunately, we do not have that ability, as it is federal legislation.
Actually, I do not know that anybody really has disagreed with this, no matter where they come from on this spectrum. I think there is a general recognition, for instance, and I will use a bankruptcy, that a particular employee will be entitled to wages, vacation pay, termination and potentially severance pay. The question that always follows from that is, given that this can be quantified, who should pay? That is what we are left with. In your submission, I think you are saying that dealing with the limit, it should not be the general taxpayer but rather the business community specifically.
I have two questions, and that would be the first one. Is that your position? That is what is really here in the legislation now, that in general it is the taxpayer who is going to fund this particular matter and it is not going to be the business community. Is it your position that should be reversed?
Mr Clancy: I think very clearly our position is as I enunciated it, that we feel the responsibility to pay those debts is the employer's responsibility. We can understand why the government is proposing legislation that has broadened it to the general taxpayer, I guess because they do not want it to look like a disincentive to people to be employers.
My problem with that is that bankruptcies are one thing, but bankruptcies are not necessarily always things that cannot be avoided. In many occasions, bankruptcies can be avoided. Plant closures are things that can quite often be avoided. Many times those kinds of plant closures are to take a plant from one place to another community or even to another country because the ability to make more profits is there. Why should the general taxpayer have to pay that? It would be our opinion that it is a business decision, and because it is a business decision, the business community should have to pay that.
We find that in most cases the closures that happen could quite possibly be avoided if there was any incentive on the part of the business community to change those things. We have gone through all kinds of plant closures in Ontario and in the greater Toronto area in the last year and a half or so, and quite a few of those closures could have been prevented if the people who were involved in directing those corporations wanted to do business in this country. They did not have to leave to go to another community or anything else, except that they were in it for one motivation, profit. The workers are not in it for profit; they are in it for guarantees. If they are in it for the profit motivation, we feel they should be the ones who are paying the cost, not the general taxpayer.
Mr Offer: You bring forward an important point. I do not want to put words in your mouth, but it seems you are saying that the vast majority of business owners in this province are good people who want to make a success, but in your case I think you are saying there are some who are not as good as others. I do not know whether that is what you are saying. If it is, I would like to hear that. Is it then right that the good business operators, people who have been in business, who employ a lot of people, who expand and continue to expand should, through a payroll tax, in many ways subsidize those who are less good? Is there some inequity in that case?
Ms Wall: I would like to say that I do not like this combination of good employers versus bad employers. Essentially, employers are in it for the profits they make, and yes, in most cases the ones who are doing things on behalf of the workers or setting up good collective agreements have been negotiated by the strong unions in this province. It is a misnomer to say good employers versus bad employers. Within that system we have, yes, it is to stop a kind of superexploitation of workers.
In this city we have had several examples of garment industries, for example Lark Manufacturing, closing down one day, opening up as another company the next day and then laying the same workers off and opening up down the street. That kind of superexploitation of workers has got to be stopped. In the end the workers themselves are waiting for years for any kind of compensation. Yes, this legislation and asking those employers to pay for it is the way to go because essentially they are the ones who are abusing that system at the present time.
Mr Arnott: I am very concerned about your suggestion that a payroll tax should be implemented. I hear that when economic times improve, as I hope they do in the next few months, when the 18-month commitment is elapsed, there will be a new payroll tax of some sort to pay for this. Do you honestly, fundamentally reject the notion that a new payroll tax will inhibit job creation in Ontario?
Mr Clancy: Do I think it will inhibit job creation, the payroll tax of the amount that would be? No, I do not think it would inhibit job creation. But I think that can be a concern of some people. I am not making decisions for the government. If you are asking me to think for the government, I am not going to think for the government. I think the government's legislation is fair legislation, and the way the government has dealt with it is fair. But the argument of payroll tax is just a matter of how I think and how our organization thinks responsibility should be assessed. We have lobbied on that platform before, and we will continue to lobby on that platform. This is an opportunity to continue that lobby. It is not a matter of whether I think it will inhibit or not inhibit. I think it will make them a hell of a lot more cautious if they have to pay that kind of tax and then have to continue to pay that tax because that tax is being used.
I am not as scared of the good employer, bad employer question because there are good employers and there are bad employers. The problem is that the good employers should be insisting that the government legislate against the bad employers. If the good employers were as concerned as they should be about the bad employers, the people who are going to cause them that payroll tax, there may be a change in the whole system of whether we have good employers or bad employers, because we have some lousy employers in this province and in this city.
I think those are the kinds of things we see that could offset that kind of situation, and that is why we say the government should consider that payroll tax. With regard to the bill, I think it is an excellent bill, but there are some things where we may want to step farther ahead of the government. I am sorry for taking so much time.
Ms Dassinger: I just want to draw your attention to the example of Route Canada. You may remember it. It was dragged through the courts and finally there has been a settlement. But to reiterate what Pat has said about the cost being higher for companies, that was a publicly owned company. It was basically sold off at bargain basement prices by the Prime Minister to someone who did not even have a credit rating, who could not even get a credit card and months later went bankrupt. Those workers were very high-seniority workers. Most of them had been there in the area of 25 to 35 years. They were broken workers. It has taken them four years to recover only a portion of what has been owed to them. If there had been more responsibility and obligation on the part of that employer prior to that little deal being made, then perhaps they would have acted more responsibly.
Mr Owens: Plus the social cost as well.
Ms Dassinger: Exactly.
Mr Arnott: I do not know if I understood you or heard you correctly. If there were an additional payroll tax, would you feel that it would encourage more responsibility by employers?
Mr Clancy: I guess we have in our community different ways of punishing people. We get into workers' compensation, the assessment for workers' compensation, how workers get assessed by work groups in workers' compensation. If we are going to judge how the business community treats its workers, we cannot always judge the business communities that are locked in as good employers, because they have strong unions that make them good employers. We have to get into the communities that are not good employers and that are not playing the game.
Maybe it is not the government that needs to protect workers from bad employers; maybe it is other employers. All I am saying is that I am not really concerned about that issue. That is really not an issue with us. The issue with us is that there is going to be legislation that is going to make sure the workers come first on the totem pole for picking up losses. Whether it is done by general taxation or by a payroll tax, this is the real issue. We just think a payroll tax would be better than general taxation.
The Vice-Chair: The time has expired for your presentation.
Mr Clancy: I am sorry we have overrun our time. Take care of your problem and we would be here for half an hour.
The Vice-Chair: That is no problem at all. The committee was interested. I thank you very much for your presentation and for coming before the committee. I now ask for George McCullough, if he is here. Okay, not seeing Mr McCullough in the room, we will recess until 2 o'clock, when the committee will reconvene for the afternoon session.
The committee recessed at 1203.
AFTERNOON SITTING
The committee resumed at 1403.
ONTARIO PUBLIC SERVICE EMPLOYEES UNION
The Vice-Chair: We will reconvene the hearings and call the meeting to order. The Ontario Public Service Employees Union is first up. Could you please introduce yourselves for Hansard and for the members.
Ms Dalys: I am Beverly Dalys. I am here on behalf of the Ontario Public Service Employees Union. I have John Nicholson with me.
On behalf of the Ontario Public Service Employees Union, I would like to thank this committee for taking the time to hear us and to hear our position on Bill 70.
It is a very timely piece of legislation and very important now, particularly in light of the economy. This has been the worst year for Canada's economy in quite some time, and Ontario has been unfortunate to take the brunt of the downward turn. Plant closures and the latest business rage of downsizing have cost the province an estimated 250,000 jobs in the past year.
Many of these losses came as a surprise to the workers who discovered they no longer had a job to go to and they no longer had an income to rely on. It is encouraging, in the midst of these times, to see a government take a positive direction with these amendments to the Employment Standards Act.
It is particularly welcome to see a concern for workers whose job security and opportunities for financial planning have been jeopardized. OPSEU represents thousands of workers in financially vulnerable agencies and facilities, such as the 46 children's aid societies that are now in a deficit position. As a union that has a growing membership in privately owned companies that provide services to government, and I am talking specifically about contracting out, we take the threat of job loss very seriously.
In the public sector, decentralization policies have forced transfer payment agencies to balance their budgets and not to expect bailouts from the provincial government. This really makes a repeat of what happened in New York City this year with its financial crisis and the reverberations in which about 3,200 government employees were given two weeks' notice of layoff. That kind of thing is a possibility in Ontario now as well.
For our members in the private sector our interest is much more obvious. Private contractors are completely responsible for their own finances. As a result, OPSEU has a very keen and relevant interest in wage protection legislation.
When you do not know from day to day how long your job is going to last, it is agonizing and it is detrimental for workers, their families and their communities. A guarantee that workers will be able to recover moneys that are owed to them when, through no fault of their own, they find themselves unemployed is a crucial step for the wellbeing of the province.
The proposed amendments to the Employment Standards Act in this bill recognize that it is crucial for workers to receive all the money they are owed when their jobs disappear. This legislation was drafted to cover workers whose employers have failed to pay wages, vacation, severance and termination pay.
Having these additional protections guaranteed by law is absolutely essential now, especially in light of the recent changes to the Unemployment Insurance Act, which of course is federal but covers everyone across the country, that make qualifying for UI a longer, more difficult process. It also means a lot of people spend less time receiving it and are forced to accept a little bit less in terms of alternative employment. Without receiving the money they are immediately owed, many workers would be forced, at best, into a desperate job search, often for lower-paying jobs, anything they can get, and, at worst, directly on to welfare rolls.
The money guaranteed in this legislation will make the difference for some laid-off workers who might otherwise be unable to search for meaningful work or to maintain themselves and their families while they explore other options, like retaining or relocation.
For these reasons, OPSEU commends the government for drafting this highly principled legislation and creating the wage protection fund.
Unfortunately, there are a growing number of working people in Ontario for whom this legislation will not apply. These are workers who have no recourse to vacation, severance or termination pay ever. These workers deserve a reasonable chance to avoid being immediately thrown on to welfare rolls and to find quality employment after losing a job.
A considerable proportion, possibly as many as a quarter, of Ontario public service bargaining unit employees are working under what is called unclassified status. These workers, like seasonal, or definite-term or task employees in the private sector, have managed to slip through the cracks in Ontario's labour legislation. Wage protection is just one more workers' right which they are denied.
Unclassified workers do not enjoy the same protection as classified permanent employees with whom they work hand in hand. In this way, the provincial government as employer sidesteps its own legislation.
There is a recent trend also for employers to technically hire workers on a fixed term or task and to extend these work agreements or contracts indefinitely. Unfortunately, workers in these situations are not afforded the same status and rights as their co-workers who have permanent positions.
John Nicholson, a steam plant supervisor at the Vineland horticultural research station near St Catharines, will bring to the attention of this committee the situation he and his co-workers are currently facing.
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Mr Nicholson: In a period of five years, we have been managed by as many contractors. On August 28, 1990, a contract for operating the plant, signed by the Ministry of Government Services and Johnson Controls Ltd, expired. The successor contractor, Jesco Ltd, had not yet finalized its contract.
We were directed by the Ministry of Government Services to bill for personal services. Two weeks later, the Ministry of Government Services signed power station employees on as unclassified staff for a one-month period, until this contract with Jesco was settled. It was not six months after Jesco assumed management of the power plant that the company went into receivership.
We have since missed regular scheduled paycheques and have made several frustrated attempts to recover our money. The Ministry of Labour, the surety company holding the performance bond and the Ministry of Government Services, for which the work is being done, have all denied liability for payroll. Meanwhile, we have suffered personal hardships. Debts have intensified for some workers who have had to refinance their homes. One worker's truck was repossessed. Others have had their telephones disconnected. All of us have paid NSF charges for cheques we have written that ought to have cleared.
The experience at Vineland clearly indicates the need for an effective system through which employees can receive money owed to them. It also points to the need for protection for many of the workers across the province who are now excluded.
I have provided continuous service for six years at Vineland horticultural, but have had several different employers. Certainly I feel I deserve the same protection as other workers who have six years' continuous service for one employer.
Ms Dalys: OPSEU's concerns about this legislation are twofold. To begin with, unclassified workers -- and I am talking specifically about the public service -- who lack seniority rights under the collective agreement are losing their jobs because of government downsizing and privatization. More job losses are going to occur as transfer agencies become insolvent.
Our second concern is that if employers' liability for unclassified or definite-term or task employees -- and this of course applies to the private sector as well -- is less than it is for regular employees, there will be a proliferation of this kind of employment. Employers will seek a way out, a way to save a little bit of money, to have a little less responsibility, and more workers are going to be excluded from this legislation. OPSEU is concerned that unless all workers are covered by Bill 70, there will be an increased transition from regular to contract employment in this province, as employers try to circumvent their responsibilities, and these amendments will protect far fewer workers than is presently intended.
We are confident that the disparity between definite-term and task employment and regular employment with regard to coverage under Bill 70 was merely an oversight by the government. There is no question in our minds that this principal piece of legislation was intended to cover workers in Ontario, not just a few who are becoming almost privileged workers who have a real, regular, full-time permanent job.
As such, OPSEU recommends what it believes will be a friendly amendment to the Employment Standards Act, and that is that clause 40(3)(a) -- that is in the original act -- be repealed to allow the legislation to allow definite-term or task employees to benefit from the protections offered regarding termination of employment.
Thank you for your time. Are there any questions?
Mr Offer: Thank you for your presentation. Looking at the relevant subsection (3), as far as I can recall, that is the first time that particular matter has been brought forward to the committee. I was just trying to think what that would mean to the private sector. What is the impact of your amendment on the private sector, which may have a degree of contracts for services for which subsection (3) would qualify?
I was also thinking as we got on to that, would this kick in -- let me just leave it at that, because I have not thought it all the way through. Can you give me some idea as to what implications that might have for the private sector?
Ms Dalys: Private sector employers?
Mr Offer: Yes. I am sorry, but I see this as that an employer has contracted with an employee for a particular service over a particular period, with a beginning to the contract and an end to the contract. You are saying that right now subsection (3) puts that outside of entitlement to, for instance, termination pay and things of that nature. You are saying by moving that away, that now makes that person entitled to notice. There are those who might argue that the expiration of the contract is something which the employer and employee have in good faith contracted and determined. I wonder what that means.
Ms Dalys: I think it means several things. OPSEU's experience has been that the application of definite-term or task employment often is not definite-term or task. There are often contracts that are signed over year after year after year. It is not someone who is coming in to do landscaping once. It is someone who is coming in on contract to do regular, ongoing work. These are people who generally expect that their contracts will turn over from year to year and who are putting service in with the employer often because there is not as much permanent work available. This is an option that has been taken up by employers a fair bit. We see it. We have more experience with it in the public sector, but certainly it is making inroads elsewhere.
The other point is that, yes, the expiration date of a contract may serve as notice, but what happens to a person who is on a personal services contract for a year, and six months into the year the employer goes under? That person does not have the same rights as someone else who might have worked there permanently or become employed as a permanent employee and then six months later did have the protections under part XI of the ESA.
Mr Offer: We could discuss this, but my initial reaction, without really thinking this all the way through, is that that possibility could be part of the contract of employ; there could be provisions within the contract of employ to deal with that. I do not know if that would happen. People who contract for landscape services, apartment buildings, might have a landscape contract which is landscape in the summer, snow removal in the winter. A home owner might have the same thing. There may be, and in many cases there is, a contract entered into. Would that, in the event that for some reason the contract is not carried out, put them in the position of having this fund?
I am sorry, I do not have the question fully unfolding in my mind, but I just have a sense that this has some very far-reaching implications. I do not want to pass any judgement on this. Certainly we will be looking very closely at it, but I feel it has some very far-reaching implications which we must, in a responsible way, appreciate before we can properly address this issue.
Ms Dalys: If I can respond to that on two points, first, you mentioned the possibility of a home owner who might be contracting for landscaping in the summer, snow removal in the winter. Without wanting to get too far into legal technicalities, in the Ontario Labour Relations Act there is a distinction between dependent and independent contractors. Our concerns are with dependent contractors. Definite-term or task I think refers more to dependent contractors. That is who we are concerned about.
As to far-reaching implications, of course there are. That is why we have developed this position. We are afraid of far-reaching implications which boil down to an employer saying, "If we put this person on contract for a year, and then put him on contract for another year and another year after that, we can shirk some of our responsibilities." That, and I am sure I speak for OPSEU's membership, is a far-reaching implication, a very important one.
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Mr Arnott: How would you favour that the wage protection fund be financed?
Ms Dalys: I would have to think about that. I stand in defence of the wage protection fund; that has not been the focus of my concern. I really have to think about that question. I would be happy to respond to you in writing if you are interested.
Mr Arnott: Yes, thank you.
Mrs Witmer: You indicated that you do not know when this brief was put together. Was this put together by the executive of OPSEU?
Ms Dalys: This was put together by the education and campaigns department of OPSEU.
Mrs Witmer: So it is the only group that has had input into this submission.
Ms Dalys: There have been discussions with members who are affected, unclassified members. Obviously John Nicholson, who has been on several contracts and has spent some time as an unclassified public service employee, has had input.
Mrs Witmer: You mention here on the first page that you are a union that has a growing membership in privately owned companies. Can you clarify that?
Ms Dalys: With privatization practices coming along -- for example, in the industry of natural resources where a lot of work is contracted out -- we have been making applications through the crown transfers legislation to take over those units.
Mrs Witmer: Have you been successful?
Ms Dalys: Crown transfers, as you know, take a while. We are going in the direction of becoming a private public-sector union. We are developing, as privatization goes along, to follow that trend. As much as we are against it, we are a union first and foremost, so we do have an interest in the private sector.
Mrs Witmer: But at present there is no involvement of your union in the private sector.
Ms Dalys: There is. We are involved in crown transfers. That is involvement in the private sector.
Mrs Witmer: Has your membership directly been impacted by companies closing down and your members losing their wages?
Ms Dalys: We have members who are involved in contracted-out companies, where we have crown transfers going through, whose jobs are on the line. Yes, John Nicholson is one.
Mrs Witmer: But only in that regard.
Ms Dalys: At the moment, yes. We have members, as I explained before, in transfer payment agencies. The government is saying it cannot bail out these agencies when they get into trouble. We have those.
Mrs Witmer: But it is a little different from some of the people who have come in here and indicated they have worked for a company for 25 years and suddenly it has closed its doors and they are left without wages and severance and termination. I guess I am trying to establish where you are coming from, as opposed to some of the other individuals who have been here.
Ms Dalys: The perception of this bill is that it is oriented towards the private sector, which it is. But to say that it applies only in the private sector is a misnomer. What we are coming here to show you today is that with the expansion of unclassified employees and with the expansion of contracting out and crown transfers, we have a keen and relevant interest now, and unless some of these policies are reversed, we will continue to have a keen and relevant interest.
Ms S. Murdock: Just for the benefit of people who are not here every day, the section you are asking to have included in Bill 70, on contracted-out employees, is a section which exists within the Employment Standards Act right now but is not part of Bill 70. What you are asking us to do is amend subsection 40(3).
Ms Dalys: Yes.
Ms S. Murdock: I do not have a question. My understanding is that the Employment Standards Act is under review right now and that is one of the areas which is seriously being looked at, due to the extent of your lobbying and excellent work in that regard. The mandate at this point under Bill 70 does not cover that area, and I am wondering how you would respond to that.
Ms Dalys: A couple of points: one, of course, is that when Bill 70 was drafted, at the beginning it talks about how it is harmonized with the existing Employment Standards Act. For example, at the beginning, section 1: "Subsection 2(3) of the Employment Standards Act is amended by striking out `47 or 49' in the fourth line, and substituting `39c, 39f, 47 or subsection 49(1) or (2).'" That is harmonization. What I am bringing up is another area.
Ms S. Murdock: You are asking us to add subsection 40(3) to that list.
Ms Dalys: Yes.
Ms S. Murdock: I had not given it any thought so I really cannot say, but certainly I will look at it. I cannot say any more than that, because I have to look at the ramifications. There is a committee set up to study the entire Employment Standards Act.
Ms Dalys: In relation to Bill 70, which is a very timely bill, given the economy, we also have a situation with unclassified and contracted-out people, etc, which is very important in that respect. Perhaps it should be looked at in the context of Bill 70.
Mr Owens: What is the current situation, Mr Nicholson, with yourself and your colleagues with respect to your moneys?
Mr Nicholson: We would like to know too. Presently the Ministry of Government Services states that we work now for the bonding company, which is Alta Surety Co. Alta states that we are not employees of theirs. Alta has a company in Montreal that disperses its funds, Assistech Canada, and it also states that we are not its employees. No one seems to want to take us on as an employer, yet the Ministry of Government Services insists that we stay. They acknowledge that our job is important to the Ministry of Government Services and the Ministry of Agriculture and Food, the client ministry involved.
As for our pays, we have been paid up until July 19, I believe, but that was after a lot of fighting through every avenue we could possibly think of. We are afraid that it is going to take another 90 days at least for them to rewrite this contract, reissue it for tender, and during this time we will have to continue to fight for our wages, again through all the avenues that we have been using.
Mr Owens: So I guess hung out to dry is a fairly apt description.
Mr Nicholson: Yes, sir.
The Vice-Chair: Thank you for your presentation. It is the first one we have had from the public sector, so I thank you for your outlook on it.
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INFORMATION TECHNOLOGY ASSOCIATION OF CANADA
The Vice-Chair: Information Technology Association, please come forward?. Please introduce yourselves for Hansard.
Ms Moyer: Thank you very much for taking time to listen to us today.
Mr Chairman and ladies and gentlemen of the committee, my name is Janice Moyer, and I am the president of the Information Technology Association of Canada, or ITAC. I have with me today two members of our association. On my right is Allen Berg, who is the vice-chair of Enterprise York, and also the president of Computer Methods, a small software company that has been in business in Ontario since 1975. On my left is Richard Newman, who is the manager of employee relations at IBM Canada Ltd.
I would like to spend a couple of minutes this afternoon acquainting you with ITAC and why we are here today, and then ask Allen and Rich to address specifically our comments on Bill 70.
Information Technology Association of Canada represents the computer telecommunications and related office equipment, hardware, software and services industry in Canada, an industry with revenues of approximately $35 million in 1990 and employing approximately 280,000 people in Canada. Ontario has the lion's portion of that figure, with provincial revenues of approximately $20 billion and with some 150,000 employees in Ontario.
Information technology has been Canada's fastest-growing industry sector for about the last 40 years. It currently has a growth rate of more than 8%, even in these recessionary times, and some of the sectors, such as software and services, are growing as fast as 14% per year.
We are currently generating in the area of 8,000 new jobs per year, approximately half of these being in Canada, most of them in small and medium-sized businesses. The mission of our association is twofold. The first is to promote the effective use of information technology by Canadians to help improve our standard of living and our international competitiveness as a country, and the second to provide leadership on issues that affect the growth and the profitability of the information technology industry in Canada.
The association brings three important perspectives to bear on the discussion surrounding Bill 70 that I would like to review with you today. The first perspective is that our industry is directly and indirectly at the heart of the sweeping changes that are under way in the Ontario economy right now.
Technological innovation in all enterprises is driving the shift from our industrial and service-based economy to a post-industrial, knowledge-based economy. Technology is the underpinning, and constant change is the overriding characteristic today. The world is paying less and less for Canada's resources. Increasingly, employers are far more interested in the knowledge value that people can add to a product or service for sale.
The worker of the future will increasingly be expected to add intellectual, rather than physical, value to the task at hand. Let me quote a paragraph from Robert Reich's new book, The Work Of Nations:
"The real economic challenge facing the United States in the years ahead -- the same as that facing every other nation -- is to increase the potential value of what its citizens can add to the global economy by enhancing their skills and capabilities and by improving their means of linking these skills and capabilities to the world market. [We need] to encourage new learning within the nation and to smooth the transition of the labour force from the old industries."
In case you have any doubt about the pervasiveness of technology in our lives, let me give you a couple of pieces of information from the Harvard Business Review recently. In 1970, less than 50,000 computers were installed worldwide. Today, more than 50,000 computers are sold every day and more than 80% of all those who use computers today had never even touched one in 1980.
The second perspective is that our industry is fiercely competitive and operates in the context of an international marketplace. Technological lifespans and competitive advantages are now measured in months rather than in years. Our member companies today are both competitive and full of knowledgeable workers. Our technology and our people in turn help other Canadian industries to become internationally competitive.
To survive, our companies must lead rather than react to technological developments taking place in the United States and the Far East. You and we should not think of trying to slow down or stop technological change. We will all be far better off to channel our efforts to working together to find ways to accommodate and to take advantage of technology in various workplaces and to preparing Canadian workers for the future.
A Statscan survey recently indicates that Canadians are ready for this. Almost two thirds of Canadians surveyed think that the introduction of new computers and other technology has made their work more interesting and meaningful and 96% feel that their job security is not affected by or in fact has been improved by the introduction of computers -- surprising, I think, to most of us.
Canadians are adopting and enjoying information technology, partly because it is defining today's jobs. Information technology has been called the single greatest factor in determining the competitive potential in all other industry sectors today.
Finally, the third perspective we bring to bear is that our industry employs people who are highly skilled workers. We treat our employees as partners who are critical to our success and we make major investments in their education and training. We pay them above-average wages, provide them above-average benefits and encourage them to participate in the operation and the success of our business. This industry is one that thinks of its employees as valued partners rather than workers. In fact, our industry is our people. They are our biggest asset.
Because of this and because our industry tends to be at the forefront of our shift to the knowledge-based society, many of our companies have created employee relations models in addition to the existing industrial relations models to ensure employee involvement in the day-to-day conduct of their work and the assurance of fair treatment. Thus, employment legislation in its broadest sense needs to take these models into account.
By way of conclusion, let me add that ITAC's vision statement is helping Canadians build a better future through information technology. With that background on the association and the industry, I would now like to ask Richard Newman to make specific comments on Bill 70.
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Mr Newman: Mr Chairman, ladies and gentlemen of the committee, in April of this year when Bill 70 was first tabled, many of us in the private sector were surprised and shocked by some of the elements of this bill. To our knowledge, there had been little if any consultation, at least with business, regarding the extension of directors' liability to include severance and termination pay and the inclusion of officers as carrying the same accountability as directors.
Needless to say, we were therefore delighted by the government's responsiveness to business concerns when on June 5 the minister announced his intent to realign this bill with the Ontario Business Corporations Act. However, we still continue to have some concerns with Bill 70.
First, the broadened definition of wages under the wage protection program will in future include severance and termination pay, as we all know. The end result of that, however, will be to substantially increase final fund settlements in cases regarding insolvencies. This program, therefore, seems destined to become another level of social safety net with the costs borne by the taxpayer in the short term. Predictably, in the long term, these costs will be borne by the remaining employers in Ontario through some form of payroll or head tax. I will come back to that later.
Second, Ontario currently provides the highest termination and severance provisions of any province in Canada. We compared the cost of terminating the employment of 50 people with representative lengths of service and whose pay averaged $35,000 annually. The costs for Ontario were just over $600,000. The next closest province was Manitoba at $335,000. All of the rest ranged somewhere between $50,000 and $300,000. Now these figures only include termination and severance pay. They do not include back wages, vacation pay or holiday pay and the like.
Earlier this week I asked our legal staff to check what would happen in New York state if 50 people were laid off. They went back to our US counterparts and determined that it would be nothing under the law, and I did not believe that. So I sent them back a second time and they have not got to me yet, but on the first go-round their point to me was that in the United States employment is employment at will and it is looked at in that context, as opposed to being under the common law approach that we take in Canada. What that means is that in the United States there will be some form of severance pay or termination pay for at least some employees. It depends on the custom of their firm.
Clearly much of this expense being generated by termination and severance pay will eventually be picked up by the employee wage protection fund. The degree will depend on the extent to which the employment standards provisions change and the degree to which the board exercises its regulatory ability, ie, the $5,000 cap.
Third, with respect to group terminations, there have been discussions this year about the possibility of increasing termination and severance amounts and changing these thresholds and caps, particularly as they regard group terminations. In that Bill 70 hooks directly into employment standards definitions, we worked out the potential future costs for the same group of 50 people using some of the ideas aired in consultations this spring, and the figures became astoundingly high when taken in the context of other jurisdictions. In the case of that 50 in Ontario, using middle ground assumptions that were discussed in the consultation proceedings this spring, that package came to over $1 million.
Is all of this a problem? It will not be a problem for those who view this as a socially desirable termination insurance kind of program funded by some form of wage premium. Bill 70 will be a big problem, however, to an investor trying to decide in which province or state to establish a new facility.
Earlier in these proceedings right here in this room, a payroll tax was proposed as a right, just and relatively inexpensive long-term solution to funding. This program, when you couple it with a payroll tax, will drop with a thud on the scales when weighing in against the investment case for Ontario. We have to recognize that it is not only the cost of doing business in a given environment that investors will measure. They will also look for indicators of the different kinds of influences and mindsets that are at work in these different jurisdictions. They will be looking at their decision in the context of what is going to happen five, 10 and 15 years out. Is my investment going to be secure? They will be looking at the broad undercurrents as well as the specifics.
Some of the people whom I heard speak earlier this week at these proceedings simply do not understand the realities of how these investment decisions are made. We are not sloughing off social responsibility. What was sloughed off is that the funding of this program is a relatively insignificant cost taken against the payroll systems of industry. The message that comes through to someone who is betting his own personal savings for his future wellbeing speaks a lot more loudly than that.
To help position Bill 70 in the context of small business where most of the jobs, as Janice said, are going to be created in the future, I will turn this over to Allen Berg who, as a small business owner, can speak in that context.
Mr Berg: Mr Chairman, ladies and gentlemen of the committee, as noted earlier, I come here as a small business owner. I also bring a unique perspective in my capacity as vice-chairman of the board of Enterprise York, an organization within York University.
Enterprise York is one of the six provincial centres of entrepreneurship established by the previous government of Ontario. The purpose of these centres is to encourage entrepreneurship in Ontario. My role is to organize the staff of the centre and to direct their programs in serving as a catalyst to help small business thrive and expand in Ontario.
The high-tech industry encourages the growth of small companies. The products tend to be relatively complex. Potential use of our products is everywhere. It is labour-intensive, but the level of skill involved tends to be high, and our industry is exceedingly competitive. These small firms tend to be highly specialized and many deal in a marketplace niche with a very limited range of products, so there is not a lot to fall back on when your main product develops problems.
Let us pretend for a moment that you are in your late 20s or 30s. You have worked in the high-tech industry for a few years and have a fantastic idea about how to adapt personal computers to the business requirements process of firms in the construction industry. Your product will enable construction companies to be much more competitive and profitable.
You do not have much capital and cannot get much of a line of credit. You want some of your acquaintances or even relative strangers to serve on your board so you can take advantage of their unique expertise. In preparing your business plan with help from your lawyer and accountant, you find that there is a whole lot more involved than you initially thought. As you think your way through the cost and location of your facilities, the cost of employing 10 to 12 people and the rules and regulations at all levels of government, you suddenly focus on the fact that some environments are better than others in enabling you to reduce your risk of failure.
Remember now, it is your money, your risk, your effort. It is not some nameless corporate executive who is going to make this decision. Also, you are probably a person who appreciates having grown up somewhere in Ontario and who wants to stay here.
I went through this decision in 1973. If I were to go through it today, I am not sure what the answer might be. Clearly there would be some clear-cut economic advantages in choosing to locate your new business outside of Ontario. This presumes you want to minimize your risk. However, just as big a problem for us in Ontario is the fact that many potential entrepreneurs will go through this process and decide to do nothing. That scares me. That possibility would clearly cost us in terms of unrealized job opportunities in Ontario.
Let's assume for the moment that you do go ahead. Your business prospers and grows to 50 people. In time, however, you find it more difficult to remain competitive in your market segment, and a few years later start to lose money. In looking for a so-called white knight, you find that no one really wants to buy into a failing business in which the main assets are its people and, to a lesser extent, its product and customer base. The liabilities by this time are primarily vested in its people, ie, termination and severance pay. As I observe Bill 70 and its amendments, I see its future structured with the potential to extend termination and severance pay requirements, add to the responsibilities of owners and directors, increase the $5,000 cap and the like.
You as the hypothetical owner find yourself between a rock and a hard place. You cannot sell your business and you cannot keep it going. Caring and honest owners, directors and officers, when faced with a decision like this, will find themselves wanting to fold up the business sooner rather than later and cut their potential losses, rather than keep struggling when there is a risk of losing everything including one's own personal assets.
Bear with me for one last scenario. The owner does close the business and the receiver is now faced with trying to find a buyer. Change your role to that of a potential buyer. Does it make sense for you to take over the assets and the liabilities of an operation when the previous owners, directors and employees have a divided attention as to how they will fare under the provisions of Bill 70 versus getting on with the future?
In Bill 70 lies another potentially serious problem. All the well-funded machinery of the board will be in place to make things very complicated and uncertain for a long period of time for the previous management team, and by association, for the incoming management team.
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What Bill 70 is about is the protection of workers' wages. When we consider the long term, however, our association sees it as one more government-initiated structure that will inhibit the generation of jobs not only in our industry but in other growth industries and industries that need to be restructured and consolidated in view of the larger implications of the international marketplace in which Ontario resides. We feel there should have been much more consultation with business before proceeding with the initiation of this bill. It is still not too late to undertake such further consultation, and we invite you to take advantage of this offer.
Thank you for this opportunity to present these observations.
Mrs Witmer: Thank you very much for a very informative presentation. I think you have pointed out very well the need for us to take a look at the changes in the global economy and to prepare our people in order that they are suited to assume jobs in other areas.
In the very last paragraph, you talked about the need for more consultation with business. If this consultation did take place, what would you be encouraging the government to do regarding Bill 70?
Ms Moyer: Rich, I know you have given a lot of thought to that. Would you handle that, please?
Mr Newman: I have two layers of desire, I guess. The first one is probably one that would not appeal to this committee, but I should set the stage for it. I would like it rethought actually, if I had a chance to put my input into it. I see it as a social program really. I think the aegis of it probably is prompted by social stimulus. Yet what is happening, in its current form, is that it is going to cripple business, especially small business. So I would like it rethought.
I think if it were possible to stack it somehow or rationalize it with the UIC, turn it into an insurance program and fund it out of general revenues, that would be the right thing for this province, for both workers and employers.
Recognizing that might not sell, my second suggestion would be that you unhook it from employment standards, that you in fact take out the termination and severance pay and leave it strictly what it was before, what the intent of the Bankruptcy Act is and things like that. Leave it to earned back wages and leave it to earned vacations and holidays and things that are there from the past. Moreover, I would put the cap back with the Legislature.
Mrs Witmer: As opposed to regulation?
Mr Newman: As opposed to regulation.
Mrs Witmer: Certainly if it were limited to strictly vacation, the $5,000 cap would be changed dramatically.
Mr Newman: There are cases -- you just heard one before this -- where people in fact go and work for nothing, because as long as there is light at the end of the tunnel, maybe you will accumulate quite a bit of back pay.
Mr Owens: My question is around the statement that Bill 70 will inhibit the generation of jobs. I like the statement and I will use it later in remarks, but in a different context.
My comments are around the fact that the wage protection fund is not meant to be a social program to be universally accessed by all. When one looks at IBM, IBM pays its way. It pays its employees well. I understand they have just signed a letter of intent with Apple Computer. There is going to be a good alliance there. They are good corporate citizens. The problems we have, and the problems of the workers who have testified before this committee, the workers we have all seen in our constituency offices, have come from employment situations which are not like that at IBM. These are the people we are aiming to protect. I am not quite sure how something that takes place at the back end, where all possible avenues have been exhausted, is going to inhibit, at the front end, the creation of jobs.
Mr Berg: I will answer that because I have seen this quite a few times in the last year or year and a half, wearing my different hats, what I do as a small businessman and also as vice-chairman of Enterprise York. I do not think anybody opposes, certainly not I, having the wages paid of workers of companies that fold or are in receivership. I think that is a given for anybody I know of.
What bothers me is to try to resurrect companies that are in receivership. Usually the banks, as many of you probably know, do large ones, but they also pull the plug very quickly on small corporations and small businesses.
Mr Owens: Not according to the Canadian Bankers Association.
Mr Berg: That is another argument.
Mr Owens: The white knights of industry, according to this morning's testimony. That notwithstanding, yes?
Mr Berg: That is not up for discussion now. But I see a lot of small businesses that are right on the ledge. They are either pushed over in a few days by the bank or have a few months and then they go out. A lot of them do not go into bankruptcy; they go into receivership. What bothers me is really how to recover and raise something from the ashes for small corporations. A lot of them are in the high-tech industry because they have very few hard assets. Their assets are in their people.
If I were an investor -- and I have looked at them as an investor -- this legislation would scare me. It scares me because one is putting in a board that will not make big decisions. The board's decisions, when I read them, are over 45 days or over 90 days, and it is not conducive to putting a deal together quite quickly to save the jobs of companies or people that are in receivership or close to bankruptcy.
I think it is the severance and the termination packages that bother me. I do not know, if I buy from a receiver, what the liabilities are on a successor corporation, because they may well carry over. This is not a bankruptcy but a receivership. That is what scares me and that, in my opinion, is what will lose jobs for you because I will not look at it. I will say, "What's the use? I will go and look at a situation in Buffalo." That is all.
The Vice-Chair: I am going to have to jump in here because it is now Mr Offer's time. I am afraid that unless Mr Offer does not exhaust his time, you are out of luck this time, Mr Klopp.
Mr Offer: I will be, as usual, as brief as possible. You know there is legislation pending in the federal area around this whole issue, Bill C-22, I think it is, which calls for protection of wages and vacation pay in bankruptcies and which is to be financed through a payroll tax. I wonder if you have had time to look at that and if you have any thoughts as to that. We are obviously not dealing with that particular legislation, but a lot of people have come before us and talked about this whole issue of harmonization.
Mr Newman: If I remember correctly, it was a $2,000 peak that they would pick up, and the harmonization would be that you would pick up the other $3,000 and would administer it through the provincial ministry.
Mr Offer: I do not think that is it.
Mr Newman: For the same reason that I do not think we should be doing a payroll tax or a head tax, levy or whatever, at the provincial level, I feel the same way at the federal level. Going back to this gentleman's comment, it is a social safety net used only in certain specific cases of insolvencies where in fact it is not forthcoming. It is a form of insurance, as I see it, and it could be paid for out of general revenues.
I think what the federal government is doing is absolutely wrong. They are sending a message to business all across the country now, in the sense that the mindset at work in Canada is really not to foster the creation of jobs and to leave employers free to put jobs together, so much as it is to have employers pay the costs of the phase-out of old industries and the phase-in of new industries. That I see as a broad societal problem.
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Mr Offer: Very quickly, we have heard of a potential impact, no matter how it is funded, whether it be through a payroll tax, which is a possibility down the line, or through general revenues, that there is going to be, no matter what, an impact especially on small business, the small business person having to try to access insurance, which is a cost of doing business. Whether they are successful or not is up in the air. Mr Berg might want to share with us that aspect.
Mr Berg: Mr Offer, I will be as brief as possible. When I look at a business, or when people are walking in here, pieces and pieces of legislation being piled on small guys like me, we are just throwing up our hands and saying: "What's the use? Let's go to another jurisdiction." You can write all the legislation you want. We are just too overburdened. In the last year and a half, we have had or possibly will have the GST, two bills that may affect us through employment, your bill and the bill from the federal government, and then a tax on payroll basically for health costs. I do not have a lawyer or a legal department such as IBM that sits around and reads acts, unless you want to subsidize it. What I have is myself. You are cutting into my time of generating profits or business or new enterprises, you really are, and this is just another piece of legislation where many people like me will say: "What a day. There must be easier ways of doing business."
Mr Newman: I would make one last comment from my perspective, I guess. As I look at IBM with 12,000 or 13,000 employees, I cannot conceive of our growing in the next 10 years, in the foreseeable future. Our whole focus today is to try and lean up. For the first time in my 33 years at IBM, we are five months into a year and we are negative. We are losing money. It is that kind of thing that is driving us to link up with Apple; two historically hostile organizations.
Mr Offer: I suppose there are also transnational competitive pressures sort of driving your --
Mr Newman: Yes, there are. That is what is driving, but this is what is driving Ontario today. It is not just driving IBM and Apple; it is driving every organization you have got. My point is that your new jobs lie with organizations like Allen's. They do not lay with the IBMs and the Apples, so take care of them.
Mr Klopp: They are selling stock.
Mr Newman: I wish. Not another one heard from.
Interjections.
The Vice-Chair: Okay, please, some order. I wish to thank you very much for your presentation and to let you know, sir, that in reality I think we have had about three small technology people come in and present, so we recognize there is some concern within that group.
Ms Moyer: Thank you, and if there is anything else we can do to be of assistance, we will make that offer at any time at your convenience.
CANADIAN UNION OF PUBLIC EMPLOYEES, ONTARIO DIVISION
The Vice-Chair: Thank you. Our next presenter will be the Canadian Union of Public Employees, Ontario Division. There is a slight typo on the agenda, but it is okay. For the sake of Hansard and some of the members, would you please identify yourselves and introduce yourselves to the committee.
Mr Stokes: My name is Michael Stokes and I am president of the Canadian Union of Public Employees in Ontario, and with me is Brian Blakeley, our legislative liaison.
The Ontario division of the Canadian Union of Public Employees welcomes this opportunity to present our position on the employee wage protection program to be enacted by Bill 70, an act to amend the Employment Standards Act.
With over 400,000 members, CUPE is the largest labour union in Canada. The Ontario division of CUPE represents more than 151,000 members employed in both the public and private sectors in all regions of Ontario. CUPE members work in a wide range of settings, including rest and retirement homes, nursing homes, homes for the aged, associations for community living, children's aid societies, the Ontario Housing Corp, the Workers' Compensation Board, municipalities, public utilities, Ontario Hydro, school boards, hospitals and universities.
Many of our members work for employers in situations of very real financial hardship. These employers, to name but a few examples, include day care centres, rest and retirement homes and nursing homes. Many of our members have experienced the hardships of missed paycheques or an employer that goes out of business with moneys owing for wages, vacation pay, termination or severance pay.
A current and very real example of the financial uncertainty that CUPE members face in their day-to-day work lives is the situation of Garson Manor in Garson, Ontario. This private nursing home has, over the last 10 years, switched hands several times and our members have become accustomed to living their lives under the constant cloud of the imminent bankruptcy of their employer. On one occasion this spring, the employer presented our members with cheques for $10 in lieu of wages. This is but one example of CUPE members who could have benefited from an employee wage protection program had one been in place when they required it.
On behalf of CUPE members at Garson Manor and the many other health care workers in similar situations throughout the province -- Garson Manor is in by no means a single situation; it is a situation that is plaguing rest and retirement homes across this province -- as well as all other workers in Ontario, CUPE Ontario, as indicated, is pleased to have this opportunity to comment on the employee wage protection program introduced in this past session of the Legislature.
In our view, there is a very real and pressing need for a wage protection program in Ontario. The current recession is without question the worst to have hit the province since the Great Depression. Job losses in this province have totalled over 214,000 in the first year of this recession, compared to 89,000 in the first year of the 1981-82 recession; 97,000 jobs were lost in the manufacturing sector compared to a drop of 76,000 in 1981-82.
The rate of job loss in Ontario has been over twice that of the national average. In Ontario we account for 80% of the national job loss. Many of these jobs are gone for ever. Like jobs in the resource sector, manufacturing jobs are hard to replace. It is important to remember that it is in the lower-paid jobs of the service sector where most new jobs have been created over the past decade. Increasingly it is in the service sector that workers displaced from the resource, manufacturing and industrial sectors, as a result of the restructuring of the Canadian economy brought on by the free trade deal and the goods and services tax, must look for employment.
In June of this year, the Minister of Labour informed the Legislature of Ontario that the employment standards branch of his ministry had received more than 13,000 potential claims for compensation from workers. That means 13,000 Ontarians have not been paid wages since the Premier announced the wage protection plan in October 1990. These workers were unable to collect their earned wages and other entitlements due to their employer's insolvency, closure or simple failure to pay. The Ministry of Labour estimates that in the first 18 months of the employee wage protection program, more than 50,000 workers will qualify for compensation.
Judging by the severity of this recession, a portion of those 50,000 citizens of Ontario will no doubt come from CUPE workplaces, be they day care centres, nursing homes or community social service organizations. Receiving up to $5,000 in compensation for unpaid earned wages, vacation pay, severance and termination pay will undoubtedly help these workers and their communities substantially.
When the Minister of Labour, the Honourable Bob Mackenzie, introduced the legislation creating Ontario's employee wage protection program, he said, "We have to take measures to increase protection for workers so that they do not become victims of circumstances they cannot control." Mr Mackenzie also stated, "Workers are entitled to receive the money they have earned, and they must be assured that this money will be given to them."
CUPE Ontario strongly supports this position of the Minister of Labour. Workers should be assured that they will receive payment for their labours.
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While the need for wage protection is highlighted during times of extremely high occurrences of bankruptcy, such as during the current recession, the need is none the less important in good times. Businesses fail for a myriad of reasons, as the table from the Brown commission report indicates. It is on page 6 of our document.
The employee wage protection program proposed by the government is, as we understand it, meant to reimburse workers for unpaid wages, vacation pay, termination and severance pay not paid to them as a result of employer bankruptcy, abandonment or any other failure-to-pay situation.
As we see it, the program has two main components: first, to compensate employees for lost wages to a maximum of $5,000, and the EWPP will cover earned wages and vacation pay as well as the minimum amounts of severance and termination, as outlined in the Employment Standards Act; second, the creation of an expedited appeals process for employers and a new adjudication system for employee appeals.
The program promises to provide quicker access to unpaid wages for employees than they are entitled to under the existing system. The legislation also reaffirms the responsibilities of directors of a business corporation with regard to their obligation to make good on unpaid wages. The bill as amended does not appear to extend any new liabilities to employers or their agents.
Currently a worker who is owed wages, vacation pay, termination or severance pay has recourse to the employment standards branch of the Ministry of Labour. Following an investigation of the worker's entitlement, an employment standards officer has the authority to issue an order to pay against an employer. The maximum amount that can be so ordered is $4,000 plus any outstanding severance pay amounts. However, despite the best efforts of the employment standards officers, it often proves impossible to collect these amounts.
A worker entitled to wages, vacation, termination or severance pay is recognized by the federal bankruptcy laws as an unsecured creditor. Since workers' claims under the current bankruptcy laws rank behind those of all the secured creditors, such as financial institutions, their claims are rarely, if ever, paid. Many workers are therefore unable to collect wages, vacation, severance or termination pay owed to them by their bankrupt employers.
Recently the federal government has announced plans to amend the federal bankruptcy law to provide some relief to workers who are owed wages and vacation pay. However, they propose covering only $2,000 of earned wages and vacation pay from a special fund to be established from a new tax. It seems unlikely that this proposal will make it through the legislative process in Ontario or in Ottawa.
The inadequacy of the current process for recovering unpaid wages and other moneys has been documented by a number of reports, including the Premier's Council report entitled People and Skills in the New Global Economy. An excerpt from that document reads:
"Ontario should provide a wage protection advance to all workers who are owed wages, vacation pay, contributions to benefits and pension plans, termination pay and severance pay by employers who shut down and default on their legal responsibilities. Ontario must then vigorously pursue recovery of these funds by all legal means available."
That is on page 277 of the report.
The Brown commission report also recommended changes to allow employees to have increased rights to moneys owed to them for unpaid wages under bankruptcy laws.
Clearly it appears that this government has taken into consideration the recommendations from those two reports in introducing this much-needed and progressive legislation to protect the wages, vacation, termination and severance pay of the workers of Ontario.
The government of Ontario, in proposing this legislation, has moved to ensure that compensation owed to employees is paid in a timely manner. Under the EWPP appeals may be initiated by employees, by employers, by directors or by the director of employee standards. The government has announced that employees can file claims for unpaid moneys dating back to October 1, 1990. An employee can file a claim for any unpaid moneys with his local employment standards branch office. To ensure the timeliness of payments from the EWPP, hearings and appeals by employees will be required to be scheduled within 45 days after an application to appeal has been made. Impartial referees will then be required to make their decisions within 90 days of the initial hearing.
In most cases, it appears that no payments from the EWPP will be made prior to the conclusion of any appeal proceedings. However, an adjudicator or referee hearing an appeal will be able to order an interim payment for any portion of the claim amount that is not found to be in dispute. Payments will also be made to workers while an appeal by directors about their status is proceeding.
The EWPP will, as we understand it, be administered through the employment standards branch of the Ministry of Labour and financed out of general tax revenues. Employment standards officers and area officers will investigate all claims for unpaid wages, vacation pay, severance and termination pay, as is the current practice, to identify employees' eligibility for payment under the EWPP.
In conclusion, I would say that in our submission we have documented:
1. That there is a very real need for wage protection in Ontario, both during times of recession and during times of economic prosperity. The need is clearly reflected in the statistics on full and partial plant closures and the estimates of total financial loss to workers presented in our brief. The EWPP is needed to offset the financial penalties to workers, their families and the communities in which they live of plant closures, bankruptcies and other situations leading to a failure to pay earned wages.
2. Why CUPE Ontario supports the initiative of the Ontario government in amending the Employment Standards Act to establish the employee wage protection program.
When the Minister of Labour, the Honourable Bob Mackenzie, introduced this legislation, he noted that it was both "a major achievement in strengthening the rights of workers in Ontario" and "an integral part of our government's comprehensive approach to labour adjustment."
CUPE Ontario strongly supports the creation of the employee wage protection program through Bill 70 and sincerely hopes that the government of Ontario will continue in its efforts in this regard. CUPE Ontario looks forward to the day, hopefully a day in the near future, when the people of Ontario will have a comprehensive system of labour adjustment in place. The employee wage protection program is a much-needed and timely first step in this process.
We would like to thank you for your kind consideration of our position on the employee wage protection program.
Mr Owens: The Ontario Public Service Employees Union made mention of a problem with respect to government services being contracted out to private sector employers and these private sector employers then denying responsibility for payment of wages when they have gone out of business. Do you see that happening within the CUPE sector around nursing homes or children's aid society group homes or homes for the developmentally handicapped?
Mr Stokes: Absolutely. The situation in all of those sectors that you mentioned is outrageous. Those services are best provided by public employees. When they are contracted out to companies, often these companies find themselves in financial difficulty and the people who suffer are not only the clients but the workers, who are denied wages and benefits that are rightly owed to them. It creates quite a stressful living condition, as I said, for the residents of those homes as well as the workers.
Mr Owens: We really appreciate your support. Do you see any problems within the legislation, any recommendations you might like to make as to how it might be fine-tuned?
Mr Stokes: Not offhand. We see it as a very progressive and positive step. You could go further if you like. We would obviously be pleased to see it extend beyond this to include all wages and benefits that are currently owed to an employee, rather than have it capped.
Mr Blakeley: There are two areas that we considered including in the brief. One is the fact that there is no provision for indexing on the $5,000 amount. I understand that will probably be contained in other briefs from labour organizations and we chose not to include it in ours, but it is definitely an area of some concern; $5,000 may seem like an appropriate amount in 1991, but in 2001 if it is still $5,000 we have defeated the purpose of the legislation.
Mr Stokes: Yes. While it has not been included, we would support indexing.
Mr Blakeley: The other area concerns the lack of a specific funding mechanism other than general revenue. I think to a certain extent that makes sense in that you do not want to impose a taxation on the good employers in the province, but problems as far as financing is concerned might develop over the long term.
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Ms S. Murdock: I just want to make a comment, because when I was Shelley Martel's constituency assistant the Garson Manor situation arose, actually for the first time. The thing about this piece of legislation is that in the Garson situation, while it is in receivership or whenever it is put in, because it has been in it a couple of times, the worker under this legislation would still be eligible to receive benefits if that came to pass, regardless of whether some mechanism was put in place to keep the thing alive. The worker does not suffer.
I know that too many times they get their cheques and then they go and cash them at their local grocery store, because Garson is a small community and you do not have to go to the bank, as you do down here. Then it would bounce, and yet these were employers at the time who were funded by the provincial government and were getting good dollars, and yet were not paying them out to where they belonged. I am glad to see you used that one as an example, because it is definitely a timely one.
Mr Blakeley: Certainly a key feature of the legislation as well is that there does not have to be a termination of the business before benefit entitlement arises. If you get a $10 cheque you can file a complaint with the ministry and hopefully it will be made good.
Ms S. Murdock: I just have one question. I know the deputy minister said on Monday that the average wages, vacation, termination and severance pay would amount to about $4,300. I know you said you would like a COLA on the amount, the $5,000 and so on, but would the $5,000 cover most of your employees?
Mr Stokes: Probably in those work situations. Because they are critically underpaid, I would imagine the $5,000 would cover it under today's situation.
Mr Offer: I have just a few questions. They deal with the legislation as originally introduced by the minister, and I think you have alluded to that on page 5 of your brief in terms of quotations. I am wondering if you can share with me your reaction to the amendments which were subsequently introduced, those amendments which, for instance, took away the liability of officers and restricted the liability of directors of those companies that in some cases went bankrupt. I am wondering if you could share with us whether you feel those amendments enhance the principle of workers being assured they will receive payment for their labours, as you said on page 5.
Mr Stokes: I do not know whether "enhance" is the right word. I think it restricted the liability to those who are appropriately responsible for it. I do not think the intent of the legislation was ever to penalize volunteer directors.
Mr Offer: I was not alluding to the volunteers. I would just like to get your thoughts as to whether, in your opinion, those amendments should or should not have been introduced.
Mr Stokes: We do not have any problem with the amendments, if that is what you are asking.
Mr Offer: I would like to get your thoughts, because certainly that has been the subject of some discussion as we have gone through these hearings.
Mr Blakeley: I think the amendments were introduced for a couple of reasons. The amendment regarding the directors' restrictions, as I understand it, now brings those restrictions in line with the restrictions set out in the Ontario Business Corporations Act, which is obviously the appropriate place to be defining a director's responsibilities and liabilities in a corporation. If you then start turning around and using other pieces of legislation to achieve goals which are addressed in separate legislation, I think you would be running into a problem.
We were at a meeting this afternoon where we were discussing regulations for health care workers and trying to achieve goals that are properly contained in the Mental Health Act. People were trying to use the legislation to achieve goals that are not what the legislation is trying to do.
I think in that case it did not reduce anybody's liabilities. It clarified that the liabilities were the same as the ones in the Business Corporations Act.
Mr Offer: I guess the question is not so much the liabilities, which basically are the same; it is the enforcement procedure which is different under this bill than under the Business Corporations Act. I just wanted to bring this point up because you were so very strong and clear in your presentation in terms of the workers being assured they will receive payment. It harks back to the April 11 introduction of the legislation, which was of course amended and which seems to fly in the face of the principle.
Mr Blakeley: In response to that, the workers, as they stand now, do not have a lot of protection. If somebody closes up shop and disappears, there is no guarantee they will receive any form of monetary compensation. What this legislation proposes is that the government will go on the hook, if you will, for $5,000, and then the government will have to recover the money. So if the government then has a problem getting the money back because it does not have anybody to go after, that does not lessen the value of this legislation to an individual who is out cash.
From what we have looked at, the way to guarantee the workers will receive their pay from their employer would be to amend the federal bankruptcy law -- not the way it has been introduced, which is the token $2,000 with another taxation program, but to put unpaid wages, vacation entitlements, severance entitlements, ahead of secure creditors.
Why should a bank go in and be able to reclaim money that it made a mistake lending, let's say? Let's take a bad case. Let's say they gave money to somebody who had a bad business idea. This person went out and employed people and went bankrupt. Why should the bank, which had knowledge of this business, had a chance to look at the prospectus, at the business plan, and to evaluate the people who were coming to it for money, have a greater claim to the money than the employees who said, "I'd rather be working than be unemployed, so I'll go down and I'll cast my lot with this person who is hiring"?
Mr Offer: Yes, I recognize your opinions on the Bankruptcy Act. We have heard this, obviously, and it is unfortunate we do not have any jurisdiction over that. Just carrying it forward, is it your position that there is some social responsibility of the taxpayers of the province to in effect guarantee the termination and severance pay of potentially every worker of this province up to whatever limit is in the legislation?
Mr Blakeley: I think what we see in this legislation is a willingness of the province, or of the current government, to assume that role, to say that in Ontario people who work for a living and who are denied earned income deserve the protection of the government to the amount of $5,000, as it now stands, and that the government will take the responsibility of seeking redress for that. I think that is an appropriate policy.
Mrs Witmer: We have heard from different people during the past four days and certainly we hear from most of the union members that they are very supportive of this legislation, that it will certainly help their members to recover unpaid wages and the other moneys owed. Yet we have heard from business people, employers, that this is definitely going to have an impact on the economy in Ontario because it has created uncertainty, that there are individuals who will not invest more money in this economy and individuals who are looking to move to other jurisdictions, whether it be the United States or Quebec or what have you. What does your membership feel about this, the fact that the possibility of getting a job in the future could be lessened because of this type of legislation, which the employers definitely do fear and will mean an added cost to doing business in this province?
Mr Stokes: First, the protection would be extended to all workers, not just our members. The majority of workers in the province are non-union.
Mrs Witmer: Okay. The only reason I say that is because most of the people who have appeared here have represented the unions.
Mr Stokes: Our interests extend beyond our own membership to all workers in general and the protection that should be extended to them. The issue of the impact on the business community, I think, is a red herring. I do not think businesses will leave this jurisdiction because of this piece of legislation. If they are going to leave, they are going to leave for other reasons. I do not think it is going to pre-empt anyone from investing in the province as well. I think this is a good province. It could be a successful province for business. I do not see why it has to exclude rights for workers at the same time.
Mr Blakeley: Another concern we have is that we do not see how it is a new cost of doing business. There is no specific taxation.
Mrs Witmer: There is the increased cost of purchasing directors' liability insurance, if you can get the insurance.
Mr Blakeley: But our understanding is that those liabilities are currently in existence under the Business Corporations Act.
Mrs Witmer: No. According to this legislation there are some changes that will have an impact. I guess I hear you saying that you do not feel it is going to cost this province jobs.
Mr Blakeley: No, I do not think it will. Basically the legislation provides an avenue for some compensation for people who happen to get in with a bad lot, as far as employers go, or an employer who comes across some unforeseen circumstance. Generally I think employers set up business to earn a living and recognize that paying their employees is part of the cost of doing business.
I will defer on the question of liability insurance. I assume you will hear from numerous other witnesses who will address that issue. Our understanding was that it is in line with the current liabilities.
Mrs Witmer: Actually, we have heard from people that there is a great deal of difficulty in getting liability insurance and that it does increase the cost of doing business. Certainly this bill will have a severe impact.
Mr Blakeley: That was certainly a significant part of the discussions during the legislation when they reviewed that. It may increase the cost of doing business in that area, but I do not think it is going to drive businesses out.
Mrs Witmer: I definitely feel that in this province there is a need for greater consultation with all people. I think we are seeing polarization on this issue and some of the other upcoming labour legislation. What suggestions would you have for bringing together all the people who are going to be impacted by this type of legislation so that, when legislation such as this is brought forward, we do not have the problem that was created with Bill 70, where it had to be seriously amended? What suggestions do you have so that we could work more closely together?
Mr Stokes: That is an interesting question. The fact of the matter is that this is the first time the labour movement has had an equal opportunity for consultation in any of the processes that existed. I guess I am not surprised it is the first time I have heard these types of questions come forward. What about broadening the consultation process? Quite frankly, we were shut out of the consultation process. We think the consultation process that exists now is much broader than the one that existed before.
Mrs Witmer: Okay, so I hear you saying this is the first time you feel that you have been consulted.
Mr Stokes: Not on this piece of legislation. The first time the labour movement has been consulted in real, genuine terms was since October 1990.
Mrs Witmer: I appreciate that.
Ms S. Murdock: On a point of order, Mr Chair: Mrs Witmer just made that the liabilities of the directors. I think it is a misunderstanding that the Ontario Business Corporations Act and this legislation would differ. They do not. They are the same. I have asked the ministry people to do a chart of the three different areas because I think a lot of us are getting confused as to what is and is not in it with the amendments that were announced on June 5. There is no difference between the liabilities of the directors under OBCA and this.
Mr Offer: The procedure for enforcement.
Ms S. Murdock: The procedure for enforcement is different but the liabilities are not different.
Mrs Witmer: It is very different, and I think that is important and significant.
Mr Offer: The working mechanism is clearly one that is having some concern.
Ms S. Murdock: I will agree that the enforcement mechanism is different, but the liability is not different. I just wanted to say that.
The Vice-Chair: Time has expired and I thank you for your presentation.
Is there anyone here from the North Shore Loggers Association? No? I think we are going to end up having to take a recess for 10 minutes while we wait for the next group, which will be the Canadian Bar Association -- Ontario.
The committee recessed at 1535.
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CANADIAN BAR ASSOCIATION -- ONTARIO
The Vice-Chair: Would the committee to come back to order. Our next presenter is the Canadian Bar Association -- Ontario. Please come forward. The bar association has given us two briefs. One I believe is pre-dated to the proposed amendments and then there is a current one. I ask that you identify yourselves and introduce yourselves for Hansard.
Mr Manning: My name is Garth Manning. I am the president of the Canadian Bar Association -- Ontario. We represent something in excess of 16,000 members. I am merely going to set the scene for no more than two minutes. The main submission will be made by my colleague, Daniel Dowdall, and then will be taken by my other colleague, John Swan.
Setting the scene, you are quite right; there are two submissions. The first one is the submission my association made when Bill 70 was originally introduced. We will all recall that the original bill attracted some attention -- I think that would be an understatement -- and was subsequently amended by the minister. We have given you our original submission because our up-to-date submission, the one with three names on the front, brings our submission up to date and takes into account the changes the minister announced, although some of the material in our original submission is still germane today.
I would like to emphasize that the association is non-political in nature. We are not equipped to, we do not want to and we do not in fact comment on political matters. We are knowledgeable in submitting briefs to all areas of government. We have done so on many occasions. Our aims are primarily in the public interest, and second so that any proposed legislation is written in clear terms which are incapable of being misconstrued.
With that brief introduction and setting the background, I will leave the actual submission to Dan Dowdall and John Swan.
Mr Dowdall: We are going to divide this presentation up between John and me. I am going to talk about certain concerns we have with respect to the payment plan itself and the implications of that and some continued concerns we have with respect to director liability. John will be addressing you with respect to concerns we have about the procedural elements of the proposed bill.
Dealing first of all with the question of the payment plan, and this of course is the proposal that a fund be established and people can make claims against the fund, I think in a nutshell the concern I can express in that respect is really one with respect to the failure of the bill to take into consideration the issue of mitigation. As lawyers, one of the fundamental issues we deal with in terms of the recoupment of loss to individuals is the question of whether or not they have been able to successfully take action so as to lessen the loss. The concern we have with the bill is that it has not taken into consideration the fact that employees who are displaced as a result of termination may have been able to take effective steps to lessen their loss.
My particular background in being here today is as a fairly rare breed of insolvency lawyer. I am a fairly busy person, unfortunately, these days. Very often in my practice, for instance, we see situations where companies fail and the corporation dies but the business continues. In many ways, receivership is a fairly effective way of restructuring a business so that the useful parts of the business go on and get purchased by a new purchaser, who continues and employs the employees and the failing parts of the business get liquidated and discontinued.
There seems to be a public misconception that somehow or other receivership or bankruptcy leads to a mechanism whereby the table gets purchased by Mr A, who carts it off in one direction, the machine over here goes off to Mr B, Miss C picks up some other machine and it is all just disbanded. In reality, what happens in receivership and bankruptcy, in the vast majority of situations, is that the functioning parts of the business are purchased and the employees who are associated with that are re-employed.
To put that in the context of Bill 70, what is happening here is that there are purchasers buying businesses and re-employing individuals, and those purchasers are, under the Employment Standards Act, successor employers. Under the Employment Standards Act, the employees have the same rights with respect to severance pay and the same rights with respect to termination pay from that purchaser as they would have in the situation they had previously left. So we are in a situation where they really have not suffered a loss.
Perhaps the best way of showing this might be an example. A company goes into receivership. It had 70 employees; 50 of these employees are re-employed by a purchaser; 20 of these people are terminated. Clearly the people who are terminated are in a different situation from the people who are re-employed. Let's take the position of one of these individuals who becomes re-employed. The employer decides to terminate that individual three weeks or three months into his new employment. At that time, the new purchaser would, under the existing legislation, be responsible. The purchaser, not the public purse, would be responsible to pay that person based on the seniority rights he had accumulated in the predecessor business, both termination and severance pay, according to the statute. We do not see that there necessarily is a loss in that situation.
The question that arises is, why is this bill proposing to compensate this person and allow this person to make a claim against the fund, which I think, when all is said and done, and notwithstanding the efforts that may be directed to recoup some expense from the directors, is ultimately going to largely come out of the public purse?
I am saying the same thing with respect to both termination and severance pay and, to a lesser degree, with respect to vacation pay. Certainly with many of the receiverships and bankruptcies I have been involved in, when the employees are in fact rehired the purchaser, as a matter of goodwill, just gives the employees the same vacation routine and the same pay package and so forth that they routinely had.
That is not to say everybody is going to come out fine in this situation, but I think what we have to do in looking at this bill is to determine where there really is a loss happening. It would be a very unfair situation, for instance, in one of these situations where there is continued employment, for a person to walk up, get a $5,000 cheque from the government and have all the termination and severance pay rights he already has from a new purchaser. There would be some reduction, I believe, if they were then fired by the new purchaser, but what we are doing is really giving the new purchaser a kind of windfall in the sense that he now has employees to whom he owes less obligations than he would in another situation. When the choice is between the new purchaser taking on an obligation, which he has been taking on for years, and being relieved of that obligation at the public purse, it does not make a lot of sense to us.
That is the main thrust of the provisions, which are set out in more detail under the section dealing with the payment plan.
The second issue that comes out of the plan is the whole question of the fact that the fund itself is likely -- I underline the word "likely" because we are going to have to give time to see what happens -- going to displace what has really become a fairly entrenched practice in the insolvency community of the banks going in at the commencement of a receivership and paying money, paying the outstanding payroll amounts, especially in light of the fact that the bill seems to suggest, although it is not very clear on this, that the banks will not be able to pay the employee and take an assignment of the employee's claim, which is the practice, for instance, in the United Kingdom.
Today sees the bank go in, appoint a receiver and fund the last payroll that has not been made, so that the employees get the payroll money, which is the money they really are relying on. None of these people is banking on his vacation pay, banking on termination and severance pay. They are not expecting those payments. What they are expecting is their payroll cheque. That cheque now gets honoured by the bank. It almost always gets honoured gratuitously. The bank adds that to its security and tries to get it out of the assets, but the bottom line is that if the bank comes up short, it eats that amount. That payment is happening immediately and it is being made by the bank.
Our view is that what is going to happen is a situation under this fund system, especially if there is to be no assignment to the bank, where the bank is not going to make that payment, the employee is not going to get the payroll cheque he has counted on and the bank's recovery is going to be enhanced out of the public purse.
The reason I speak to this issue is that as a bankruptcy lawyer -- I said a rare breed, and there really are very few of us -- we have obviously been dominated -- I think the entire time I have been at the bar we have been talking about our new Bankruptcy Act, which got introduced -- at least part of what we hoped for got introduced in the last few weeks. One of the reasons, as I have understood it as a bankruptcy practitioner, that the last decade of delay in bankruptcy has been about is precisely this issue, the contentious nature the government has had about how to deal with the employees and the question about whether it ought to treat the employees as having a supersecurity position against the assets or whether it ought to set up a fund and how to fund the fund. Of course, they have opted, as we have seen from the recent amendments, for the fund option, but they are doing it really on the basis of some tax on employers rather than out of the public purse per se.
I think this is an area we really have to sit down and think about. At the very least, I think we owe the banking/commercial insolvency end of our world the duty to make the government's position on this clear. If there are not going to be assignments, we should say it. If you look at the wage legislation that came in with the bankruptcy amendments, they came right out and said, "You can't assign." I do not know that I agree with that. I think that is not a good policy actually, because I think it is just going to delay payment to the employees. The banks are going to have a perfect excuse not to make the payments they have been making all along. They are going to say, "Go see the government." There the fund is well known. So you are letting the banks off the hook.
I think it is my duty here to come and tell you that. I am wearing sort of a double hat. Because we are all taxpayers here, I am not sure that is the best way I want to see the money go. Again, that is a political decision.
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The third element I wanted to come and speak to you about on this plan is how the fund is going to impact on restructuring. I talked about insolvency lawyers being fairly rare. Those of us who have a substantial portion of our practice working with troubled companies, as I do, are an even rarer breed. I have had to deal in my practice with the whole question of how it is that some of these issues impact on restructuring.
Traditionally, when you have a company that is in trouble, typically management does not recognize that problem very quickly. Hindsight is wonderful, and you say, "Gee, I should have recognized that." But the reality is that the managers, just like any other human beings, are able to kid themselves about their problem. The result of all this is that by the time the companies end up in a restructuring mode and they are in my office or whatever, they do not have any real extra cash to throw around. You look at a company and you say: "Look, you can't make money making widgets and it's dragging down the rest of your business where you are successful. The answer here is that regrettably, because you can't make money doing it, you have to shut down part of the business. But let's save this other part over here."
The problem is you are in a catch-22 situation, because the present legislation says that if you are going to lay people off, you have to make extraordinary payments to them. The problem you have there is that you just do not have any money. You have got all the credit you can have. You are usually on COD with your suppliers. If you stop taking goods in from your suppliers, you do not have material to put through your plant and you might as well shut down the whole plant. You cannot borrow any more money at the bank. The businessman has probably mortgaged his house and injected money into the business. He is at this situation where he has these obligations to make and he cannot come up with the cash.
Under the present regime we have, you are able to go to the employees and you are able to just tell them the facts of life, call in the guy from the union, call in the employees and say, "Look, let's make a deal." The reason is because they know that in the present priority regime, if you go bankrupt they are not going to get anything for termination and severance pay. That is the sad reality of where we are at.
I think all of us in this situation would like to see some form of bankruptcy reform where employees' rights have a higher priority than they already have. In our original submission what we said was that this should all be part of bankruptcy reform. Regrettably it looks like it has been shoved off to phase 2 of bankruptcy reform, which for all I know may be another 26 years away, just like phase 1 was.
In any event, the problem you have here is that you get into a tension situation between sustaining the business, which means the employment for the individuals who are going to continue, versus the making of the payments to the individuals who are being dismissed. There is a tension in the rights. With the next act and the new fund that would be here, it is going to be a lot tougher to make these kind of deals, because the dismissed employees are really going to say: "I want to insist on a minimum cash payment that I can go get from the fund. There is nothing left for me in this business."
The point we want to point out for you, so that in making your decisions and recommendations you can at least focus on it and make a decision on it, is that there is a balancing here. The fund is creating a situation where the rights of continuing employees are being put in tension with the aspirations of the terminating employees and the result of all this might be that -- you have got a company that has no cash. We would like it to have cash and we would like it to not be in trouble, but the reality is it does not have cash and it cannot make the payments, and what I am afraid we are going to see are situations where the deals we have been able to make in the past are not going to be happening.
One of the recommendations we make is that there should be incentives in the plan to turn to people and say, "Look, if you the employees had a reasonable deal on the table from the employers and you just turned it down because you were going to come here and get cash out of the public till," they should perhaps have some question mark in their mind at the time they are refusing to make a deal as to whether or not they really are going to qualify for compensation.
On to the question of directors' liability. First of all, I should say with a lot of sincerity, as one of the people who screamed and yelled perhaps most about the previous bill, that I am very gratified by the fact that there was a response to the concerns that were expressed about the extent of directors' liability and officers' liability in the area. To me, directors and officers are not mythical people. They are the guys who come into my office and sit in the chair across in my office and they are very scared individuals who are sitting there saying: "Are they really going to take my house? Am I really going to lose my car?"
Ironically, there is a tension here, because these same directors and officers who seem, when you are dealing in a legislative context, to be faceless moguls are really human beings like you and I, and they are very terrified by the concept of losing everything they have as a result of director liability concerns.
I can tell you a true story. I have a client I am working with. It is a company here with a lot of employees. It was one of the most democratically run companies I ever had. I remember I asked the client, "Who is the president?" He said, "Oh, we elect that from the employees every year." He was in my office because he was concerned about his liability to the bank, which was $100,000. This was right at the height before the government had withdrawn the last part of Bill 70, and I almost had to restrain myself from laughing. I told him his Bill 70 liability with this many employees -- this was back when we had termination and severance pay obligations in the amendment -- was more like $500,000. The man got up out of his chair and started walking towards the door saying, "I'm going to go shut the plant."
That is the kind of reaction. I had to physically get out of my chair and say, "No, we'll work this out." We calmed him down, but the point is to convey to you the seriousness with which these individuals regard this. If you take a 55-year-old man, who may be a director of a company, and tell him he is going to be wiped out because of liability to employees -- he has come into my office to try and find ways to stay in business, because the businessman's first objective is to meet the payroll. It is not because he is an altruist. It is because if he does not make the payroll, the employees go home and he is out of business. He has nothing more to fight for. He is on the hook for his guarantee to the bank. He is out of business. He has lost his investment in the business. For perfectly selfish reasons, his primary objective in business is to make the payroll, and that is the number one thing that dominates a businessman's objective when he is trouble.
The Vice-Chair: I am going to interject to warn you that you are about halfway through your brief but you are three quarters of the way through the time allotted.
Mr Dowdall: I will speed it up. In insolvency situations, when you look at what does not get paid, it is the things that directors do not have control over. They are what I call the stub-end issues. You are always paying payroll in arrears. You never pay vacation pay, or very rarely in very few businesses. You do not pay vacation pay; the boys take their vacation. There is never this act of saying, "We're not going to make the payroll." What happens is that there is a constant struggle to make the payroll and then it suddenly just does not happen because you run out of cash, because the bank appoints a receiver, because you get petitioned into bankruptcy. The directors are being held personally liable for something which in reality they have no control over, and that I think is unfair.
In our proposal, we are saying that the way to deal with this is to introduce a due diligence defence. In fact, we are making the radical proposal that there should be actually less liability than there is under the existing corporations statute, and explain in here why it is that there has not been a tremendous outcry about the existing corporations statute liability. The reason for that is because up until two years ago, and over the last two years, it has not been a practical problem. But a combination of Supreme Court of Canada rulings which have wiped out in certain cases the deemed trust for vacation pay, and this payment fund, which is now going to stop the bank's gratuitous payment, which benefited the directors in the past -- two years ago, when the director came into my office, we did not talk much about being worried about the employees because we knew they were going to get paid, and we have gone to the situation now where they are going to get dinged.
They are caught in this impossible situation. Their options are, do you rape the company, do you take the little bit of cash you have and maybe continue the business, continue the employment, or do you grab it all, throw it into some bank account, cut people a bunch of cheques, and then terminate them all? We have had this. I have had businesses, clients, which could have continued but have not continued because to do so would have been to expose the directors to these kinds of liabilities. So I think there is a counterproductive element to this thing as well.
John is going to talk about some procedural aspects that we find troublesome, and then I guess we will have some time for questions.
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Mr Swan: I will be very brief. The Employment Standards Act has always taken the position, and it is well-known to be very effective, of making sure that employees get current wages. A call to the Department of Labour will very often make sure the employee is paid very promptly. It is a very proper threat to make sure the employees have money to buy their groceries.
What we are concerned about is the transfer of that very summary procedure to determine the liability of directors under the legislation. We would suggest that rather than using a means to reimburse the compensation fund, which is designed to protect employees for their weekly paycheque, that method be replaced by the ordinary method by which any debtor is made liable to pay a creditor; that is, an ordinary action started in the the courts in which the ordinary defences are available. We do not see a reason, when the purpose of the payment is not to fund employees immediately, that the summary procedure of having a director's liability determined by an employment standards officer should be adopted.
The second point is that we do not see the need for what we can point out is a rather savage fine of $50,000 for failure to comply with an order of the employment standards officer. That failure to comply could arise if there was a failure to pay in accordance with the order. While there are some procedural safeguards for the director who seeks to have the order reviewed, it seems to us to be overkill to suggest that in addition to being made liable for the amount of the wages he should be liable for, there is the risk of a fine.
In our brief, we point out what we understood was the origin of that particular provision, but if the provision is intended only to get those who have, for example, absconded from the jurisdiction and taken the company's kitty with them, then perhaps it should be limited to that and should not be used as something in terrorem. We point out as well that if a director is facing his or her own personal bankruptcy, a fine is not discharged on bankruptcy, and that looks a bit vindictive, that the person cannot avoid the liability for non-payment even by going bankrupt.
The Vice-Chair: We will start our questions with Mr Offer. We have time for only one question each.
Mr Offer: I have one question in two parts. People have come before the committee and spoken about the provision in the bill that the branch does not have to exhaust all its remedies against the employer before proceeding against the director. Can you share your thoughts with us on that provision? Second, the due diligence provision is one thing which I think was in your earlier brief. To be clear, does that mean there should be a right for a director to argue before someone that his or her liability should be mitigated, reduced or whatever?
Mr Dowdall: To exhaust all its remedies: The present Corporations Act provides that there is an obligation to take certain steps to recover from the corporation. I think we should never get away from the view that director liability should be secondary. The assets of the corporation should be what pays people out. The problem we are confronted with is certain constitutional and legislative problems in trying to create the appropriate priorities. The problem is that the province has in some ways tried to create the appropriate priorities only to be defeated as a result of certain decisions of the Supreme Court of Canada, and the bankruptcy amendments are not going to help us at all with that, that I can see.
Mr Swan: On the due diligence, the model we would recommend is something like the Income Tax Act. There would a number of decisions under that which indicate the standard of care that the director has to establish, and it is pretty high. It means that the director who, for example, takes all reasonable precautions to make sure vacation pay as accrued, let's say, is put aside into the kitty, is protected if somebody whom he cannot control takes off with it or pays it improperly. The cases on the Income Tax Act are a useful source of information on that.
Mrs Witmer: I appreciate your presentation today and the former one. It certainly gave many of us a great deal of information. What advice would you have for the province, now that the federal government has introduced legislation, on harmonization of the two plans?
Mr Dowdall: I think it is going to be a real problem. It is going to take a lot of discussion, not only because you are both trying to do the same thing in one area but especially because you are trying to do different things. The province is trying to compensate for more dollars absolutely and also for different things. I am not sure: If you make your claim to the federal fund and you get $2,000, what does that cover? It also comes bouncing back even to the directors, and it has significant enforcement issues for the directors, because the subrogation issues and enforcement issues at the federal level are very different from those in the province. I do not have a complete answer for you. I think it is a real hornet's nest.
Mrs Witmer: I guess I hear you saying that there certainly needs to be more investigation.
Mr Dowdall: Exactly.
Mr Swan: The difficulty is that the feds have undoubted jurisdiction overall under their Bankruptcy Act. I think it almost puts the responsibility on the province to find some way in which its goals can be achieved within that overall umbrella, because if it comes to a dispute, as happened with the statutory trusts, the federal legislation will prevail. There is nothing we can do about that except to work within that framework to achieve, for the province, its goals, whatever they may be.
The Vice-Chair: I am going to have to --
Mrs Witmer: Just one comment: We have certainly had some people indicate that the province should not be passing that bill until that process has been completely worked out.
The Vice-Chair: You are getting as good as Mr Offer at sneaking something in.
Mrs Witmer: That is good. I have tried for four days.
Mr Owens: Mr Dowdall, you mentioned the concept of a reasonable deal being worked out. How would you define a reasonable deal? What time frames would you attach to that reasonable deal, and who then would you say would be responsible for the wages that would have been paid during that period of the reasonable deal being worked out?
Mr Dowdall: The issue for the reasonable deal is that the topic, the subject matter of the so-called reasonable deal, is termination and severance pay. I am not saying that some employer ought to be able to come and say, "I'll pay your wages six weeks from now." We are dealing with matters which really are what I call extraordinary payments in the sense that they are not made in the ordinary course. Businessmen do not want to be in a position where they are laying off employees. They would rather be growing and hiring more people, thanks very much.
The reasonable deal is really defined by the circumstances of the company and the cash flow needs of the company. It is very difficult. This is largely what I do on the debtor side of my practice. We try to figure out what we need to make the business run within reasonable parameters so it is not going to be in constant crisis, and then devote excess cash flow to making extraordinary payments, like trade suppliers the debtor company has accumulated amounts owing to. We try to get the debtor company on payment plans it can make, and the same thing with the employee package.
The Vice-Chair: Thank you for your presentation. It has been something different. You are the first people to come with your point of view from your perspective, and we will be definitely taking that into consideration.
STUDENT UNION OF LAKEHEAD UNIVERSITY
The Vice-Chair: Our next presenter is the Student Union of Lakehead University, Mr Middleton. At your leisure, sir.
Mr Middleton: Thank you for this opportunity to address the committee. My name is Ian Middleton. I am the president of the student association at Lakehead University, and I represent both graduate and undergraduate students as well as full- and part-time, approximately 7,000. Lakehead University is situated in Thunder Bay.
Our student union is a non-profit organization. It is democratically based. Its mandate is service-oriented, which means we run services for our students. We are also a politically motivated organization, so we do more than just run businesses. We also lobby the government, we also run campaigns and we also try to promote social awareness and social consciousness within our community at the university and within the community of Thunder Bay.
There are a few issues in the bill I would like to talk about. But first I will give you a little bit more background on our organization. We have eight full-time employees; we also employed about 120 part-time positions throughout the academic year. We are fairly large. We have revenues in excess of $1 million, which may seem a little surprising for a student association, but it is one of the smaller ones in the actual province. We have a varied operation: we have everything from a women's issues co-ordinator to an ombudsperson to student security service as well as a pub.
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On a first reading of Bill 70 I was fairly concerned with the liability for board of directors of not-for-profit organizations and I was pleased to see the amendments come out, which eliminated the enhanced liability. Nevertheless, under the current acts we still face a fair deal of liability. As an organization that elects its board of directors as well as its executive officers through general elections, I feel this could hurt the democratic process at our institution.
If, for instance, you as MPPs were to face the same liability that members of our association had to face, I do not know how many people would actually run for a position. Our members of our board do not necessarily have much to do with the business operations of our organization. Perhaps that is a fault within our own organization. Nevertheless we would like to have as much participation by students in our group as possible, and that means those who are not as economically advantaged as others and who do not have the fiscal resources available to them that others do. For instance, our institution has the highest percentage of students on assistance in the province, and we would feel that if they were aware of their liability currently, we might not have anybody sitting on our board. I was rather shocked to find out what my liability was when I was going through the bill.
On other issues with the bill, although I am not as well versed in it as the bar association, I think it is nevertheless fairly good. Employees need to be protected, especially those in northern Ontario, where we have a boom-and-bust cycle in communities. I think a situation can occur where they do not have the kind of protection they might have if they were in other parts of the province. Perhaps the $5,000 is a little bit low. I think there could be room for improvement there. I think the enforcement policies seem to be fairly good.
Finally it seems that the existing legislation is merely being enforced by this bill, and I think if you have legislation, it is there for a reason and it should be enforced. Attaching a fine to non-payment is putting teeth into the legislation. This is a fairly short presentation; I apologize for not having anything written but, due to the Ontario Federation of Students, we are having my brief translated. It is a bilingual organization, so any documents we send out have to be translated. I apologize for that. I would like to thank the committee for this opportunity to come and address you, and if anybody has any questions, please shoot.
The Vice-Chair: I thank you for this part of your presentation, and do not ever feel that you have to have a written brief to come before a committee of the Legislature. That is not what we are about. We know that it is not always easy for people. If you are up to questions, this time I believe we start with Mrs Witmer.
Mrs Witmer: I really appreciate your taking the time to come and share that information with us. I think most of us had overlooked the fact that it does have an impact on students. Have you discussed this widely with the other students?
Mr Middleton: There is a provincial organization, the Ontario Federation of Students, which represents every university in the province except for Wilfrid Laurier University. We have had discussions with them and through their network we have discussed it with a number of other student associations, yes. There is a great deal of concern. There are two student associations that are in a little bit of financial difficulty. We are fairly fortunate that we have a stable base of income through our student fees, but other student associations rely on incomes from their business operations and some of those are not doing so well. The University of Waterloo, for instance: one of their pubs lost over $100,000 last year. The students' association at the University of Windsor is $500,000 in debt. So there are some associations that are in trouble. Ours went bankrupt in 1972. We were the Alma Mater Society at Lakehead University and we went bankrupt and changed to the student union.
Mrs Witmer: Representing two of those in Waterloo that you have spoken about, what suggestion would you have for this government as far as this bill is concerned and how it impacts on the universities?
Mr Middleton: I think that perhaps it is not the actual Bill 70 that is the problem but the existing liability under the Ontario Corporations Act that poses the biggest problem. Considering that there are organizations that are in trouble, I think that Bill 70 does help alleviate perhaps some of the concerns that those employees might have if their associations do go under. And the federation of students at the University of Waterloo is quite large and has a great number of employees, so they have a legitimate concern.
Mrs Witmer: I really appreciate your coming and speaking to us.
Ms S. Murdock: I have not got any questions but thank you very much for coming. I know it was a long haul.
Mr Middleton: I did not walk.
Ms S. Murdock: Coming from Sudbury I can identify, and I am not as far as you by any stretch but I am just wondering -- maybe I misunderstood you. I did not have a question but now I do. At the beginning of your presentation I understood that your concern was for the directors' liability, and then you have changed completely, support the $50,000 fine, the enforcement provisions that Bill 70 provides over the present ESA, and the $5,000 is good but it could be better.
Mr Middleton: Perhaps I did not make myself clear. I was worried about the section that deals with not-for-profit organizations, because we are substantially different than the usual business in the sense that we have volunteer directors; none of our directors are reimbursed. So I have a concern in the sections that deal with not-for-profit, but not in the other section that deals with the other.
Ms S. Murdock: All right. So that the amendments that were announced on June 5 by the minister probably pleased you.
Mr Middleton: They did a great deal.
The Vice-Chair: So we can move on from your non-question?
Ms S. Murdock: Yes, from my non-question. Yes, you may.
Mr Ramsay: Ms Murdock's non-question kind of answered mine, so that is all right.
The Vice-Chair: We do have a minute or two so if anyone has a question.
Mr Offer: I have a supplementary to those two non-questions. What type of corporation do you have? Are you incorporated?
Mr Middleton: Yes, we are.
Mr Offer: Is it a non-profit organization?
Mr Middleton: Yes.
Mr Offer: I just wanted to be clear that you are now outside. Is the presentation you are making here today your presentation or is this also from the students' federation? I think it is very important that the committee really does get the sense from young people on campuses of this particular bill and how it will affect them, especially because of the fact that we are not travelling. I am sure you know that and I am sure you know why. But is this a presentation which we could take as one from the federation?
Mr Middleton: I will give you the background on how I came to be here. I was contacted by a constituency office in Thunder Bay which mentioned that this might impact our organization. Shelley Wark-Martyn's constituency office telephoned the student union and said this process was going on and you might have concerns because there are things directly affecting not-for-profit organizations. So I got the information from the Ministry of Labour. Then I contacted the Ontario Federation of Students and had them do some fieldwork in the province, talking to other student associations. I had meetings with them yesterday and today and we worked out our presentation. So I do have association with the Ontario Federation of Students, which, as I mentioned earlier, represents all student associations except for Wilfrid Laurier.
Mr Offer: I am glad you were able to come because we just received word from the clerk that there was not a time slot available for almost 40% of the people that wanted to come before the committee. It is good that you were able to do so.
Mr Klopp: And support the bill the way you have.
The Vice-Chair: Let us put it this way. I am going to jump in right now, before we digress somewhat. I thank you very much for your presentation and for the points that you brought forward. It is very important to hear from the young people that are in college.
Mr Middleton: Thank you again.
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DAVID WILLIAMSON
The Vice-Chair: I would ask Mr Williamson, if he is present, to come forward for his presentation. At your leisure, sir, whenever you feel comfortable.
Mr Williamson: I am Rev Dr David Williamson, minister of Victoria Avenue United Church in Chatham. I come as a concerned individual, and come representing other friends in the church. I also come representing the local union of automotive workers, and the Chatham and District Labour Council, as well as the Office of Community and Economic Development in the city of Chatham. I do not have any brilliant critique, and I will not take too much of the committee's time today. I think my presence here today, my willingness to come in from holidays and fight the traffic, and even endure my mother's cooking tonight --
The Vice-Chair: You had it made until you said that.
Mr Williamson: Well, some days it is better than others.
The Vice-Chair: We are going to pass that on to your mother.
Mr Offer: Do you know something called Hansard?
Mr Williamson: She does not read it fortunately. I think probably my presence here today really is simply a statement of support and appreciation for the intention of the legislation. On behalf of that group and our community, I agreed to come and simply say that we are very appreciative and supportive of the intent of the legislation, Bill 70, in particular, the amendments as well. Also, maybe you have heard the story but I am sure you have heard it in various forms. I need to take just a couple of minutes of the committee's time to tell the story of places like Chatham.
Chatham in Kent county in southwestern Ontario is an area which is hurting deeply. It is extremely unstable right now. The unemployment rate is certainly above the provincial average, varying anywhere between 12% and 13%. It is hard to tell exactly because we are lumped in with Essex and Lambton counties as well. It is an area which primarily moves around the agricultural industry and the automotive industry, which are both deeply in trouble right now. We have lost approximately, probably over, 1,800 jobs in the last year. We have seen Motor Wheel close just a week ago. We lost 550 jobs there. Elan tool and die closed, losing 165 jobs there. NHS Die Casting and WG Die Casting closed; that was 110 jobs there. There were major layoffs at Siemans of 183, Standard Tube of 140, Eaton Yale of 250, Navastar of 250, Woodbridge Foam of 140 and Hunt Wesson of 60. It is estimated, fairly accurately and recently, that about 156 have also been laid off as a result of those layoffs in small businesses in our community.
A recent survey done this spring by the department of economic development in the city of Chatham indicated that of manufacturing operations within the city having more than 10 people, 20% of the full-time jobs are now laid off, and it is anticipated in the near future that 30% of those full-time jobs will be laid off. Within the two major cities in Kent county, that is the city of Chatham and the city of Wallaceburg, there are just under 9,000 people presently listed as unemployed with the unemployment offices. As in so many communities, the general welfare assistance has tripled in the last year. The predominant feeling of the community right now is that those jobs will never return. The plants will certainly never raise their heads again in our community. It is a community which is very discouraged and, at best, unstable.
With respect to Bill 70, when I called a labour leader -- perhaps the major labour leader in the city -- for his comments on the bill, he said simply, "Something is better than nothing." Whether that is exactly right I do not know, but I have no brilliant critique of the legislation. Certainly something is better than the nothing which many of those 1,800 people are now getting.
It is appropriate and right that workers who have given many years to an industry and to an employer should be compensated clearly and easily and readily. That may be particularly true of places like Chatham whose history has been very stable. People who have worked, some for generations, for a particular employer, and have worked many, many years, find themselves with absolutely nothing.
I support the legislation because I believe that, in the climate of insecurity and instability in which we live, it may provide some element of stability. We live in an environment of rumour and devastating reality, and I believe Bill 70 will be helpful in providing at least some minimal sense of security for those who anticipate that their wages may not continue into the future.
With respect to the directors' issue: For me, it is an issue of stability as well. At least there is clarity there. I know a lot of businesses now are struggling simply to find directors, and cannot find people willing to sit and act as directors in the company. Although it is a difficult issue, I think it will at least provide some element of clarity and stability.
I am here for these few minutes simply to tell you the story of Chatham and southwestern Ontario, and the manufacturing struggles there, to express, on behalf of many people there, their support and appreciation for the direction of the legislation, and to say that we look forward to its inclusion in the legal framework of our province.
The Vice-Chair: The floor is now open to questions. We will start with Ms Murdock this round.
Ms S. Murdock: You said you are a reverend and a doctor from the Victoria Avenue United Church?
Mr Williamson: That is right.
Ms S. Murdock: People have come to you and talked to you. I am wondering how many of those companies in the Chatham area have been able to pay their employees and how many have not. What is your experience with those people you have talked to regarding that?
Mr Williamson: I wish I had a really clear answer. I have been away or I would have got clearer answers. My understanding is, though, that some have and some have not. Firms like WG Castings have not been able to; they simply said, "We will not do it." As I interpret it, many people with whom I live and work -- and I am talking about both agricultural and automotive people, and company presidents as well as people on the line -- are terrified.
I do not know anybody who feels their job is secure. From the general manager of a major company to a Ph.D research person in the automotive industry, everybody is just terrified, and grieving for so many people who have lost their jobs. Some have got some kind of compensation, sure. Some have struggled to get it. It has been modest.
Most people, even if they got some compensation, have no real sense of future. After 30 years, I mean, they only have a few bucks, what are they going to do? That is the best I can explain the whole mix.
Ms S. Murdock: I want to thank you for a point we probably have not raised often enough: that Bill 70 affects not only the line workers and the people who are out doing the jobs in the agricultural industry, but also the plant managers. Anybody who works and earns a wage is eligible under this legislation. So it is a good point.
Mr Williamson: We have a company that has lots of work, a good company, great track record, but struggling a little bit because of some complications. They cannot find anybody willing to be a director because of the tentative nature of the thing right now. It is a mess.
Ms S. Murdock: Despite the amendments to the directors' liability?
Mr Williamson: Well, they are not passed yet. Hopefully that will help. I think it will at least provide some clarity. I do not know.
Ms S. Murdock: Thank you very much for coming.
The Vice-Chair: We have a few more minutes if anyone else has any questions. I thank you very much for your presentation. It is unique. I believe you are the only person who has actually represented all the different sides of the community, and I thank you and your community for that.
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WORKERS' INFORMATION AND ACTION CENTRE OF TORONTO
The Vice-Chair: The next presenter scheduled is the Workers' Information and Action Centre of Toronto.
Mr Kidd: My name is David Kidd. I am from the Workers' Information and Action Centre in the city of Toronto. We are a newly planned unit in the city. Our mandate is to represent the interests of non-unionized workers, immigrant workers, workers of communities of colour and women workers in the city of Toronto.
We would like to record our support of the employee wage protection plan. In the last 15 years, there have been at least three commissions, including the 1985 Brown commission on bankruptcies and solvencies, that called for the establishment of such a fund.
The ongoing recession -- some people feel that it is over, but it is an ongoing recession -- creates uncertainties for workers: more than 1,600 business bankruptcies in Ontario just till May this year; over 20,000 jobs lost in Ontario last year. It is difficult to lose a job. Workers need a support system in order to readjust to their changed circumstances. In Toronto, an education centre for workers who have been displaced has found that the average length of unemployment for workers -- it has been 10 months before they find other employment. It is shorter in some other sectors and longer in others.
It is ironic that we use the word "support" when we talk about such things as a wage protection plan for layoffs and shutdowns. Workers do not receive their legal rights. This is one of the points we would like to make very clearly. Access to back wages, access to vacation pay, access to termination are legal rights that have already been established; severance pay as well. Yet often in discussions about this program, they are discussed as if they are frills. We support the intent of this program to guarantee and put into place a mechanism that will get for workers what is theirs in the first place.
As this bill has been presented and as the program has been suggested, businesses have used their associations and their access to the media to lobby against this bill. They feel it is unfair for businesses that are in difficulties to pay their workers what they are owed. Their lobby has been successful in pressuring much of the media to portray the proposed bill as too generous to workers and too onerous to employers during these hard times.
Their lobby has also seemingly convinced the federal government not to include payment even of vacation pay in the proposed new Bankruptcy Act. We urge that you maintain the program as proposed and in the future extend better termination and severance payments as the Minister of Labour promised in May of this year.
We have a number of concerns, however. We would like to state at the start that the Employment Standards Act is one of them. For a number of years a number of different associations and workers' organizations have called for the Employment Standards Act to be looked at. We hope it will be amended and its mandate changed when the Ministry of Labour reviews the legislation under its jurisdiction this fall.
Currently it is based on a complaint-driven system. There is no place for regular industry-wide inspections, no place for proactive response to investigations or prosecutions. The system is based on individual complaints as opposed to group applications or even class actions. We suggest that class actions have to be included in legislation in the future to allow workers to pursue this avenue.
The system tends to deny access to large groups of workers. It requires prior knowledge of the system for people to interact with it and to utilize the resources that are available. It tends to deny access to new Canadians or marginal workers or those with limited literacy skills.
The majority of the workforce is non-unionized, and as such, when laid off, it does not often get appropriate information on how to deal with the issues that arise. These problems can be compounded when the system itself deals with workers as individual cases, as opposed to people or members of the community with the same issues or problems.
A more general concern we have about the particular proposal is the lack of resources that officers and workers in the employment standards branch have. We support the proposed 112.7% increase in the Ministry of Labour budget for 1991-92, with a significant portion of that increase going to this program. But it does not appear that the employment standards branch will get improved resources to process this program and amend other things that are under its responsibility.
There are many concerns about the branch. The staff is overworked. It is extremely difficult to get through on the phone at any time during the day. Reportedly, the staff frequently push workers to accept less than is their due in order to get case closures.
I am extremely familiar with the Lark Manufacturing case, which is before the courts now. The point I want to make here is how long it has taken in many instances for the branch to prosecute or even to act on behalf of workers. It has been almost three years now that they have been owed over half a million dollars in back wages, vacation pay and termination pay, and it took the employment standards branch almost a year to start proceedings against the Lark directors under section 60 of the act.
In general, the number of prosecutions have been low. Between 1979 and 1988 there were only 150 prosecutions, with only 77 convictions, while in the year 1987-88 alone, the branch received over 660,000 phone inquiries, heard over 32,000 complaints and investigated 18,000 complaints.
The branch needs resources to promote itself too. This is another concern. I can see that there has already been quite a response to this program to date. I believe there were 13,000 applications for the program as of June this year.
I just want to make a point about the workers who are our main concern. For these workers English is not their first language. They work many hours, and we are not talking about Sunday or weekend workers. Their regular day extends over 10 or 12 hours, because they may be forced to take a break in the middle of the day, and they do not get access to information about programs like this.
So the branch will need resources to promote itself. The branch needs more staff; in particular, staff with multilingual skills to ensure access to this program. Currently, for example, only one Chinese is an employment standards branch worker; there is not one Vietnamese worker. This makes it difficult for workers, even if they get through on the phone, to get their inquiry understood. Many workers have reported difficulties filling out the forms to file a complaint, and it is difficult to get assistance from an overworked staff. In Metro the majority of the workforce speaks English as a second language. That is the reality today.
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We support the streamlined appeals process that has been proposed. As mentioned earlier, the branch, through a lack of resources, has been unable to deal with the current case load. We would also encourage consideration of some other ideas. We support the ability of the branch to sue corporations on behalf of workers under the Ontario Business Corporations Act. We also support another suggestion that has not been formulated, I believe, in relation to this, that there should be interest paid for wages and other moneys owing, right back from the original date that the money was owed, because that is not included in this as well.
We would just like to talk a bit about the issue of termination and severance pay. As stated earlier, the business lobby and much of the media would like to ignore current legislation that guarantees some workers access to termination and severance pay. We are concerned that this is money that workers are entitled to and that these moneys need to be kept included as funds that the program would deem to protect, as outlined in this programs proposal.
We also do not feel that the current legislation adequately allows all workers the right to collect severance pay. The restrictions of a payroll of $2.5 million and at least 50 workers involved in the layoff or shutdown disallows a large number of workers from collecting these funds.
The last place of my own employment had a payroll that was way less than $2 million and we had close to 200 workers, so I myself have been in that situation where we would have been disallowed severance pay. The International Ladies Garment Workers' Union has reported that between 1986 and 1988 it was involved with 19 plants that shut down that affected almost 1,200 workers. Only one group of workers was able to collect severance pay. In three cases, the employer laid off just under 50 workers so as to avoid paying severance pay. We would suggest that severance pay be provided for any group of 10 workers who are involved.
I would also like to make one comment on the proposed federal Bankruptcy Act. There needs to be a harmonization of the Ontario legislation with the proposed federal Bankruptcy Act to guarantee workers equal rights to moneys owing, along with financial institutions in the case of a receivership, when a company is in financial difficulties.
As an example, in July 1988, Best Outerwear clothes company here in the city of Toronto still owed its workers over $95,000. The bank that was owed the money was able to sell the accounts receivable but did not give over any of the receipts to the workers in question. This is something we would like to state again, that we believe it is important that workers' rights are included up there with the other institutions when it comes down to who is owed money in a bankruptcy.
In conclusion, we would just like to make roughly three points. We would like to make it very clear that we support the proposed bill and we do feel that there needs to be a protection.
The second point is the fact that the media and the public at large need to understand that back wages, vacation pay, termination and severance pay are workers' rights. These are not frills. These are not something that anyone should fritter away. There is a sense in the vast amount of stories that are out there that somehow employers are being hard done by if they have to come up with these things. What I was reminded of by the Lark case was when a worker came before a number of us with his case and said, "If I had stolen $10 from my employer, I would have been put into jail a long time ago, but it has been three years for me to even look at over half a million dollars for all of us together."
The last concern we would like to raise is the one just around the access to the program itself. We think this could be a very useful start to what needs to be done to guarantee workers' rights in this province, but we are quite concerned that there will not be the amount of money for promotion of the program, multilingual access to the program, support for the workers in the branch to actually do their job and support for the branch to prosecute, if required.
I will stop there. Thank you for your time.
The Vice-Chair: I thank you for this part of your presentation. Do we have any questions?
Mr Offer: No real question, just a comment, as we are somewhat winding down on this. I sense that people recognize that there has to be at the very least something to do with wages and vacation pay. Then it starts to veer off with respect to different opinions as to whether termination should be in, whether notice should be in, whether severance should be in. You have a variety of opinions on that.
There was a point in your presentation where I had to leave for a moment. When you speak about the rights of the workers -- and I do not think there is really any argument as to what is entitled under the legislation; that is clearly ascertainable, there is no problem -- is it your opinion that the obligation should be borne by the taxpayers, as is now the case for the most part? The fund is being funded by the consolidated revenue fund; the consolidated revenue fund receives its dollars from taxpayers. No matter how one views the right of the worker and how one wishes to discuss the entitlement to that right, is it right and proper that the obligation be satisfied by the taxpayers? I would like to get your thoughts on that, because you have the taxpayers paying, you have employers paying, you have potentially just directors of the companies which have run into difficulty paying. It is one of those things we have tried to grapple with, and I think your opinion would be quite helpful.
Mr Kidd: I cannot speak on behalf of my centre in that regard, in that we had a discussion of this today and we had a reference to that and there was no conclusion we could come to. We would much prefer the system that is proposed under the federal Bankruptcy Act, which would be an employer levy. We would be much more in support of that and we were concerned about it coming under general tax, but we came to no conclusion. All I can say is that we would be more in favour of that system, but we had similar concerns that it come under general revenues, particularly when we feel in the cases where it is an employer's responsibility for meeting these costs that are costs of doing employment in the province of Ontario, they should be prepared to pay them. But we did not come to a final conclusion.
Mr Arnott: I apologize, sir, for missing the start of your presentation, but I want to thank you very much for coming in.
Mr Kidd: No problem. Thank you.
Mr Owens: I appreciate your bringing up the issue of access, because there clearly is no point in having even the best programs in the world if people cannot access them. The issues you bring up are truly valid. I know we have folks here from the ministry, and I certainly hope that when they are setting up the agency they will keep these comments in mind and perhaps even go to some of the user groups you have identified to draw staff from so that you do have that ability to communicate in all languages and make sure that all people have access to the fund and to the information.
Mr Ramsay: That is if the legislation passes.
Mr Kidd: Even if it does not, it would be good to give support to that branch. It is a hardworking branch of the government and needs to have more support; and it means more access.
Ms S. Murdock: I want to thank you as well, and thank you for your presentation. As well as the points you raise, the employment standards branch is going to love you. They will now have transcript of Hansard to support what they have been saying for a long time, and the multilingual aspect is something that has been noted in other areas of the Ministry of Labour.
I just wanted to say on one point you raised, which was on the interest, it is covered in this legislation under section 40p, I believe: "Where money may be received by an employee under this part, or may be collected from a person who is liable to pay wages, interest may be collected on the money as prescribed." So there is that balance.
I just want to ask you about the 10 workers or more, because there was a lot of discussion in that area.
Mr Kidd: I am sure.
The Vice-Chair: Very quickly, Ms Murdock, please.
Ms S. Murdock: We have 15 minutes left, Mr Chairman.
The Vice-Chair: Oh, I am sorry. My apologies.
Ms S. Murdock: Sure, sir. You are just so used to stopping me.
The Vice-Chair: My apologies, Ms Murdock.
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Ms S. Murdock: Could you please explain why you feel that 10 is better suited than 50?
Mr Kidd: I think the concern was that 50 is too many. I have been through these processes before, deciding how many roomers in a rooming house is an appropriate number to be protected under legislation as well. I think the concern is again just around the fact that there are -- I am sorry, I do not have the figures. That will be something we will try to get more of when we actually hand in our written presentation by the 15th of this month.
It is just that there are a lot of workplaces with even under 10. Increasingly that is the case under today's economy, and increasingly these are workers with no protection. I guess I chose the figure 10 because in the inquiry with a lot of different deputations into the Lark case a year ago where a lot of different people had worked on a number of different cases, this is the figure that was arrived at by the panel that day. That is why I chose it, but that is what it comes to, the fact that it is missing a lot of workers with the 50 and the $2.5-million payroll. It is missing a large chunk of the workforce. Again, I said that out of my own experience with a social service agency with close to 200 workers.
That is just the case in terms of the other figure as well. It is grossly inadequate, so it just misses a large part of the workforce. That is why it is funny to hear the claims that this plan is preposterous because it is going to give all these workers severance pay, when for most workers that is not an issue because they are just unable to access it under those kind of guidelines. They cannot get access to severance pay if their payroll is under $2.5 million or their workforce is underaffected -- it does not affect 50 workers. Like I said, in three cases that the IOGWU dealt with, the employer laid off under 50 to ensure that he did not have to pay severance pay.
The Vice-Chair: Hearing no further questions, I thank you very much for your presentation.
CENTRE FOR INDIVIDUAL RIGHTS
The Vice-Chair: We are running ahead, and with everyone's permission, including the presenter's, I would ask if the Centre for Individual Rights would be ready to make its presentation now.
Mr Melady: I have a written paper. You may as well look at what I am looking at.
The Vice-Chair: I thank you for coming in today. Welcome to our committee.
Mr Melady: Good morning. My name is Patrick Melady. I am president of an organization called the Centre for Individual Rights. I would like to start by thanking the politicians here for being here to listen and to hear the concerns that the centre has on the issues represented by Bill 70 and the amendments to the Employment Standards Act, among other issues. I thank you in advance and the submissions are made respectfully.
The Centre for Individual Rights has been established in response to a need on the part of individuals, both employers and employees, for a unique voice and a unique perspective on employment and business issues. There is a clear need for such a voice and a forum in which to raise and address employment legislation and regulation issues.
The guiding principles of the Centre for Individual Rights are that we believe in a democratic society with an economy that is driven by an unrestricted individual decision-making process and that these individual decisions will be responsive to the market needs and that this market responsiveness is critical to achieving prosperity in employment and in employment opportunity.
The Centre for Individual Rights believes that the individual is a primary decision-maker in determining the appropriate response to any market reality. The role of government should be to promote the individual, to support democracy and to unfetter the economy.
The Centre for Individual Rights believes that employment and employment security flows from a strong business community which is confident that its freedom to operate will be acknowledged and accommodated by all levels of government.
The Centre for Individual Rights views employer and employees as having a common purpose, that being to continue the business, expand the business activity and increase employment, to secure employment.
The Centre for Individual Rights believes that the government's role is to facilitate the realization of the business community's agenda. The focus of the centre is business and employment. We believe in "prosperity in employment and employment opportunity." We promote that.
Since May 22, 1991, the Centre for Individual Rights has conducted seven briefing sessions with concerned employers in Ontario. We have spoken to over 200 private sector and public sector employers regarding the NDP agenda for employment legislation and regulation. It is clear from the employers the centre has spoken to that the source of employment legislation and regulation has not been the business community. There is a widespread expectation in the business community that the NDP will engage in consultation. Indeed the Premier, Mr Rae, has committed to "a very broad consultation," but we have yet to see any definition of what that consultation would be and how the process would function. We await that definition.
The Minister of Labour, in the presentation of proposed legislation, relies heavily on referral to legal experts from labour and management. The Centre for Individual Rights believes this is similar to asking a fox to mind a chicken coop, that the reliance on legal experts does not take into account the needs and opinions of those who must live with the expert advice. Those are the employers and the employees.
The Centre for Individual Rights subscribes to the view that consultation is made up of problem identification, development of alternative solutions, analysis of the alternatives and, finally, acting upon those alternatives which correct the problem identified. The Centre for Individual Rights has seen the NDP government of Ontario announce problem identification and solutions to be implemented in one breath. Bill 70, An Act to amend the Employment Standards Act to provide for an Employee Wage Protection Program and to make certain other amendments, is a current example of the NDP's failure to meet its own stated objective of a broad consultation.
The stated purpose of Bill 70, as I understand it, is to protect wages, vacation pay, severance and termination entitlements of employees of bankrupt employers. The stated purpose is commendable and we support it. The proposed legislation to establish a fund called the employee wage protection plan, to be funded out of general tax revenues by the Ministry of Labour, does not accomplish the objective. There is no security of wages, vacation pay, severance pay or termination entitlements.
The employee wage protection plan sets up investigations and administrative appeals processes to evaluate the failure to secure wages, vacation pay, severance and termination entitlements. The mechanisms proposed have no effect until an employee's job has begun the slide down the slippery slope to economic ruin, or in some cases, where there has been a declaration that the bottom of the slope has been reached and recovery is not a realistic alternative, the declaration of bankruptcy. The employee wage protection plan does not address the issue of securing the entitlements. The proposed amendment, which says that directors and officers of the business are then to be held accountable for employee entitlements, is neither progressive nor constructive in securing the wages, vacation pay, severance and termination entitlements of employees.
The attitude expressed here is that the business and the minds of the business were neither prudent nor acting in good faith when they sought to engage in business and subsequently create employment. This is a harsh, cynical and abusive view of business. It is certainly not conducive to encouraging more business activity, which is necessary to re-employ those directly affected by the employer's demise, ie, the former employees.
The employee wage protection plan and the other initiatives of Bill 70 do not accomplish the stated goals, and as such should be abandoned. Bill 70 should be put on the scrap heap. The Minister of Labour should begin again and this time there should be a real effort to canvass all interested parties in seeking a solution. That is my submission. I thank you very much for your time.
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Mr Arnott: Thank you for your fine presentation. I just want to ask you a few questions about your organization. I represent the riding of Wellington near you in Cambridge. Would you feel the opinions you have expressed are fairly broadly representative of the business community in your area?
Mr Melady: Yes. The briefing sessions of which I speak took place in communities such as Windsor, London, Cambridge, Kitchener, Waterloo, yesterday Guelph and again tomorrow in Brantford. I expect to hear the same thing, that the business community has not been consulted and would in fact support the statement that Bill 70 does not accomplish the stated goal.
I have yet to hear anyone in the business community say it is not appropriate to secure wages, vacation pay, severance and termination entitlements that belong to employees under the law. No one challenges that. It is an entitlement. The methodologies we see presented in Bill 70 are quite frankly wrongheaded, inappropriate and ineffective. They examine failure. They do not secure. Then they seek to take yet further dollars from an operation that has already declared, "I have no money."
It makes no sense to me. It does not accomplish it. It is financed out of my pocket as a taxpayer and that is inappropriate. I pay for those severance entitlements and those vacation pays and those wages when I purchase the products or services rendered by that business to the economy. I do not want to be held accountable for it yet again out of my tax dollars. I would prefer to pay for it directly, not indirectly and not hidden, and that is what we are faced with in Bill 70. Do I digress? If you have another question, I am pleased to answer it.
Mr Arnott: No, that is fine. Thank you very much.
Mr Huget: I notice the Centre for Individual Rights says that the stated purpose of Bill 70 is commendable and that it is supported by the centre in sort of a basic statement of principle, if you will. At the same time I seem to be hearing you say that the taxpayer should not be accountable for these wages that are owed workers. I assume you would say that the business community should not be put under any other further burden to compensate people for these lost wages. The point I am getting at is that if the principle is supported and the action we are trying to take is commendable, how would we achieve it then?
Mr Melady: I think the way to achieve that would be to consult with the business community before announcing a solution. My understanding is that the purpose of today's hearings and other hearings that take place on Bill 70 are to hear the opinions of the people and the community re Bill 70.
The Centre for Individual Rights is prepared to participate in any consultative process that deals with the issue of problem-solving. When it comes to making commentary on problems and solutions identified, we will participate by making our comments on the solutions identified. In this particular case it is not our presumption that the stated purpose of Bill 70 is to secure; it is a statement from the bill itself that its purpose is to secure.
We do not find, in our analysis of it, that the stated purpose of Bill 70 is accomplished by the content of Bill 70. If the government of the day is interested in hearing from the Centre for Individual Rights on alternative solutions, then it will adopt our recommendation that Bill 70 be put on the scrap heap and the consultative process be engaged in.
There are innumerable ways and means of accomplishing securing of wages that do not create administrative overheads and burdens for the taxpayer, yet place the obligation squarely where it belongs: on the individual or the business which engages in the activity that causes the employment. If the marketplace cannot handle the incremental costs of handling the burden of severance and termination entitlements, then that business should not participate in the economy.
Perhaps the economy should pay more for the goods and services. I do not know. There are a lot of ways of dealing with it short of being punitive, short of being harsh and cynical and abusive in the assessment of the people who in good faith engage in business in this province.
I have yet to run into a business that is desirous of going into bankruptcy for the vicarious pleasure of pocketing termination entitlements, severance entitlements, vacation pay and wages of employees. You do not get rich sticking it to people; you do not succeed sticking it to people. Yet that is what the business community feels is happening to it. There is an assumption that the business operates with a view towards taking, as opposed to receiving, from the economy.
Mr Huget: What would the view be in terms of someone who has been forced out of work and has waited, in some cases for years, for wages that are owed and still has not received them? Would you say those people would be harsh and abusive in asking for those wages and asking for a mechanism to get them the money that is rightfully owed to them?
Mr Melady: No, certainly not. If it is an entitlement to that individual under the law, then let the law be enforced. Do not create more overheads and more burdens to be borne by the general taxpayer. If it is an entitlement under the law, then they should receive it, and they will receive it if it is an entitlement under the law.
I have faith in the justice system we have here. I have faith in the democratic process and that the obligation will be met. Bill 70 does not accomplish its stated purpose. How the government can continue to support that direction leaves me at a loss.
Mr Ramsay: I thank you very much for your presentation. Just to comment on my colleague over here, Mr Huget's question reflects, you know, the same sort of narrow, having-blinkers-on perspective that this government took with this particular problem. As we have related and you have related here, nobody disagrees with the principle of what you are trying to accomplish here in this legislation. Obviously the money due workers is due workers and we need to find a way, but you are having to direct your questioning all in this particular context of what we are doing here.
The point that has been made by the witness here -- and having been in government previously myself and involved in other areas where I can see that good consultation was not done -- is that when you identify a problem, you have got to sit down with everybody involved and find out how to solve it. In this regard, the people who are supposedly on either side of this agree there is a problem and that it has to be fixed. I guess what the present presenter is saying and others have said is, why do we not start again and sit down and find a way?
We have had some ideas put forward. I ask the presenter whether he really does have any specific ideas. We have heard the idea of posting bonds and of securing accounts. Certainly there must be mechanisms to do this, because we all want to secure this somehow and it is a matter of finding the technique. I was wondering whether you had any ideas you may have considered or that other people in the business community have talked about.
Mr Melady: I do, and I would be prepared to put those forward for consideration when we know Bill 70 is on the scrap heap. The issue of posting bonds and the securing of wages is done time and time again. It is not done through payroll taxes; it is done through payroll. Allow business to operate, know what its parameters are in operating and it will continue. Continue to throw abuse and cynicism at it and it will choose to go elsewhere, if that is what needs to be done in delivering the goods and services.
I am sure there are minds better than mine turned to the issue of alternative solutions. The concept of posting bonds, the concept of allowing employers to calculate and put into secured accounts for the purposes of meeting those obligations, any number of things can be done. But the process we have before us in Bill 70 is an examination of failure, not a securing of the wages, vacation entitlements, severance and termination entitlements of employees. It leaves me exasperated at times that apparently knowing and thinking human beings are not cognizant of the economics involved in going after a bankrupt. The individual or corporation has already declared, "I have no money." The concept of levying a fine on a bankrupt does not accomplish the purpose. It is punitive, small-minded, narrow and cynical.
The Vice-Chair: The time has expired. I thank you very much for your presentation.
Mr Melady: I thank you very much for listening to me. I appreciate the opportunity, and I look forward to returning and dealing with the issue of securing wages, vacation pay, severance and termination entitlements in a consultative process.
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NIAGARA REGION DEVELOPMENT CORP
The Vice-Chair: We have one final presenter, Mr Duffy, I believe.
Mr Duffy: My name is Mike Duffy. I am the general manager of the Niagara Region Development Corp. I am not the other Mike Duffy and the CTV cameras are not in the background.
I am pleased to see that one of our local MPPs is a member of this committee and look forward to a further dialogue with her.
I am here at the direction of the board of directors of my corporation and with the support of the manufacturing and service industries in the Niagara region. Over 800 manufacturers, 1,400 business service companies and, in total, 12,000 businesses are resident in the Niagara region. We are optimistic that the dialogue today will continue in the future. Our concerns, I am sure, are not dissimilar to yours.
Before I get into more detail about our concerns with Bill 70, I would like to spend a few minutes outlining the initiatives and responsibilities of the Niagara Region Development Corp. It was formed in the depths of the 1981-82 recession to address previously unheard-of unemployment levels and manufacturing closures. While continuing to promote the Niagara region as a location for new business investment and job creation, the NRDC has increased its attention to assisting Niagara manufacturing industries to improve their competitiveness, the ability to successfully compete, not just within the province of Ontario or Canada but within the global context.
Competitive companies generally offer a unique product or service and/or have a comparative advantage over their business rivals in such areas as lower cost, higher quality and superior service. Competitive companies, irrespective of size, enjoy greater prospects for growth and, more significantly, better withstand the increasing dramatic fluctuations in local, national and international economies.
The drive for competitiveness is a dynamic process, particularly now with the trend towards globalization of trade patterns, introducing new rivals for Niagara's traditional businesses in the North American market. The NRDC recognizes the necessity for Niagara companies to continue to innovate and invest in improved productivity, quality and market penetration to maintain their competitive position.
To assist in this activity, the NRDC is refocusing its efforts from an exclusively outwards-oriented search for new investment to a more balanced program integrating new investment with a recognition of the needs of Niagara's existing industries. Rather than focusing on job creation to make the region better, we are making the region better, ie, more competitive, as the key to creating more good jobs. We have cultivated a wide network of domestic and international contacts over the past 10 years. In addition to using this network to search out new companies, we utilize it to find new markets, technology and capital to revitalize Niagara's existing companies. A six-point plan has been developed and approved by our board of directors which will contribute to investment in Niagara in the improved competitiveness of Niagara's companies.
Our 11 largest manufacturers last year, 1990, contributed close to $25 million in municipal taxes, had a combined payroll of $684 million, and generated sales directly attributed to the Niagara plants only of over $2.6 billion. The average wage cost to these 11 manufacturers represented $47,535 per person, each employee generating the equivalent of $183,000 in sales for his company.
A comparison to just 10 years ago, 1981, reveals a dramatic loss in manufacturing jobs. Overall industrial employment has dropped from 50,800 in 1981 to 47,200 in 1990, a drop of 7%. We look at the same period and employment in those same 11 largest manufacturers has dropped 15% from 17,000 to 14,000. Keep in mind that figure of $47,535 per person.
Ontario's growth and prosperity have been based on its manufacturing strength. This holds true today, but our position has deteriorated. The trends of recent years show that Ontario's position as a major industrial manufacturing centre is under increasing stress.
The demands of today are that we must compete successfully within the global economy, and in particular we must improve our ability to compete for costs and quality with manufacturing industries not only in the United States, but in Europe and the Far East. These concerns of those who work in industry in Ontario are not dissimilar to those of the provincial government. We all realize that business failure brings hardship and disruption for those who lose their jobs and for their families.
We all realize that other levels of employment in service and tourism are also reliant upon the strength of our manufacturing. Our manufacturers have made great strides in managing the costs within their control. Our manufacturers have invested deeply in Niagara and in Ontario, all within the bounds of reasonable risk.
The presentation today focuses on only one of the areas that impact upon the ability of our industries to remain competitive and so stay in business. For a manufacturing business with 100 employees with five-year average seniority and an average pay of $40,000, the severance or termination pay would be about $400,000. This amount is large in comparison to other amounts for which directors are personally liable under existing law. Employees would seek to recover these amounts from directors and officers of the businesses upon bankruptcy. The proposals in Bill 70 would then impose significant risk to those doing business in Ontario, thus making Ontario business less competitive to businesses in other neighbouring jurisdictions.
A director or officer is not able to avoid this liability unless he has the superior foresight to do so more than a year in advance of a failure. There is no recognition of the difference between directors and officers who have an ownership stake and those who, as outside directors or as employee managers, have no ownership stake.
Niagara Region Development Corp is also involved in a matchmaking service called Locating Investors for Niagara Companies, Inc, or LINC for short. We are constantly seeking out investors and management expertise to not only set up businesses on local ideas, but also to expand homegrown industry or retain existing jobs in a faltering business.
Bill 70 will be a significant deterrent to the participation of any new manager, consultant or investor, not only in a financially troubled business but also in a fledgling enterprise which is already starting up in a high-risk environment.
To avoid the legislation of Bill 70, the role of the intervenor would be relegated to that of an adviser whose actual participation would have to be carefully structured to keep the adviser from falling into the definition of "officer."
There are many other points contained within Bill 70 which our local entrepreneurs and businesses have advised me they have problems with. For the sake of time and the hour of the day, I would like to move on to another area.
Business has been under siege not only from your government but from our federal government, and indeed from the economic and market forces of the whole world. No one would come here today to say that the dropping of Bill 70 from your agenda would solve all of our problems. The problem is a cumulative problem.
Niagara Region Development Corp and Niagara's businesses are asking you to reconsider some of the clauses which increase the risk of doing business. We also ask this committee to broaden its mandate to address the cumulative impact of legislation in combination with the economic and political forces which are tearing the livelihood from our communities.
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We did a recent survey of all manufacturing in the Niagara region, and we learned that 20% of the CEO-general manager-chief operating officer's time in Niagara business is currently devoted to the review of legislation, government relations and survival scenarios generated by, "What if legislation is passed?"
I am not saying legislation in general is not important or government relations are not important, but when 20% of every working day of our chief executives is devoted to non-productive effort, the time has come to speak up. Can you imagine the effect of diversion of that CEO's time to the development of new markets, increasing exports, development of new products, negotiating strategic alliances and joint ventures with other local manufacturers or indeed offshore companies, and increasing worker and machine productivity? The list goes on.
The cumulative effect of that energy diversion in our region of 800 manufacturers currently employing 45,000 skilled people would have enormous impact on the success of our companies. The increase in revenue to expand manufacturing facilities and hire or retain employees, and the desire to do more than just survive, would accelerate Ontario's industry once again to its peak performance.
Thank you for the time you have afforded me this afternoon. I look forward to further dialogue on this subject and on other pending legislation. I will be preparing copies of my comments and giving them to your committee.
Ms S. Murdock: Just a clarification: Some of the comments directly relate to Bill 70, particularly in terms of directors' and officers' liability and some of the other things you mentioned. Are you familiar with these recommended amendments that are going to affect the original Bill 70 or that hopefully will?
Mr Duffy: Yes, but not in as much detail as the other one. As you can understand, we started our consultative process and then we were aware of amendments.
Ms S. Murdock: I know the ministry staff have copies they have been providing, so we will make sure you get a copy before you leave. I think when you see what the amendments have done to the liability of directors, it will significantly change your comments.
Mr Duffy: Thank you.
Mr Offer: Thank you for your presentation, Mr Duffy. We have gone through some of the aspects of the principle of the bill. I have asked this on some other occasions, but is there a message that a bill such as this sends out to the business community?
Mr Duffy: Yes, it does. The provincial government is not alone in increasing legislation. Our own municipal government is introducing further legislation related to development lot levies. It may not have a direct impact today on a manufacturer, but every time he wants to expand he would be looking at paying an additional $2.50 for every square foot that he builds, and some of the structures in our Niagara region are very substantial structures. It is an increased risk of doing business.
My board of directors consists of 27 people, only four of whom are associated with regional government. All the rest are business people in the community representing virtually every sector of the community. At our last board meeting they indicated to me that in the past and present they are deluged with flyers and offers from other jurisdictions. They have never read them in the past. They have been devoted to the Niagara region or other locations in Ontario and Canada where they are located, but they find they are forced to change, one of the factors being increasing legislation, which is a further risk to doing business in Ontario.
Mr Offer: Under the legislation, there is a potential liability to directors personally. If one accepts the principle of protection of wages for employees in bankrupt companies, what would be your reaction if the liability to directors were eliminated -- for small business, for instance?
Mr Duffy: I think that would be very well received. The example I gave you of our sister organization, LINC, is primarily for small business. The situations we are working with are small number of employees. A great number, over 80% of all the businesses in the Niagara region, are less than 10 people. So yes, it would have a very significant benefit.
Mrs Witmer: Thank you very much for your presentation. Many of the concerns you have expressed have been expressed by other business people throughout the province over the last four days.
You talked about this being just one part of what is going on. What are some of the other areas of concern that business people in this province have?
Mr Duffy: Probably the single biggest one at this time has been the advance notice of possible changes to the Labour Relations Act. My understanding is that it is either an internal document or a white paper, blue paper or green paper, that it is certainly not at the stage of proposed legislation, as is Bill 70.
We have had virtually every sector of our community, including our greenhouse growers and farmers, concerned about the impact of possible changes in that area. We hear our greenhouse operators' concern that they may lose the exemption for hours of operation. They are telling us at the same time that the plants do not stop growing at 5 o'clock; they grow through the weekend and do not just start up again at 8 o'clock on Monday morning. They have very peculiar situations where they have to look after these kinds of things.
To keep on the same example, because it is the most current one I have met with, the flower greenhouses are currently a $150-million business in the Niagara region. Nobody knows that. They are about three times the total dollars in our total wine grape and tender fruit industries. There is the devastating effect, when they are already competing with Holland. There is a 747 transport plane that comes into Toronto every single day with cut flowers from Holland which are distributed in Ontario. They are competing with them.
Mrs Witmer: That is very frightening. You made an interesting point about the fact that business people are now looking at the brochures that come in. I had one business person in my community drop off a box of material that he has been collecting, and it was this high with brochures and enticements. I was shocked at what he had received.
Mr Duffy: As an economic development officer and a member of the Economic Developers Council of Ontario and the Industrial Developers Association of Canada, I can say that we constantly monitor what other states, what other countries are doing. Ontario once had an edge on a lot of jurisdictions and is rapidly losing that edge.
Many of the industries that located in the Niagara region initially, and some of these companies are close to 100 years old, moved there because of the availability of cheap and plentiful hydro power. The same industries are there. They still need the same amount of power. These are very energy-intensive industries; Atlas Specialty Steels, for instance. Atlas was purchased a short while ago by the Sammi group from Korea. They are now planning to spend $500 million in Quebec. In my opinion, that should have been spent in Ontario, in Welland, where they have a much larger plant and over 1,000 employees currently there.
These are some of the concerns.
Ms Haeck: I want to ask Mr Duffy a quick question with regard to the nature of most of the employers. You talked about the 11 large manufacturers, but most of the employers are relatively small. Any idea of the exact size of their workforces?
Mr Duffy: The total manufacturing --
Ms Haeck: No, not the manufacturers, the other people who are members of the Niagara Region Development Corp or who you know exist in the region. Do they have under 10 employees, or 20? What is sort of the average size of the business?
Mr Duffy: Some 80% of all the businesses in Niagara are less than 10 people. The General Motors of 9,000 people is unique.
Ms Haeck: Right, and obviously Atlas is, with its 1,000 or whatever, or John Deere. They are relatively rare.
Mr Duffy: There are only five or six companies of 1,000 or more.
Ms Haeck: So in reality, most of this legislation really would not affect most of the employers of the Niagara region, since they have under 10 employees?
Mr Duffy: Many of those companies have boards of directors.
Ms Haeck: No, as far as paying some of these --
Mr Duffy: Yes, under that criterion.
Ms Haeck: As well, most --
Mr Duffy: Excuse me, but what is a "small business"? Is it a small business at 10? I would say no; most of our small business is probably under 200. You are getting into a larger group of companies that are within that area.
Ms Haeck: As for entitlements, my concern is that there is a certain message around the entitlements that people who may have worked in a company which for whatever reason has closed its doors are not entitled to the wages for which they worked. I am concerned about that particular message. There is a concern on the part of the directors, but those people who may have actually put in those hours also have mortgages and they obviously go to the local grocery store and buy food and put clothes on their children's backs. I am just trying to figure out how we deal with entitlements.
Mr Duffy: I think the vast majority of people in this province do not understand the legislation. I think this is one of the good points that has come forward with not only changing legislation, but perhaps the controversial nature of how this particular legislation has been introduced. It is getting a lot of press coverage. It is getting a lot of interest by parties who had never previously been interested in it. So maybe there is a good aspect to some legislation and we learn a little bit more of how we all operate here. I think that is good.
The Vice-Chair: I thank you very much for your presentation to the committee. It is nice to hear from the Niagara area. I think it will also help us in our deliberations, I guess in a week's time, when we go through this and try to come together and work this out as to what we are going to be doing.
Mr Duffy: Thank you, Mr Chairman. I will be sending a copy of my deliberation to you.
The Vice-Chair: I would like to take a moment to thank each member of the committee. You have made it very easy for me this week and I thank you for that. It has been a good week as Chair and I guess we will see each other in about a week's time.
At this time I am adjourning the committee for this week.
The committee adjourned at 1744.