BOARD OF TRADE OF METROPOLITAN TORONTO
CANADIAN AUTO WORKERS, LOCAL 27
CANADIAN MANUFACTURERS' ASSOCIATION
UNITED STEELWORKERS OF AMERICA, DISTRICT 6
CONTENTS
Tuesday 30 July 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
Board of Trade of Metropolitan Toronto
Canadian Auto Workers, Local 27
Canadian Manufacturers' Association
More Jobs Coalition
Afternoon sitting
Philip Howes
Paul Higgins Jr
Ontario Chamber of Commerce
Canadian Auto Workers
Brian A. Grosman
Anthony Bratschitsch
Ontario Federation of Labour
United Steelworkers of America, District 6
Gogi Bhandal
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)
Substitution: Witmer, Elizabeth (Waterloo North PC) for Mr Jordan
Also taking part: White, Drummond (Durham Centre NDP)
Clerk pro tem: Manikel, Tannis
Staff: Luski, Lorraine, Research Officer, Legislative Research Service
The committee met at 1002 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.
BOARD OF TRADE OF METROPOLITAN TORONTO
The Vice-Chair: I call the committee meeting to order. The first presenter is the Board of Trade of Metropolitan Toronto. Would you take the seat at the end of the table, please.
Mr Richardson: Thank you for the opportunity of appearing before you this morning to make a presentation with respect to Bill 70. The Board of Trade of Metropolitan Toronto has more than 15,000 members and is the largest board or chamber of commerce in North America.
The Vice-Chair: Excuse me for a moment. For the sake of Hansard, could I ask you to introduce yourselves.
Mr Richardson: In the next sentence. The Board of Trade consists of a volunteer structure and many committees and its role is to analyse legislative initiatives, debate policies and actively lobby on behalf of its members.
Today we are here as representatives of the labour relations committee. David Wakely on my right, of the law firm Winkler, Filion and Wakely, represents the labour relations committee. On my left, Terry Dolan of McCarthy Tétrault, a law firm in Toronto, represents the insolvency and creditors rights committee of the board. My name is David Richardson. I am the chairman of Ernst and Young Inc, which is an insolvency and receivership firm, and I am the chairman of the board of trade insolvency and creditor rights committee. Jim McCracken is also with us today in the first row behind me and he is head of the board of trade's legal department.
We have had numerous joint meetings between these two committees and have written three letters to the Premier and/or the minister with respect to Bill 70. The first two letters were written prior to the announced intention to amend the legislation. The third letter, which has been circulated to you today, is to express some new concerns that we have as a result of recent developments, particularly the federal government's introduction of Bill C-22 to create a wage claim payment program, and the minister's announced intention to amend this bill. I believe Mr McCracken has also left copies of the prior two letters with the clerk of this committee.
We support the changes that we understand are proposed for Bill 70, particularly with respect to the elimination of director liability for the severance and termination portion of the coverage and the immediate cessation of liability once a director resigns, and also the comprehensive elimination of officers' liability, but we are concerned about a number of issues. I will ask my associates to address some of them. First, I would like to ask Terry Dolan to discuss the board's views on the need to harmonize Bill 70 with the federal initiative, Bill C-22.
Mr Dolan: What I would like to talk about is the situation where there is an insolvency. Both David Richardson and David Wakely are going to talk to you about the incidence of that, but I am going to confine my intentions to situations where that occurs.
There is in that situation the obvious need to have a harmonization between the two pieces of legislation. We have been giving some thought in our committee to just how that could be done and we have expressed them in the letters written, most recently in the last letter.
What makes sense to us is that the arrears of wages owing to an employee if there is a receivership or a bankruptcy should be the first and most important concern. That is the urgent need. If someone did not get a paycheque, he or she is going to be troubled, and that should be done quickly. What the federal legislation contemplates is that a claim would be submitted to a receiver or a trustee.
I digress for a moment to point out that in Bill 70 you have referred to a receiver as being a court-appointed receiver. Many receivers are privately appointed. That is a technical matter which should be picked up, because if you want to have a harmonization, what would make sense, we suggest, is that this legislation provide, first of all, that resort be made first to the federal legislation to pay the wage arrears. That could be co-ordinated if claims for both programs were submitted to the receiver, widely defined, or the trustee, as the case may be. That claim would then be processed by the person who has come in and taken possession of the books and records of the company, who is at least going to be in the best position, not to mention dealing with the employees directly.
That claim could then be submitted by the receiver to the federal program as contemplated there, and then if there is to be a greater range of coverage, as you have, and a greater amount of coverage, as you have in Bill 70, a point on which we will be making some comments later, then that supplemental coverage could be submitted to the provincial authorities.
We think, broadly speaking, that is the way that would work most efficiently. What you do not want, we would submit, is the situation in which claims are being submitted to the receiver or the trustee, on the one hand, for the federal legislation, and independently of that but simultaneously, claims are going to a program administrator. The chance for delay, so that people do not get paid anything, or duplication of payments would just be multiplied tremendously.
We think what that will mean in most cases is that where there is an insolvency, the arrears of wages, to a large extent, will get paid by the federal legislation. The function then of this legislation, Bill 70, in an insolvency will be primarily to pay severance and termination pay. In that situation, where you have a company that has failed and gone out of business and you do not resort to directors and officers, it means the province will not be able to recover the payments that are made whenever an insolvency or a receivership occurs. That is simply an indication of something to be taken into account.
Generally speaking on the harmonization, that is the way we suggest it would work: claims made to the receiver and the trustee first to the federal legislation; it can happen at the same time, but as a second resort clearly to the provincial legislation.
Now I suggest that I turn this over to David Richardson and David Wakely to carry on with some of the other points, and then if there are questions we can come back to this.
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Mr Richardson: I would like David Wakely to express the board's concerns with respect to private member's Bill 116, An Act to amend the Employment Standards Act with respect to Notice of Termination.
Mr Wakely: The bill has now received second reading. It is a matter of speculation whether the bill will ever be passed and receive royal assent, but in its present form it provides for an amendment to section 40 of the Employment Standards Act which would increase the amount of notice of termination that employees would be entitled to in businesses which had 10 or more employees but less than 200, from the current graduated amounts ranging from a week to eight weeks in the case of individual notice, and to 10 or 12 to 26 weeks, half a year, in the case of mass layoff. In the case of companies or organizations that had more than 200 employees, the notice would be increased to 52 weeks.
Simply stated, it is the view of the board, and I would submit, the view of industry and the industrial community in general that this type of notice is extravagant and excessive, and is far in excess of any similar type of notice that one can find in the western world. I am not aware of one jurisdiction where notice at this level could be found and I would submit, as I say, that it is excessive. In a period of time when it would seem to be important to present to prospective employers an environment which is likely to welcome them and give them the impression that Ontario is a place where they could comfortably conduct their business, this is not the type of legislation which will accomplish that end.
For your consideration I would merely suggest that if and when the government intends to introduce amendments, as we have been told it will do, of an overall sweeping nature to the Employment Standards Act, serious consideration be given to maintaining the existing level of notice and not increasing it, and certainly not increasing it to these levels.
Mr Richardson: Thank you, David. Would you also explain the board's view that severance and termination pay should not be covered by Bill 70?
Mr Wakely: Yes. The issue here is whether the contemplated legislation should extend to cover claims for notice and severance, and when I talk about notice here, I am referring to the existing level of notice rather than the levels suggested in the private member's bill. The question is whether the fund, the program, should pay claims made for notice and severance rather than simply for vacation pay and wages, as is currently the level of coverage contained under the Ontario Business Corporations Act, the OBCA.
The act, as we have been advised in the June news release, will be amended to include severance and notice, and in our respectful view these are forms of entitlement which are not appropriately contained in or to be dealt with under the Employment Standards Act. In the case of a failed business, there is potential for a claim for existing levels of notice as well as for severance, and it is entirely possible that the same employee who is no longer employed by this failed business would qualify for and receive unemployment insurance.
We suggest that the purpose of unemployment insurance is to cover situations where an employee has lost his or her employment. It is not fitting and it is not appropriate, we suggest, in the circumstances of a failed business venture that employees be in a position to receive from the fund not only notice but severance and ultimately unemployment insurance. This will result in stacked or a duplication of benefits as we understand the operation of the bill. In a normal layoff or termination situation, an employer typically will provide actual notice of termination rather than pay in lieu of so as to reduce its liability in the event of a discontinuance or a normal layoff or shutdown situation. The employer then is required to pay severance, that is true, based on a graduated scale ranging from one to 26 weeks based on length of service, but only in very rare instances is there a payment of both these things, for the obvious reasons.
In a failed business situation, as we would anticipate that occurring, it will almost invariably be the case that the employees will not have received actual notice, so there will be an obligation to pay wages in lieu of notice as well as the severance. In the case of a failed business it would appear, to us anyhow, anomalous that an employee would receive perhaps three levels of duplication of benefits: notice, severance and unemployment insurance, whereas the same employee who is laid off by a business that was not failing, is just laid off in the normal course of business, would perhaps receive one, perhaps two, of those benefits but certainly not three in the normal case. We would suggest for your consideration that the amendments to the act make it explicit that notice and severance not be claims that can be made against the program.
Mr Richardson: The next point I would like to express for the committee is a concern that the administrative procedures under the bill are based on what we believe to be a significant misapprehension by the ministry. The ministry staff believe that approximately 50% of the claims that will be administered under Bill 70 will relate to non-bankruptcy and non-receivership situations, in other words, cases where an employer moves out of the jurisdiction without honouring its obligations to its employees or simply ceases operations and walks away. The board believes that these latter cases will only be a minority and that the overwhelming majority of cases will be situations that are insolvency proceedings and independently administered by a receiver or a trustee in bankruptcy.
The significance of this is that the legislation is being drafted to suit the exception rather than what we believe will be the rule. Who is better qualified, as Mr Dolan has said, with access to both the records and in many cases the unpaid employees than the trustee or the receiver? The appropriate approach, we believe, in an insolvency and bankruptcy case is that the receiver or the trustee should prepare the claim. He should send the claim for the approved amount of money to Ottawa for immediate issuance of a cheque up to the extent of the federal coverage. He should then distribute the federal moneys to the employee claimants and compute the balances, after deducting the federal contribution, due to the employees under Bill 70 and send that net claim to Ontario for the top-up payment, which will really in effect, as Terry has indicated, be a payment on account of termination. Then when the cheque is received from the provincial wage fund administrator, the trustee or receiver would distribute those proceeds to the employees.
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The reasons we think this should happen are that, first, we believe the federal fund should make the first payment; second, the receiver has the administrative system and the information to distribute the dollars; third, we do not think the employees should get whipsawed between two jurisdictions; fourth, trustees are all licensed by the federal government and are used to administering dollars on account of third-party creditors and beneficiaries of trusts; and fifth and most important, we think it is the most expedient system. I think the whole purpose of this legislation is to protect the employees and to put money in their hands quickly.
Under this approach the Ministry of Labour could then concentrate on the analysis and processing of claims against the fund that arise from other than insolvency and bankruptcy circumstances.
Then there are two technical points we wanted to draw to the committee's attention. Terry referred to one of them, and that is that subsection 40u(6) and clause 40e(1)(a) of the bill referred to trustees in bankruptcy and referred to court-appointed receivers. There are many insolvency situations where receivers are privately appointed or where they are appointed as the agent for a secured creditor but not as a receiver or trustee, and where they are appointed as a liquidator under the Winding-up Act. We believe the definition should be broadened under this bill so that it sweeps in all of those other situations and provides more comprehensive coverage.
The board is also concerned that the legislation should not include additional amounts as prescribed by regulation. Clauses 40b(2)(d) and 40s(3)(b) of the bill provide that the coverage can be increased by regulation. The board believes that any change in the coverage or the director's exposure should be by way of amending the act with an opportunity for interested parties to be heard. Proceeding by way of regulation does not provide organizations like the board of trade and others with an opportunity to be heard on this issue.
Finally, we would like to thank you for the opportunity to express the board's concerns and to say that the Board of Trade of Metropolitan Toronto would welcome and participate in any ongoing dialogue with departmental representatives, particularly with respect to the important issue of harmonization with the federal legislation.
Mr Offer: Thank you very much for your presentation. The last point you made dealing with the regulation-making power under the bill is one which was brought forward yesterday. Certainly what it does, as you have indicated, is that it permits the ministry through regulation to determine the breadth and scope of payment and certainly even change some of the issues around the whole issue of wages. I believe that is a matter which should be before the legislators so that you will have a more direct input. I thank you very much with respect to all the matters you brought forward and on this question of harmonization.
Could you share with us some of the types of consultation that you have had? This matter in principle was announced last October. The bill was introduced into the Legislature just a few months ago and afterwards amendments were announced. Have you had any part to play in terms of meeting with the minister or the deputy on this particular legislation?
Mr Richardson: No. The board's input has been exclusively as a result of reviewing the original bill and the public statements that have been issued since then until Friday, when we had the opportunity to meet with the deputy minister and some of his senior advisers and explore with him the need for harmonization on some of the issues we have discussed here today. I think it is fair to say that we have found a responsive deputy minister, someone willing and anxious to consult with people experienced in this area in the business community.
Mr Offer: This is a follow-up question. The principle of providing wages and vacation pay to employees who are really victims of a particular company that has gone bankrupt is a principle you agree with, is it, or not?
Mr Wakely: In so far as the provision extends to wages and vacation pay we would support that, and we would acknowledge that there is a need for that. I think that is what is contemplated by Bill C-22 as well. In order to promote harmonization, it seems to us it would make a lot of sense that Bill 70 restrict itself to wages and vacation pay.
Mr Offer: The principle you agree with is one that does not extend to the severance and termination. Under this legislation and the two definitions contained within it, it is that at this point in time the taxpayers of the province are in effect potentially guaranteeing the severance and termination pay of every worker in the province. If the funding changes in terms of, for instance, an employer's tax, then it would be the employers that would be guaranteeing. So you feel that area is one which you do not agree with in terms of protection.
Mr Wakely: To the extent that I understand your question, we do not agree that it be extended to severance and notice. We think that the payment from the provincial Treasury probably makes sense as opposed to an employer tax, and I think that answers your questions.
Mrs Witmer: Thank you very much for the excellent points you raised. Certainly many of the concerns you have mentioned are concerns that our party has as well. We are very concerned about the harmonization. I hear you saying, and maybe you can just confirm for me, that you feel the province should wait until such time that the two bills can be harmonized before Bill 70 is formally introduced. Is that what I hear you saying?
Mr Dolan: I think you could take two approaches. You could wait for the federal legislation or you could draft this legislation to allow for that. I would think, speaking very generally, that if there is a federal program then resort must be had to it first. I am sure you have heard this as much as we have: The federal government says, "This time we really are going to enact amendments to the legislation," and in particular the wage claim payment plan.
Mrs Witmer: That is right.
Mr Dolan: I would think that is going to happen, but what is important to us is that if there is going to be harmonization at all you would need to resort first to the federal program. You should keep in mind that if you look at a company that is in trouble very quickly, your first choice, if you can, is you restructure and reorganize and you stay out of insolvency. If you have an insolvency and there is a receivership or a bankruptcy, a first choice is to try and sell it as a going concern. All of us who work in the field try very hard to do that, because it produces the best realization, not to mention that it saves the business. The corporation may stop, but those workers will still have jobs and the product will still get made.
All of your legislation, I would submit, should be directed towards those goals, towards going-concern transfers. If we get skewed on the other side, we will not have that, and that is not overall in the best interests of the province.
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Mrs Witmer: We heard the minister and the deputy minister indicate yesterday that the province was going to assume responsibility for Bill 70, as well as collecting from the federal body. I raised the question how you are going to make sure the administrative costs are going to be covered if the province assumes total responsibility for dealing with the unemployed worker and providing the money that the taxpayer and the province obviously then are going to pay. What would your reaction be if the province assumes responsibility? I think we all realize you need only one body that you would access, and the province is going to try to collect from another level of government. What is your response to that?
Mr Dolan: David Richardson commented on that in particular, but it seems to me the primary thing is that claims be funnelled through the receiver or the trustee. Originally, that is going to be the bulk of the situations you are going to have, some kind of insolvency, or any number of technical reasons why there should be a bankruptcy or a formal receivership, and those will, I believe, increase, quite apart from the economic reasons. I would think the first step is it has to go through the receiver or the trustee. I am sure it makes a lot of difference afterwards.
Mr Richardson: I think the big difference is that it is important it is clear that resort is made either to the province or to the feds, not jointly to both, and then not entering into a long dialogue between the two so that they can compare the claims. If Ontario takes the lead and says, "We will in effect make the payment and then seek reimbursement from the feds for their portion of it," that would be administratively a step in the right direction. But rather than see a large secretariat develop to deal administratively with this, as I indicated in my remarks, I think the receivers and the trustees have the systems and the information right there in the offices of the bankrupt companies to process the payments most expeditiously. It would just make an awful lot of sense if they were brought into the system and did that.
Mrs Witmer: Otherwise there would be duplication.
Mr Richardson: I think so.
Mrs Witmer: And there would be additional costs for the taxpayer.
Mr Richardson: Absolutely.
Mr Dadamo: On behalf of our side and our government, we thank you for making your appearance this morning and giving us your knowledge. Of course we are here to debate and discuss Bill 70, the bill we are here for, but Bill 116, which I have become the author of via a private member's bill, will have its day in court, so to speak, and we will have other times to talk about that.
Mr Richardson: We just wanted to be sure we got a chance to share our views.
Mr Dadamo: I thank you for that, but we should delve into the bill that is before us today. I also want to stress and just comment that this is not a ministry initiative. It is solely my intent to put it forth through a private member's bill, and we will have time to talk about it later. Nothing has been settled. You are right that it has had second reading, and where it will go from there, I am not sure. But that time will come and probably you will be back to talk about that.
Mr Huget: Thank you very much for your presentation this morning. I just want a couple of points of clarification, if you like. Are you aware of how many times the federal government in the last 25 years has suggested it was going to provide wage protection for working people in Canada?
Mr Richardson: I am familiar with how many times the federal government has indicated it is going to amend the Bankruptcy Act of Canada, and certainly it is in the range of six separate bills that have been introduced. Most of those bills have in fact included wage protection measures, yes.
Mr Huget: In light of what they have done in 25 years in terms of addressing a very important issue, I will believe the federal initiative when I see it and not when I hear about it. Quite frankly, we have a situation in Ontario where workers are in need now, and I guess the logic of waiting for the federal government to take some initiative kind of escapes me.
The other thing that interested me was that part of your presentation said the legislation we are dealing with today should be drafted in terms of going concerns, transferring ownership of businesses, and not so much dealing with the effects of bankruptcies. I wonder if you are aware of the number of problems that are experienced with workers being owed wages in going-concern transfers.
Mr Dolan: I do not have any statistics. The point I was making is that in drafting legislation, certainly you have to provide for the payment of wages where a business fails and there is a liquidation. What you should keep in your mind, I would respectfully submit, as a policy is that we want to encourage, one, reorganizations and, two, going-concern sales. You test your legislation against whether it is going to be for or against that.
If there is a going-concern sale in a consultancy situation, keep in mind that it will be by either a trustee or a secured creditor who takes the assets of the old corporation, which technically fails, but the business survives because someone else comes along and buys it, not from the old corporation, but from either a trustee or a secured creditor. Then you can address the issue of whether arrears of wages get paid.
My experience over 20 years practising in the consultancy field is that when you have a going-concern sale, there are employees who get terminated. Sometimes they are not hired in the new business, but those who are have to be paid their ongoing wages. They are not going to come and make that smooth transition if they do not get their ongoing salary. That is the way it works.
The Vice-Chair: I have to jump in here. We are running behind time and I am going to try to keep this somewhat close to it, so I thank you very much for your presentation on behalf of the committee. I know we will all be in touch as this bill goes through the workings of the House.
CANADIAN AUTO WORKERS, LOCAL 27
The Vice-Chair: The next presenter I have on my list is Mr Bert Rovers from the Canadian Auto Workers. Please take your place at the table. Good morning and welcome to the committee.
Mr Rovers: I just jotted down some notes that I felt I wanted to cover, and there are obviously some other things that have arisen since this was put together that I would like to talk to you about.
Let me at the outset compliment the committee for taking the time to hear -- I have in there "us" because I had originally planned on having some workers with me, but in the process of attempting to get those workers, they have found part-time employment. When they have asked for leaves of absence to be here, they have been faced with some fairly extreme difficulties from the employer. Nevertheless, it is my intention to make the presentation on behalf of those workers anyway, for the introduction of this legislation, which I feel is long overdue and much needed.
Let me talk to you about the two industries which closed down recently in London, first, D & C Roussy Industries and, second, Forest City Truck International. Both these industries were part of the trucking industry and were in business for over 10 years in the case of D & C Roussy, and over 35 for Forest City Truck. Both of these businesses got into trouble as a result of federal policies of high interest rates, the high Canadian dollar and deregulation. Let me make it perfectly clear that there were no other reasons.
The deregulation of the trucking industry is the son of free trade, which was supposed to bring any worker who lost his job as a result of this government policy the much-promised adjustment programs, which to this date we have seen nothing of.
The workers at D & C Roussy were laid off October 4, 1990, and were given no notice of layoff; nor were they paid any severance pay. Some received unemployment insurance benefits and some ended up on welfare, while the workers at Forest City Truck International were not given their one and a half weeks in wages or the vacation pay of the previous year. There was no notice of layoff or severance pay given.
There are workers who worked for this company for 27 years, so with the maximum limit set at $5,000 under this legislation, there still would be a tremendous shortfall for these workers. At the same time, the federal legislation, which we hold responsible for the loss of these jobs, is just champing at the bit. Should these workers get any benefit from a trustee or under this bill, the federal government will set up overpayments on their UI claims and reclaim portions of this money.
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Let me once again urge this committee to expedite this process and get this legislation passed. It is really needed. There is not a single day that goes by that we do not receive a distress call from these workers.
It was interesting. I was listening to the presenter before me talking about the stacking of benefits. That does not happen, because the Unemployment Insurance Act already deems that to be continuation of wages for the purpose of denying people unemployment insurance. When you get to a worker wanting to use those wages to have them insured so that he can establish a UI benefit, at that point the federal government says they are not wages and they are not insurable.
Workers really become the victim in this process. I have gone through it a number of times with people and it is fairly hard to explain to a worker. The government calls this wages and is going to deduct it from your unemployment insurance, but if someone needs an additional week or two weeks and he has received pay in lieu of, the same government then turns around and says, "Well, they aren't really wages and you can't insure that, so therefore you can't get on benefits."
If the process we are talking about is to get wages to workers as quickly as possible, I suggest we continue with the format we are looking at under this legislation and not provide a whole bunch of rules and review mechanisms, because unfortunately what will happen is that it will get bogged down in bureaucracy. When you are dealing with company lawyers, receivers, you do not get an awful lot of communication.
For instance, Forest City Truck went into receivership, not a court-ordered receivership but it went into receivership when the Hong Kong bank, which was the mortgage holder on the building, took over. It took me in excess of three weeks just to get the papers as to how this business went down, and the answer I was getting was, "We have misplaced the papers, but as soon as we get them, we will get them to you."
I am trying to explain to the 50-odd workers in there what is happening, and I have to tell them the receiver has lost the papers at this particular time and cannot get them to them. It does not make for an awful lot of confidence and people start wondering what is really going on.
There are a number of games that get played in this particular process. Forest City Truck International was a dealer for Navistar, and Navistar moved in and displaced all the officers in that company and ran the business for some three weeks and then just simply disappeared in the piece and walked away, leaving the workers high and dry. I would think there is some liability there.
We need the employment standards officers to be able to go in and write directives. I do not believe in turning this over to the receiver and letting the receiver make recommendations, because in many instances I think the receiver has a vested interest. Let me tell you about one that I got a call from a worker on last night. I think it sort of paints the picture as to what lengths some employers will go to play games.
We have an employer in London. I will mention the name: GRW Industries (1985) Ltd. The same person had been in business as Local 2 and left a number of workers, simply moving the operation to St Marys when they got certified. He operated in St Marys for a period of time and got the town to make major commitments because he was going to locate an industry there. Within a year he abandoned that community and started up in Centralia. He operated in Centralia for approximately a year and ended up closing that business, leaving those workers high and dry. We had to take the matter to an arbitrator and get an award against the individual, and finally a year and a half later we ended up getting some wages to those workers, only at the same time for him to re-establish in London, where he is operating right now.
What happened in this particular instance is that he is in the process now of moving the operation to Tennessee and needs some time to do it, so what he has done is rent his farms to the business. There is a lease signed where the business pays $93,000 a year to the farm for rent. He has sold some race horses to the business, which basically makes tubing, and then quit paying all of his creditors. What happens at that particular point, when the creditors start to move in, is that he makes an application for a farm stay under the farm debt review because he is now a farmer operating a tube mill in the city of London.
He is in the process of setting up the operation in Kentucky. I could take some time as to some of the skulduggery that is going on, about loans being made from a company that basically, they tell us, has no money in the American corporation. They cannot find the trucks because they are in the US. These workers are working today and they are phoning: "What's going to happen to my vacation pay that is owing? Are we going to have to fight for a year and a half, and if so, are we going to get it? What about my notice?"
That is not the only company that has played this game in our particular area. I can give you an example of another employer, and this happened quite some time ago. There was a bankruptcy and a viable business was sold. At that time it was a company that had four partners. After the bankruptcy the four partners ended up each owning a piece of the company. The workers that left during that period of time never did get any severance pay. We still have a claim at this time before the employment standards branch. This happened in 1988.
The company then gets reborn through a buyout. What happens is, the name gets changed, we enter into a collective agreement with the new employer, again the name gets changed, and as recently as four months ago the name was changed again, and all during this time what you do is you cut down the workforce until you start coming below 50 employees.
What has happened is that in all the restructuring we are going to have a major fight on our hands on behalf of those workers. We are going to have to get lawyers involved and what have you, because in tracing through the various companies that have been set up, every single one of them has the same four major officers within that company. We are going to make the claim to the employment standards branch that this is one and the same and when you add them all up together they are in fact in excess of 50.
These are examples of companies that are operating in Ontario, and there are lots of horror cases I come across many times from workers who are unorganized and have no place to turn. The games do get played out there. That is why I am in support of the legislation, because it finally puts some teeth where you have employment standards branch officers going in and hoping we can get this thing expedited as quickly as possible.
We do not need this diverted by having someone turn it over to the receiver or talking about, "Let's not do anything because there's federal legislation coming." I have been a staff representative for over 14 years and I have been waiting and waiting for the federal legislation to come through. It always seems to be that people play politics with it. What they do is they come close to the end of the legislative session and they introduce a bill knowing full well it is going to die on the order paper.
Workers have been caught any number of times. Believe you me, there is a considerable amount of frustration out there on behalf of these workers. I would think the employers would want to have this cleared up as to what happens with vacation pay, severance pay and all of these other issues.
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When I say I have been on staff for 14 years, I have been a worker in a plant for a number of years also. I still go back to years ago, when a worker was working in the plant and the employer had to pay on a weekly basis into a stamp book so that at the end of the year the worker could go to the bank and take that book and cash it in, and that is how he got his vacation pay. The employers lobbied very strenuously that this was a problem for them because in buying those stamps it was taking away from the cash flow within the company. Let me tell you that the government ended up changing that so that these employers in fact would be able to hold the money and it would not impact on their cash flow. I think as a result of that workers are now ending up on the short end of the stick, because vacation pay, notice and severance pay just seem to get thrown by the wayside. I think something has to be done and some teeth have to be put into some legislation to protect these workers in this case.
If we do not have this type of thing, the other scenario you have is the uncertainty of when we talk about, "Maybe we should try to keep the company together so we can sell out as a viable concern." If I am not sure that this is going to be sold or that it is a viable concern, perhaps I should start looking for other employment and provide the 14 days' notice to the employer. Then try to sell it at that particular point and you are going to have some problems. Let's have some certainty there for the workers that in fact the vacation pay will be guaranteed to those workers so that they have a reason for staying with that employer if we are talking about selling the ongoing concern.
As I say, having been involved in a number of these issues and the problems that are presented, I could go on for a fairly lengthy period of time. I can get into dealing with the specifics of individual hardship cases, but I just felt that it was important, coming from the London area, that I come here to talk about the problems we have, but also to support the legislation that is being proposed, because believe you me it is needed out there and needed very badly.
Mr Huget: Thank you very much for a very informative presentation. I am particularly interested in the experience in London. I live fairly close to London and Sarnia, and certainly I am aware of some of the problems you are experiencing there.
I wonder if you could give me an indication in terms of if you have any idea how much is owed the workers in the two examples you refer to. For example, D & C Roussy and Forest City Truck: In a ballpark sort of total figure in terms of wages, vacation pay, severance pay, is there any way you can put a --
Mr Rovers: No, I cannot put a ballpark figure on it. In the D & C Roussy case we are talking about in excess of 300 workers, and then what we would have to do is take a look at what the eligibility rules would be based on their years of service. In the case of the Forest City Truck employees, when I gave the example of 27 years of service and the maximum you would get under the legislation is $5,000, if in fact the person was to get the amount of money he was entitled to as far as pay in lieu of notice and the severance pay and the vacation pay owed are concerned, for that particular worker it would be in excess of $14,000. We are talking about 52 or 53 employees in that enterprise. There are people, obviously, with fewer years of service.
Mr Huget: I guess it would be fair to say that in all these cases, really you are looking at substantial amounts of money from a total dollar value point of view.
Mr Rovers: Yes.
Mr Huget: But more important, they are very much needed dollars by working employees and working families. I am particularly interested in the reference to the person with 27 years' service, owed $14,000. Could you give me an indication of his reaction to finding himself out of work without any severance pay, termination or back wages that he was owed?
Mr Rovers: His initial reaction -- the individual, in talking to him -- was one of surprise. The reaction of the individual's wife was even greater. She just totally broke down, because they thought they were coming very close to where they were starting to take a look at the possibility of going into retirement. As it turns out, there is the whole question of the pension plan at this particular time. It now will have to be wound up. They do not have answers as to what is going to happen with that program. Then to find that your last week or week and a half paycheque is not there, that the vacation pay is not there, that the severance is not there and that the job is basically gone -- total frustration, especially on the part of the wife. I think the husband in this case, the worker, because he is a top class diesel mechanic, felt there was going to be a transition for a while but that he would survive. But the wife had a hell of a difficulty with it.
Mr Huget: Just one short point. Do you feel, in your view, that workers' wages, particularly back wages, severance pay and vacation pay, and the money owed working people for providing a service and doing a job, should at least be treated as being as much of a priority as other creditors in society?
Mr Rovers: It should not be given equal priority; it should be the number one priority. As I said earlier on, if you go back a number of years where the vacation pay was paid to workers on a weekly basis and it was the business community lobbying that took it away and they basically held it in trust, I think they have now a moral as well as a legal obligation to pay that vacation pay to workers. They are entitled to it. The wages the people have worked for -- they were not speculating at that particular time. They were not investing it in order to make a profit on it. That was their livelihood. They are very much entitled to those wages, and that has to be the number one priority and not be tied down in a lot of bureaucracy. It ought to be gotten to those workers immediately, as quickly as possible.
Mr Offer: Thank you very much, Mr Rovers, for your presentation. I think that all members, not only of this committee but certainly of the Legislature, are well aware of the devastation of the recession and the amount of people who have been so badly hurt by it.
With respect to your presentation, you have spoken in real terms about what this means in terms of dollars to people. The bill in its original form, as you will know, made directors and officers potentially personally liable for not only wages and vacation, but also for a determination in severance pay, which you have already spoken about. The government has brought forward amendments which have altered this. They have altered it in this way: It has made directors only potentially liable for wages and vacation pay and has left, through the consolidated revenue fund, the taxpayers of the province liable for a portion of the termination and severance pay.
I know you have many years of experience. I am wondering if you can share with us your opinion, first, as to whether those amendments, based on your presentation, should have been made by the government, and second, should the taxpayers of this province potentially stand liable for severance and termination pay for employees?
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Mr Rovers: The fact that the government came along and made some amendments to the bill as it relates to some of the officers -- I am not all that concerned about that aspect. What I am more concerned about is, let's get this legislation passed at this time. If it requires the government to do some further study on that area, then let's do that studying six months from now, a year from now, but let's not delay as far as this legislation on that issue is concerned.
I think what happens is that a lot of times, and workers see it, you end up having some people pick on one particular area where there might be a bit of sensitivity, and as a result of that the whole bill gets scrapped. I think the way the government has handled it is that it proposes an amendment. At least that way we can get the thing through and then we can go back and revisit that and we will have some time to deal with it. I think from a worker's point of view it makes a hell of a lot more sense to get it done in that fashion, because I would not want this whole process to get bogged down over an issue about the directors and the officers of the company. I have some personal views on that. I think in a lot of cases the officers perhaps should be held responsible. But when I look at this legislation, I am afraid I do not want it to get bogged down on that basis, and I think that is what is going to happen. Politics is going to get in the way and workers are going to get hurt.
Mr Offer: I recognize that you are concerned about the process of legislation, but the fact of the matter is that the legislation has been introduced. We are now in committee and we are listening, albeit in a shortened form, to public hearings this week. A couple of weeks from now we are going to be talking about clause-by-clause. So this is the time.
We are not talking about federal legislation, which we have no control over, or the priorities that wages, severance and termination pay may have in bankruptcy. We do not have any ability to change that; that is federal legislation. We are here now, and what I would like to obtain from you is your opinion whether the government should have introduced those amendments to the bill.
Mr Rovers: As I say, I do not have any problem with them introducing those amendments, because quite frankly I think if you are involved in some of the politics, this thing is just going to get bogged down and we are not going to deal with it.
Let me give it to you from the point of view of a worker I was talking to the other day, that it is really amazing that we can have governments, through policies, end up having impact on industry and as a result of that they end up closing. I cannot get at anybody, but if I am walking down the street and somebody punches me in the nose, I can eventually go to a crime compensation board and get some form of compensation. He is very frustrated. "My industry," he says, related to the trucking industry, "has been closed because of federal policy. Thank God the provincial government is going to at least take a look at trying to help us with it."
That is the way the workers look at it out there. They do not look at it about all of the idiosyncrasies of the legislation, but they do recognize that if the whole issue you raised about the officers and whether or not they should be liable stays there, it is just going to get bogged down. Take that issue away, deal with it at some other time, and get this bill passed. Yes, it is going to cost the government some money at this time, but the government ought to be there to help people.
Mrs Witmer: Thank you very much, Mr Rovers. It is obvious you are very concerned for the employees who have suffered job loss and not been compensated. You just mentioned that the government ought to be supporting these people. I think it is important that we differentiate. It is not the government; it is the taxpayers in Ontario who will be funding this program. I think one of the reasons we have to carefully examine this bill is to make sure that we do not overburden those taxpayers and that those people fully understand what is taking place.
I heard you say that people were requiring more than the $5,000 limit that this fund is going to provide. If you had a chance to put in an amount, what would the maximum be? Do you think $5,000 is enough, or should this government be looking at a larger amount?
Mr Rovers: I think they should be looking at a larger amount based on people who have a great many years of service.
Mrs Witmer: What would the amount be?
Mr Rovers: The formula is already in the act based on what a person would get based on pay in lieu of notice as well as the severance pay. They should be taking a look at that amount of money.
Mrs Witmer: Are you saying that if they are owed $14,000, that should be considered?
Mr Rovers: If they are owed $14,000, that should be considered. I think the employment standards officer in his investigation should be in a position to make certain recommendations, should have the authority to make the recommendations. If there is anything the least bit suspicious, I think the government should turn around and take legal action against companies who play games, such as the example I have just given you with GRW Industries where they play the game to try and get around the legislation and ultimately try to get the taxpayer to be the responsible party. I think the government should take action and prosecute those employers; in fact, go after assets.
Mrs Witmer: So I do hear you saying the $5,000 maximum is not enough and is something you would like to see changed in the future.
We have talked about the funding, and right now it is being funded through the consolidated revenue fund. Would you support a payroll tax?
Mr Rovers: Yes.
Mrs Witmer: Okay. The third question I have, and the last one: Business in this province is telling us that legislation such as Bill 70 is having an impact, that it is frightening business away from the province, and that as a result some jobs are not being created, that there is not the same incentive to move to Ontario. Do you sense this is happening? Do you sense this is real?
Mr Rovers: I think with every piece of legislation that has come down in the last 10 years, businesses have told us they do not like it, that it is scaring business away, that they cannot operate in that environment. There is a lot of fearmongering going on out there.
I think employers can live with the legislation and will learn to live with the legislation, at least employers who plan on acting responsibly. The fly-by-night operators who are in it for the short run and maximizing of profit are always going to be complaining, but we have worked in our union with a lot of employers where employees will get severance pay far in excess of this. This has been worked out well in advance. Early retirement options are available for people, severance pay is available for people, notice pay is available for people, and counselling for people leaving. We have been able to work those things out. There are a lot of employers out there who are willing to work those things out with their workers and have no difficulty with it.
I hear almost on a daily basis from employers about all the fearmongering that is going on out there. I would be very suspicious about the fearmongering going on out there whether they are really in it for the long haul or whether they are just out there because they want to maximize profit.
The Vice-Chair: I would like to thank you for your presentation. I am sorry, Ms Murdock, but we are out of time and we are over again. So thank you once again, and I know that you will be watching quite intently as things go on.
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CANADIAN MANUFACTURERS' ASSOCIATION
The Vice-Chair: The next presenter we have is the Canadian Manufacturers' Association. Could you please come forward and for the sake of Hansard identify yourselves.
Mr Nykanen: Good morning, Mr Chairman and other members of the standing committee on resources development. My name is Paul Nykanen and I am the vice-president of the Canadian Manufacturers' Association -- Ontario. To my right is Jan Wade, vice-president of human resources with CCL Industries Inc and chair of the CMA human resources committee. To my left is Ian Howcroft, employee relations policy adviser with CMA Ontario.
We appreciate the opportunity to present our views and concerns on Bill 70, the employee wage protection program. Before we present our position in regard to the bill, I would like to make a few comments about the Canadian Manufacturers' Association. The CMA represents a broad spectrum of manufacturers, covering all sectors of manufacturing, which are geographically located throughout the country. Two thirds of our members are located in Ontario and represent 70% of our manufacturing output. Our member companies range from small manufacturing firms to large multinational corporations. However, the majority of our member companies have fewer than 100 employees. The Canadian Manufacturers' Association is currently celebrating its 120th anniversary.
The CMA is involved in many Ontario government initiatives at the present time, including, to name a few, the environmental bill of rights; the Fair Tax Commission; review of the Ontario Labour Relations Act; employment equity; pay equity; the review of the Employment Standards Act, including termination pay, severance pay, minimum wage, technological change, employee share ownership and the employee wage protection program. The government has a very heavy legislative agenda and all attempts must be made to reduce rather than increase the already onerous regulatory burden.
With regard to the employee wage protection fund, I would like to state first that the CMA supports the concept or intent of protecting employee wages. Employees who have worked for and have earned their wages have a right to these moneys. However, the extent of this right must be balanced against the greater right of society. All problems cannot be corrected through legislation. In fact, legislation without a thorough analysis of the economic impact on Ontario can exacerbate the problems we currently face.
Ontario must become more competitive if it is going to succeed in the global marketplace. If we do not succeed, Ontario's standard of living will decline, more jobs will be lost and we will not be able to afford the generous social programs that currently exist, let alone be able to afford new programs.
Because Ontario is already overlegislated, overregulated and highly taxed compared to competitive jurisdictions, our government must prioritize its initiatives. Unless there is a balance between well-intentioned social legislation and a competitive business environment to support the programs, legislation will do more harm than good for those citizens whom the programs were meant to assist.
Jan Wade will now speak to some of the specifics of the employee wage protection program.
Ms Wade: To start with, it is essential that the provincial government work closely with the federal government now that the federal government has announced its intention to increase protection for wage earners in its reform of the Bankruptcy Act. All systems or programs should work in tandem to avoid duplication or unnecessary and expensive bureaucratic and administrative delays. I think we all agree that resources, whether they be government or industry, are limited at this time and must be used as effectively and efficiently as possible. Canada's competitive position is hindered every time non-uniform or inconsistent legislation is introduced.
Although the government has stated that funding for the wage protection program will come from the consolidated revenue fund, we want to reiterate the importance that no employer tax or payroll tax be established to fund the program in the future. To do so would be detrimental to the economy of Ontario by making it even less competitive, resulting in fewer jobs for Ontario workers. Almost all jurisdictions with which we compete offer a far more competitive tax environment.
Further, although we support the program being financed from the consolidated revenue fund, we do not endorse the increased deficit to do this. Rather, the government must prioritize its initiatives and programs to determine which will be funded and which will not. Again, this emphasizes the importance of conducting a proper cost and benefit impact analysis, as Ontario cannot afford to finance all government goals and initiatives.
We emphasize this aspect on funding because of a comment made by Minister Mackenzie in his July 18, 1991, letter to the CMA. He stated: "The employee wage protection program will be financed through the consolidated revenue fund. The Treasurer has announced that there will be no new payroll tax for the first eighteen months of the program." At no time in the future should the government introduce an employer or payroll tax to fund this program.
The government must limit the coverage to wages and vacation pay and exclude termination and severance pay from the wage protection program. Job losses should allow employees recourse to the wage protection program for unpaid wages and vacation pay, within limits. Employees could then avail themselves of unemployment insurance benefits.
With regard to the coverage, the CMA's position is that it should only protect wages for two weeks or two pay periods, whichever is shorter. If an employee wishes to work for a longer period without being paid, he or she does so knowing that he or she may not receive additional wages. The employee voluntarily assumes such a risk, and therefore that period should not be protected by the wage protection program. The $5,000 limit is too generous and should be reduced as there is a risk that thousands of additional jobs would be lost permanently because of the high cost of doing business in Ontario.
Ian Howcroft will finish the formal presentation.
Mr Howcroft: I would like to state that we were pleased to see that the officers' liability was removed from the original version of Bill 70 and that the directors' liability was also limited. However, we feel that directors' liability should be removed from the employee wage protection program entirely.
Companies that are facing financial disaster need competent and qualified directors with the requisite experience to perhaps salvage the enterprise. Providing for directors' liability creates a major disincentive to attracting qualified people to these positions. The government should do all it can to encourage such persons to assume the role of director and to turn the enterprise around and make it a viable and profitable business. The only solution to closures, layoffs and unemployment in general is a public policy environment that encourages investment in machinery and equipment, which in turn retains and creates jobs in Ontario. Directors' insurance not only adds a significant additional cost to doing business in Ontario but is unaffordable or unavailable for marginal companies.
To conclude, the CMA recognizes the importance of employees' rights or entitlement to earned wages. We can support the government's objective in pursuing this goal with our aforementioned caveats and concerns. Given current economic realities, the government must ensure that all legislative and policy initiatives pass the competitive impact test. If a policy will do more harm or be detrimental to the province's competitive position, it should not be implemented. This will require the government to do more background studies and have more proper and meaningful consultations.
It is hoped that these comments will help the committee in preparing its report. Major improvements were made, but there is still room for more.
We would be pleased to answer any questions the committee has on our comments or any other related matter. Thank you for your attention and for allowing us to make this presentation.
Mrs Witmer: Thank you very much for your very informative presentation. I hear you say that you support the concept of wages. What is your opinion then on the rest of the package? I did not hear you supporting vacation pay either.
Mr Howcroft: No. Wages and vacation pay should be covered by the wage protection program. Termination pay and severance pay should not be covered.
Mrs Witmer: Could you just tell us why?
Mr Howcroft: Just because of the current economic climate. There is only so much we can afford, recognizing that employees who have worked for a period of time should have their wages protected to those limits, but there is just no way we can afford to cover termination and severance pay. That is too exorbitant a cost right now, especially given the current economic situation.
Mrs Witmer: You also mention that you felt the $5,000 maximum was too high. Obviously, if you were only to cover vacation and wages, that certainly would not be necessary. What figure would you be looking at?
Mr Howcroft: With regard to wages, we have suggested that it be for two weeks or two pay periods, whichever is shorter. If someone wants to work longer than that, he voluntarily assumes the risk. They recognize that they are not being paid, the enterprise may or may not be successful and therefore they do that with full knowledge. Therefore, wages should only be covered for the first two weeks and then after that they can make up their own minds whether or not they want to continue with that employer.
Mrs Witmer: So rather than setting a maximum such as $2,000 or $3,000, you would base it on the two weeks.
Mr Howcroft: For the wages, yes.
Mrs Witmer: What about the harmonization with the federal government? How do you believe the province should proceed as far as the introduction of Bill 70 is concerned? Should they do it alone before the federal government passes their legislation? What is your opinion on this?
Mr Howcroft: We would like to see as much harmonization as possible. If that means delaying it for a time, that should be done, just to make sure that the two systems will mesh together as closely as possible. As we stated, to have duplication or unnecessary bureaucracy is going to be a waste of limited resources. Therefore, all should be done to make sure that the two systems do mesh together. I know there have been conversations between the Ministry of Labour and the federal government. Those should continue and that should be the determining factor: if the two systems can work together. That should be the timetable, not an artificial legislative agenda.
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Mr Offer: Thank you for your presentation. On page 5 you talk about totally removing directors' liability. As such that would shift all potential liability to the consolidated revenue fund, which would of course be the taxpayers of the province, and I think in fairness what you have said is you want that to be limited. One of the things I have seen under the legislation is that all directors of a particular company seem to be grouped together. I do not believe that is always the case; there are directors who have more of a control of an interest in companies and in their day-to-day operation than others.
Do you believe, which is not in this legislation, that there should be some right of directors to argue before a board or whatever that they in their capacity have exercised, for instance, a standard of reasonable care which would exempt them from liability? I know that somewhat goes against what you have stated, because you have wanted all directors to be totally exempt. In the event that does not come about, do you feel there should at least be a provision in the legislation which gives directors of a company who may be potentially liable in a personal sense for a great deal of money the opportunity to say, "I have in my role as director exhibited a sense of reasonable care and for me I would ask for exemption"? Do you believe that at the very least should be found in the legislation?
Ms Wade: Certainly our first stance is that we would like all directors to be exempt. The reason for that is that it becomes increasingly difficult to encourage directors to come to the board with this type of onerous legislation, so certainly that is the preference. I think the problem you have -- although I suppose if it had to go through the way it did it would be nice to have some recourse -- is how you establish to what level the director had knowledge and so on. I think we could get into a real quagmire, and that is why we feel very strongly that the directors' liability has to be removed.
Mr Howcroft: It would also increase the bureaucracy if someone had to determine whether reasonable care or due diligence was exercised by an individual director in each case. To avoid that we are strongly advising that all directors' liability be removed from Bill 70.
Mr Offer: Part of the legislation speaks to the regulation-making power. It says the ministry would be able to prescribe other payments that are wages for purposes of this legislation and also provide for increases in the amount of compensation which the program can pay, and this is stated to be regulatory power. Is it your position that this is fine as regulatory or should it be through the legislative channels -- in other words, able to go through the Legislature and have the ability for public input and comment?
Mr Howcroft: Probably through the Legislature, given the impact you could have, because costs could skyrocket if it is just left to regulation to be passed without proper public debate.
Ms S. Murdock: Just a point on the directors' liability again: Jan, you said the liability of the directors is too onerous under Bill 70, and I am wondering how you see it as different under the present liability that directors have under the Ontario Business Corporations Act in terms of your argument being that it is going to be much more difficult to attract directors to sit on boards because of this onus they will have under Bill 70. What I am saying is that under the OBCA they presently have that liability, so attracting them is not a problem.
Ms Wade: I guess my understanding of the act puts the directors' liability here -- certainly more onerous, easier access -- and the people whom we have talked to in the business world certainly perceive it as being far more onerous than it is today. I do not pretend to be an expert on the act but certainly it is perceived as being more onerous. To that extent we see that people coming to the board are going to have second thoughts and it is going to limit the people we can attract. Attracting people to the board of directors now becomes increasingly difficult. As every company is consolidating and trying to compete, there is a time element, there are a wide variety of elements, and this adds to it.
Ms S. Murdock: Prior to becoming an MPP I sat on boards as well and had directors' liability insurance, depending on which board it was, of course, and how much money they had, but the thing was that there is such a thing as directors' liability insurance and that would cover them under this.
Ms Wade: It does and I think what we would see with this type of legislation in lieu of or as an add-on to the current legislation is that the cost of that liability insurance would probably increase very dramatically. Particularly for the smaller companies it would be very difficult to continue.
Mr Howcroft: Marginal companies that are already having a difficult time carrying on business are going to have to add the cost of insurance for the directors. That could be just another added cost for doing business in Ontario and could force them over the edge.
Ms S. Murdock: If the liability under the Ontario Business Corporations Act was different, then I would agree with you partially, but my understanding is that it is not and therefore there is no additional liability other than what is already asked for under OBCA. I have no further questions.
Mrs Witmer: I have one additional question. You mentioned here that Ontario is already overlegislated, overtaxed and overregulated. Bill 70 I believe has had a serious economic impact on business in this province. I have seen it in my own jurisdiction of Waterloo. I know of at least two businesses that decided not to expand because of the danger of legislation such as this and the impact it might have. I would like to hear from you of examples of things that you know businesses have done because of the potential impact of Bill 70.
Mr Nykanen: I think it falls into the same category as a lot of the other legislative initiatives we made reference to. If we take a look at manufacturing in Ontario, we have been in a recession since May 1989, so it has been a long, tough row. The other factors that have impacted on it, of course, are that we are now subjected to a tremendous number of aggressive global competitors and there has been an ongoing restructuring on a global basis.
One must recognize that manufacturing plants are fairly mobile. If you take corporations that have Canadian operations, and with the recession on a worldwide basis, if you have excess plant capacity in other jurisdictions where the costs are less or it is a lot easier doing business than in our province, decisions are going to be taken to either shut down or not expand or create additional investment in that particular location. So the impact of this, along with the cumulative effect of all the other initiatives, has a severe impact on our ability to compete. That relates directly to closures, layoffs and unemployment and causes Ontario the problems we are in right now.
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Ms Wade: If I could just speak a little from some personal experience, certainly I would agree with Paul that we are seeing businesses, as you have said, move out. The almost bigger concern, I think, is the lack of expansion and new business not coming into Ontario. Just within my company alone in the last year, we have closed our oldest plant in Toronto and moved business to other facilities both in Toronto and in the United States.
We see all our customers looking at their business, rationalizing their finance, trying to utilize their assets as well as they can. With the trade agreement, we are seeing that plants in the US have additional capacity and are able to supply the Canadian market with product. We have seen that happen just in our existing Toronto facilities where customers are pulling business out and taking it back into their US plants because it is cost-effective. They too are looking at rationalization and they get better utilization all around, and it is ongoing.
As we sat through the part of the presentation before us, there was the comment that we have had a lot of legislation before and employers will get used to it. Well, now is not before, and the times have changed. Between the globalization and the tremendous competition we are seeing from the south, I do not think we can compare with five years ago or 10 years ago. We are living in a different world.
Mrs Witmer: I appreciate that comment. Thank you very much.
Mr Howcroft: Also, the previous presenter said employers were fearmongering. Since May 1989, approximately 250,000 jobs have been lost in the manufacturing sector. That is a fact. That is not fearmongering.
Mrs Witmer: I am finished.
Mr Huget: Thank you very much for appearing this morning and providing a very good presentation. Would I be safe in assuming that you support the principle of wage protection? Would you agree to that?
Mr Nykanen: Yes.
Mr Huget: In page 2 of your proposal you say that "Employees who have worked for and have earned their wages have a right to these moneys." Then you go on to say: "However, the extent of this right must be balanced against the greater right of society." Could you explain to me what that greater right might be?
Mr Nykanen: The funding, of course, relates back to the general fund and if there is unlimited access to large amounts of money, the responsibility for this is going to rest on the citizens of Ontario who are paying taxes. It has to come from someplace. That is one impact as far as the impact on society is concerned.
The other thing is that with the additional cost components, as I mentioned earlier, we have significantly higher taxes than our competing jurisdictions, this is going to add another cost component to doing business within Ontario, which in turn is going to cause a reduction in investment and that is going to cause a further loss of jobs. That has a greater impact on society than what we are dealing with here, so we are saying there should be a balance between the wage protection fund and the other impacts. In other words, all legislation, before it is actually put into effect, should be subjected to a competitive cost-and-benefit analysis to understand fully the implications as a whole.
Mr Huget: Are you aware of how much of a burden on our current society people are forced to place on the economic part of our province by having to still stay alive and not be able to collect money owed to them in back wages, severance pay, vacation pay or termination notices? Would you agree there is some burden on society at this point because these people cannot collect money?
Mr Nykanen: There is a tremendous burden on all citizens during these recessionary times. Certainly we would agree we are facing a difficult situation right now and many citizens in Ontario are suffering, as are businesses. Profits are down, investment is down, consumer demand is down; these are all direct impacts on society.
Mr Howcroft: The Ministry of Labour's own estimates are $175 million. That money has to come from somewhere and you cannot keep having an escalating deficit and still go on indefinitely. Where would you suggest the $175 million come from -- existing programs that are supporting people on community and social services? It is limited. We support the principle, but there have to be limits.
Mr Huget: Would you say that --
The Vice-Chair: Excuse me, Mr Huget. We are out of time and I do not want to --
Mr Huget: I apologize, Mr Chair. I thought we had more time.
The Vice-Chair: No. We are gradually getting longer and longer. I wish to thank Ian for coming and bringing the concerns of the Canadian Manufacturers' Association. It will help us in our deliberations over the next few weeks when we are dealing with this bill. Thank you very much for your presentation.
MORE JOBS COALITION
The Vice-Chair: I will ask the More Jobs Coalition to please come forward and introduce yourselves for the benefit of Hansard and those of us on the committee. One of the things I would ask, not only the presenters but some of us on the committee -- we do get a little lax -- could you please sit forward and speak into the mikes? Some of us have a tendency to lean back on the chairs and it makes it very difficult for Hansard.
Mr Kerry: As chairman of the More Jobs Coalition, we are very pleased to have the opportunity to meet before you today to discuss Bill 70 and the need to create a receptive climate in Ontario for job creation. My name is Dale Kerry. I am vice-president of human resources of Jannock Ltd, and I am joined today by three of my colleagues on the committee. On my extreme left, Susan Tanenbaum, who is sales manager of Locpipe Ltd, located in Whitby. To my immediate left is Mr Cal Balcom, manager of human resources at Snap-On Tools in Mississauga, and to my right Mr Graydon McNair, manager of human resources of Drug Trading Co of Scarborough.
The More Jobs Coalition was formed in May 1991 with the objective of providing the government of Ontario with constructive input from employers on Bill 70 and on potential changes to the Ontario Labour Relations Act and the Employment Standards Act. We are very concerned that changes to Ontario's workplace laws could seriously undermine the province's ability to maintain existing jobs and to create new employment opportunities.
The More Jobs Coalition is comprised at present of approximately 30 small, medium and large-size companies located throughout Ontario. Our companies represent approximately 50,000 jobs and cover virtually all of the employment sectors in the province.
Canada and Ontario are experiencing profound economic restructuring as a result of global economic changes. The restructuring of Ontario's economy and its industry base has been increased by the depth and the severity of the recession. During the 1982 recession, many of the job losses were temporary. Unfortunately, many of the job losses, in fact the majority of the jobs lost in the current recessionary period, will never be restored.
Our coalition is very concerned that this trend is going to lead to permanent long-term levels of unemployment, and we believe if the crisis is not addressed immediately the quality of life enjoyed by the residents of Ontario will decline.
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We believe the government of Ontario must act quickly before more jobs are lost. Our coalition believes it is imperative that employers, employees and the government co-operate to ensure that Ontario maintains a receptive climate for preserving existing jobs and for creating new employment opportunities.
The coalition is concerned that initiatives that would dramatically impact the employer-employee relationship in the province could undermine our ability to compete internationally as well as our ability to preserve jobs in Ontario and continue to contribute to Ontario's high quality of life.
The coalition is comprised of companies that are committed to a future in Ontario. We are not voting with our feet. We are not moving to other jurisdictions. However, many of our customers are, and some are being forced to close. If the trend continues, many more companies may be forced to close or reduce their operations.
We are therefore appealing to the government of Ontario immediately to undertake policy initiatives which strive to create an environment which encourages job creation instead of designing ad hoc solutions to manage plant closures and economic decline.
The More Jobs Coalition supports the concept of a wage protection fund. We recognize the need to protect the wages that have been earned by workers.
We do have a number of serious concerns, however, about the employee wage protection fund as proposed in Bill 70, and we believe there are some issues that have been ignored or left undefined in the bill. We would like to see these issues resolved by your committee prior to the implementation of Bill 70.
The issues of concern which we discuss in more detail in our formal submission include the uncertainty that is created by the use of retroactivity, the somewhat vague definition of the term "wage," the ability to increase the level of compensation covered by the wage protection fund through regulation rather than through legislation, and the lack of a long-term funding mechanism to support the wage protection fund.
Our coalition's biggest concern, however, revolves around the restrictive and very limited consultation process which led to the development of this bill in the first place.
When the bill was introduced, its extreme nature relative to significantly increased manager liability and its retroactivity sent shock waves through the business and financial communities. The introduction of the legislation in its initial form without extensive consultation has undermined business and investor confidence in Ontario.
Our coalition is very concerned that the government may be planning to undertake other labour policy initiatives in a similar fractious and confrontational fashion. We do not see a limited consultation process coupled with a confrontational debate and legislative change after legislation is introduced as an effective approach to improving employer-employee relations.
Before initiating any changes to other labour legislation, our coalition will call upon the Premier and the Minister of Labour to undertake a comprehensive and meaningful consultation process. We believe the process should be province-wide and should seek input from all regions of Ontario.
Changes to Ontario's employee-employer relations will have a profound effect on Ontario's economic and social health through the turn of the century. We would urge you to proceed with the utmost caution to ensure that our employees and their children do not suffer due to the mistakes made today.
To ensure that future changes to employer-employee laws recognize the needs and concerns of all of the stakeholders, our coalition proposed the creation of functional longer-term working groups to be put in place to ensure a wide-range consultation on potential changes to the labour legislation in Ontario. We believe that such working groups could play a required role of understanding and identifying needs before proposing solutions.
Recently, many organizations have put forward proposed solutions in the field of employer-employee relations. However, the More Jobs Coalition is very concerned that these proposed solutions have been put forward before the needs and the problems have been clearly identified. Without first identifying the problems, how can we co-operate to find viable and beneficial solutions?
Our coalition believes that the examination of specific reform initiatives at this time is premature. We believe that this comprehensive consultation process to identify needs and problems should be linked with government initiatives to develop strategies for specific industry sectors.
The More Jobs Coalition is very interested in ensuring that the ad hoc approach to consultation, which led to the development of Bill 70, is not repeated in other labour legislation. The risks are simply too great.
In conclusion, I would like to say that you, as legislators, have the power to ensure that an environment receptive to job creation is created in Ontario. We would call upon your committee to send a strong message to the Minister of Labour and to the Premier that future initiatives must be designed to create jobs and to lessen the burden on the unemployed, and we seek your support in this endeavour.
We also ask your committee to send a strong message to the Minister of Labour that a comprehensive consultation process is required before future labour legislation be introduced.
Thank you very much for your time and for the opportunity to address you.
Mrs Witmer: Thank you very much for your presentation. I am really quite intrigued by the proposal that you have just discussed regarding consultation. I would certainly agree with you. There needs to be a comprehensive consultation process. Unfortunately, it was not done with Bill 70 and, as a result, the legislation was badly flawed because all of the partners were not considered and the views listened to.
When you talk about that, who do you see selecting the participants? Do you see the Ontario Ministry of Labour, government, selecting the participants in these types of working groups? Would they be regional? How do you see that structured?
Personally, I think it is an excellent idea because I think there needs to be much more ongoing dialogue. This morning we have listened to two points of view and I can see there is a basic lack of understanding among people in this province, depending on whether you are the employer or the employee. I think we need to start looking at how can we reach a compromise. But how do you see these being set up, on what type of a basis?
Mr Kerry: Most labour relations, most employee-employer relations in the province are conducted in a perfectly amicable fashion. The 1% or 2% that is not amicable gets into the press. The 1% or 2% that is not amicable is why the lawyers get hired. But provided that the government of the day genuinely wanted a balanced and realistic view of the ongoing practices of labour and employee-management relations and wanted an honest and balanced analysis of areas of efficiency and areas requiring change, I do not think the government would have any difficulty finding all sorts of people of quite good will who would be quite prepared to bring their knowledge to the sort of input that I suspect would be beneficial to legislators.
I think we would have no difficulty with the government making the choice. However, I would say that if you start from the perspective that one or another group is not genuine or is evil or is something else, then I think you are going to end up with an ineffective committee.
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Mrs Witmer: Well, if we take a look at the upcoming labour law reforms that are being proposed, how would you suggest that this be dealt with in order that all opinions be listened to and considered and heard? What type of consultation process?
Mr Kerry: The process to date has been virtually invisible. A few members of the union movement and a few lawyers representing management.
Mrs Witmer: That is right. Three and three.
Mr Kerry: Yes. That was not a very good process, and I would like to say why I believe that. The labour lawyers on the committee are all fine people, but they do not represent management. They are not, as these people are, trying to run businesses day to day. They see a small fraction of labour relations when there is an arbitration, when there is a strike, when there is something requiring the process of law, which is a very seldom thing.
I would think one of the things to consider would be to have representatives at the shop floor level. They may not have a whole lot of legal knowledge, but they certainly know how business works. They know how people interact in business settings, and they know the sorts of things that create good and bad kinds of situations. So I would suggest, as a first step, that we look at the people who are actually doing this work day-to-day right at the shop-floor level. I think we would gain from that a much better appreciation of what the true situation is.
Mrs Witmer: Would you like to see a draft document originally that you could respond to before any formal legislation is introduced?
Mr Balcom: I think so. Obviously there have been a lot of, I guess, perhaps even rumours around about potential labour reform, and not to really go down that road, because I think it is a waste of time at this point. But certainly we would like to look at a draft document and then sit down and begin the process that Dale has outlined.
Mr Offer: Thank you for your presentation. You covered a number of points in the brief presented. I know it anticipates the movement of government amendments and I think your position is quite clear that those amendments, as previously announced, must be moved and in fact accepted, as well as some other things that have not yet been addressed.
I note that you have spoken about needing assurances from Labour and Treasury that a new payroll tax will not be created. Those questions in fact were asked yesterday. Those assurances were not received, so I think this is put aside.
During this first morning of hearings, we have heard a wide variety of opinion on this legislation principle and certain aspects of it. I think that goes to make the case that there are many people who are concerned with aspects of the legislation and want to share their thoughts and opinions with us. Certainly we thank you for taking the time to do so.
Under the legislation, I would just like to get your thought, because it is clear that the principle of wage protection is accepted in this brief, but the legislation goes further. It is something I have been grappling with in terms of the legislation. The wages and vacation pay are potentially received through directors. There is a liability to directors for wages and vacation pay. But, in addition, under the legislation, workers may also have their severance and termination pay, or part of it, paid for by the taxpayers of the province, because that is where it is now paid. It is paid out of the consolidated revenue fund, and that is what we are left with here. We have no assurances from the minister that it will or will not be changed.
In fairness. I think there is a principle that we have to come to grips with in this area, and that is whether this legislation should potentially foist an obligation on the taxpayers of the province to pay a portion of termination and severance pay. No matter how right that may sound, we have to ask in principle: Is that what this legislation should do? Should this legislation be not labour legislation but social legislation? I am wondering if you can share with us any opinion you have on that issue.
I have a second point actually if I might, while you are thinking about that, with respect to the directors' liability: Do you see that this may be an impediment to people agreeing to be directors of companies? We know there are directors of companies who share, who come from other countries. They stand on boards of directors, they may not take a day-to-day operation, but they provide a certain expertise, they provide a certain enhanced competitiveness. My second question on that basis is: Do you see that this legislation may provide a barrier to those people standing as directors for companies in this province?
Mr Balcom: Perhaps we can divide this up. On the directors' part of it, I am not sure I am the best resource. Perhaps Dale can answer. We have had the opportunity on sitting in on pretty well all the presentations this morning. Where I as an individual would disagree with the CMA -- they made the comment that they did not want to see a payroll tax, and certainly we do not want to see a payroll tax either -- I am very concerned when you talk about general funding. To sit here and say, "Let's not have a payroll tax, but it is okay for the taxpayers to foot the bill," I have a deep concern about that also. Again, perhaps in your roundabout way of getting to the question, I think you did make the statement about an unlimited liability. Obviously we are very concerned about that, deeply concerned. In Dale's remarks we are not against the idea of wage protection and vacation protection. I guess it really comes down to what we as a province can afford versus what we would like to extend to all the taxpayers or to all Ontarians. We would love to see it go well beyond that. Obviously we cannot afford that at this point. That is pretty well where we would be coming from.
Mr Kerry: There is perhaps a small side point to be made, on which I am expressing no particular point of view except to say that it would seem to me your committee should grapple with the question of whether legislation is confined to the payment of wages earned, which would include wages for time spent on the job and vacation pay and so on, and/or whether it should expand from that definition to the payment of things not earned but sitting there as entitlement in law under certain eventualities. For example, severance pay and notice are not moneys that have been earned, in my definition of the word. Do you see the distinction? I am not too sure how the committee should deal with that, but I think it is a distinction that has some bearing upon the strategical thrust of your bill.
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Mr McNair: I think there is one other thing that should be brought out. If we had had the consultation process, a lot of these questions and a lot of this time would not be spent now because it would have been resolved long before it got to this point. So I think we are just going back to the same thing. We need the consultation process. It has got to be part of the system. No matter what government is in power, we need that consultation process.
Mr Kerry: Can I try and answer your second question, Mr Offer?
Mr Offer: Sure.
Mr Kerry: It is our belief that, yes, this sort of legislation, while not necessarily in and of itself creating a problem or not creating a problem, is part of a larger framework of legislation. To the degree that a director is singled out as being liable under certain eventualities, then yes, it is very much of a deterrent.
As an example of that, I can use the concept of director liability under environmental law. Our directors are very concerned. They have responsibilities in law to exercise, and I have forgotten the words, but certain standards of care and caution and due diligence and things like that, and they ask very nasty questions of people like me about whether we can assure them as directors that we are abiding by good environmental practices. But I think we all have to work to these kinds of high standards, and when the director is singled out, he says, because I think business operates as much on perception as it does on fact: "What's going on here? Why I am being singled out for a particular thing here? I have to meet certain standards, and why should I, in order to hold what is not much more sometimes than a sinecure, put myself at this sort of increased risk?" Somebody says, "Really, you're not at that much of an increased risk," and he says: "Oh? Show me." You cannot really show him. You do not know what is going to happen under certain eventualities.
To take that one step further, a large company that is successful can get directors' and officers' liability insurance if it wants to. But what about the smaller companies, and the ones particularly that are in trouble? Those are the ones that desperately need the strongest directors, and no insurance company in its right mind is going to sell directors' and officers' liability to a company that is in danger, because effectively the insurance company, I think, looks upon it as selling bankruptcy insurance, and is not very pleased to do that.
A director is at risk in many different ways, and this legislation, I would suggest, even adds a little bit to the risk of the individual business. In fact, it may add a whole lot to the risk of the business, because the smaller companies and the ones that are struggling really desperately need the best directors they can find. Even large companies nowadays are having a hard time finding good directors. For the small ones it must be terrible.
Mr Klopp: You talked about overregulation on page 6. It is my understanding that it was the Ontario government that first came up with an idea of a wage protection plan. It kind of looks in here as if it was us that thought of something after the federal people made their announcement. I am under the understanding that it was us that made the first salvo. Are you aware of that?
Mr Kerry: "Us" being the government?
Mr Klopp: Yes, the government of Ontario was the first one to make a suggestion that we are going to have a wage protection fund in Ontario. This makes it look like -- it says here, "We are very concerned that the government of Ontario believes that it must introduce a similar wage protection." It was us, the provincial government, that first --
Mr Kerry: Yes.
Mr Klopp: Okay, you are aware of that. Are you aware that in the past 25 years the federal governments over time -- I believe the number is seven -- have seven times said they are -- they have discovered they are going to help somebody, somehow, or whatever, made movements or noises. Are you aware of that?
Mr Kerry: None of us was aware of that until about 10 after 10 this morning.
Mr Klopp: Well, there you go. These are things that we read after, though. I just wanted to make sure I was not wrong. Heaven forbid if the Minister of Labour informed me wrong yesterday when he was here.
In regard to this legislation, the directors' part, in my understanding, is exactly the same as what is there now.
Mr Kerry: That is what I understand.
Mr Klopp: So listening to your comments -- I get older every day, so there is always something more added on to my pressures and my life. But I think it should be clear that this program is exactly what, perceived or otherwise, is there. I want to make that point.
The point about the taxes, I think you are very fair on that, to go on both sides, and I commend you on that. The minister the other day, when asked, "What are limitations?" I think he was very fair and very open to say, "One of the things we have to look at is how much taxes." Taxes are taxes, whether it is payroll or whatever, and I think, in all fairness -- and in fact the minister I think mentioned that too. He said the members of government are not immune to public pressure, especially nowadays. It seems that nobody wants taxes no matter what. Even if your taxes did not go up in the last budget, everybody is going around saying, "My taxes went up, my taxes went up." Of course, they compare us a lot to the federal government, which is unfortunate, even if you are a Conservative in Ontario.
The shock waves that you talked about, I think a lot has to do with the Ontario Labour Relations Act, which seemed to be a big shock wave in my riding. Ironically, when you talk about open consultation, the minister asked labour and business to get together and they wrote two reports and then both groups, I think, ran with the other one. In fact, one guy in my riding said, "So you passed legislation," and they brought this up to me. But I am glad you pointed out that it has not gone that far. All it is is those two reports and he is consulting. I am informed that he has roundtable meetings with organizations. Are you aware of this? Maybe none of your groups were invited to this roundtable. I would hope that you were.
Mr Kerry: We have asked to be represented.
Mr Klopp: Okay, because it is very important, as one who believes in consultation. I believe he has 38 organizations and I hope you can get on it, because I do truly believe, as you pointed out, you do not vote with your feet and go and Sunday-shop across the border, and I appreciate that. I just wanted a couple of those points made to help me in reading this.
Mr Kerry: I would just like to reinforce one point, which was that the original three-and-three committee, in our estimation as a group, did not fairly represent management, because the representatives on that committee from so-called management do in fact see a side of labour relations that is a management side, but they only see a very small portion of what is really happening.
The Vice-Chair: Mr Huget, quickly.
Mr Huget: Thank you very much for your presentation this morning. I was particularly interested in the comments you have made in terms of the grass roots, if you will, of management and labour on the job floor starting to deal with some very important issues. I think it is crucial that we find some different ways of doing things. Having had an experience of being both an employer and an employee, I know there are sometimes conflicting interests there. Quite frankly, I doubt that there will ever be a case where everything is meshed, but certainly we can work a little bit harder to do that.
I want just to elaborate a little on my colleague's point in terms of consultation. I believe this government, and in particular the ministry, has gone to some length to consult with all groups on this particular bill to try to get a good cross-section of opinion here. On this bill it is my understanding they have consulted with 38 different groups. There were business groups, labour groups, community groups, and if in fact that message is not getting out to the small business community, then we need to take a serious look at how we are communicating that willingness to consult. I appreciate your bringing those points to the committee so that certainly we can take them in a positive light.
The Vice-Chair: Any other questions, quickly? Hearing none, I thank you very much for your presentation. Like everyone else here, if your group has been overlooked, I would hope that the ministry in future does include you in its consultation process. Thank you again for your presentation.
Unless I hear some other reason, I would entertain a motion to recess until 2 o'clock.
The committee recessed at 1210.
AFTERNOON SITTING
The committee resumed at 1411.
PHILIP HOWES
The Vice-Chair: I call the meeting to order. I would ask that Mr Howes come up and make his presentation. Just take a chair at the front.
Just to give you a bit of warning, for Hansard's purpose you have to sit up when you are speaking into the mike. Some of us have the tendency to get lazy through the day and start leaning back, and we have to remind ourselves. So I remind everyone that they have to sit up in order for Hansard to hear them.
If you are ready to start your presentation, please do so.
Mr Howes: First of all, I would like to thank the committee for allowing me to come and make this presentation. My name is Phil Howes -- Philip when you are mad at me. I am the president, co-founder and major shareholder of a company called McLeod House Equipment Ltd. We are a Canadian-controlled private corporation, incorporated in 1976. We are currently in our 15th year of operation.
McLeod House is a small chain of rental, retail and distribution stores located in Metropolitan Toronto. We currently have three locations; a year ago, we had five. We employ 25 people; a year ago we employed about 48 people.
The shareholders of McLeod House include three others who are party to an agreement which could or could not be called a unanimous shareholders' agreement, depending on how you interpret it. One of them is a widow of a former shareholder and a former director, and there are five non-participating preferred shareholders. I have three directors on my board, including myself, one of whom is a schoolteacher who has been a shareholder since 1984 -- he is not active at all in the business -- and one who is my vice-president, who has been employed with the company since 1977 and became a shareholder in 1979. Actually, he was elected to the board of the last shareholders' meeting but has basically refused to serve until he has determined the outcome of this debate. I also have a certified general accounting degree.
I know that the members of this committee, because you are all members of the Legislature, and the employees of the ministry who drafted the legislation, have a sincere desire to make sure -- and I would like to quote the minister from Hansard -- "that the people of Ontario know they are assured of receiving the money they have worked for so they know they live in a society based on fairness and co-operation." These are values we all wish to see accomplished, without question.
From an employees' point of view, they may often find themselves in situations where they feel they have no real control over the work situation. That has to be stressful. In some cases I am sure they feel that rules and procedures are and can be changed at whim without consulting them, and that attacks people's sense of security, especially if the changes affect the rewards and recognition systems an entity has. It is difficult for people to work in situations where they do not feel they have security. People want to feel rewarded in what they do. They want to feel they have made a contribution to a successful entity and will be rewarded for that contribution, and they certainly have a right to get paid for their time.
As I understand it, that is why we have an Employment Standards Act, to fulfil these needs, to make sure there are acceptable minimum standards regarding the basic employment agreement; financial standards to give employees a basic sense of security; that certain fundamental rules cannot be changed or ignored; to make sure they are treated fairly; to give a sense of recognition in the investment they make to a successful company and to reward them for those efforts, and to make sure there is a course of action or recourse if they are not treated fairly.
I am here today because this committee is considering proposed legislation, Bill 70, which enhances the Employment Standards Act to provide for an employee wage protection program and to make certain other amendments. Basically, there are two parts to that phrase and I would like to deal with them both.
The first part is the employee wage protection program. There is a need for some sort of wage protection plan to protect employees of firms that become insolvent or go bankrupt. Why? Because we are in a recession and it is severe and it is a lot worse than the last one and it is not over yet, despite what you read in the papers. Frankly, I think what you are getting told in the papers, that it is over, is being printed by the same people who told you last year that it had not started. There is high unemployment. The construction market in the city of Toronto where I work is down 36% this year; it was down 20% last year; 56% combined is a lot. There is real economic hardship out there. People are losing their jobs. People are watching their unemployment premium or window come to an end, and people can and are losing their businesses.
It is serious, so we have an employee wage protection program. What does it cover? It covers a broadly expanded definition of the word "wages" compared to any other legislation out there. It covers regular wages and overtime, which is fine. It covers vacation pay for up to a year; that is fine. It covers termination pay. I do not know if that is covered under other legislation. I am not that well versed in it. It covers severance pay.
The minister says severance pay should be considered compensation to recognize the investment they have made. I have sat across the table from investors, and when it comes right down to it, investment is what you put in in cash, and if a business fails, you lose it. They understand that, as investors, so I frankly question that.
It covers equal-pay adjustments, if required, and finally it covers such other amounts as may be prescribed by regulation. I do not know what that means, and I do not know what regulations are and I do not know whether that means there has to be a public process or not, but frankly, it concerns me a bit.
How are we going to pay for the program? While the initial expected cost was to be $175 million in the first 18 months, our government has indicated that will come out of general government revenues, which is the stated intent. You could argue that that penalizes the regular working contributing taxpayer, but alternatively I guess you can use the payroll tax. You could argue that penalizes successful businesses to support the failed ones. I do not know.
What I do know is that the next part of the act, "and certain other amendments" -- I do not want to seem presumptuous here, and I am sure it was not intended to appear this way, but I honestly think that those four words are misleading. I think they are deceptive, and the perception from my perspective is that they were in fact intended to obscure some of the most damaging changes in rules, without warning or consultation, that I have ever seen. It does not make me feel like I live in a society based on fairness and co-operation.
If I can use an analogy, as MPPs you all are here and you all have this position because you are people of responsibility and authority and you have a sincere desire, I believe, to contribute to society. You are not doing it for the financial rewards because they are not that great, and you are basically willing to live and abide by the same rules you expect others to live by. In your responsibility as an MPP, you approve a submitted business plan for the government. In this case -- and I do not mean to criticize, that is a whole other discussion -- we have a submitted business plan which projects a large deficit, because you have legitimately felt this is the best alternative available. In performing your duties as an MPP, you have considered the business plan, based on the economic realities as you can best predict them. You have considered the risk and the potential criticism and you are prepared to defend your position.
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But what if it does not work? What if the revenues are less, just because there is a larger slump than was anticipated? People do not spend money so there is no consumption tax. Because they do not spend money, there is no personal income taxes or corporate income taxes. At the same time, the budgetary increases you have planned for go on, but you also have higher transfer costs to pay for some of the social programs in place and higher health costs as people deal, I think, with the stress of the situation. The net result is you have a much larger deficit than you originally thought.
What happens then? Quite often, your borrowing costs all of a sudden start to go up. Some lenders refuse to extend credit and just want their money back. Others will continue to support you, but only if you give them additional security of some kind, like a personal guarantee. Maybe you will give it to them. Maybe even some of them insist, and this has happened, that you make cutbacks or maybe lay off people in order to make sure you can continue.
The point of the analogy is that as an MPP, I believe you are effectively on the board of directors of the largest employer in Ontario, where people are probably hired and fired or laid off every day without your direct knowledge. Suppose you pick up this morning's Globe and Mail. You find out all of a sudden that you are personally liable for an indeterminate amount of unpaid wages, according to a new definition, and that the demand can be made upon you without having to go through the company or the government, that you are liable for retroactive liability that goes back about 10 months. Or, if you are removed from office in the next election and the next government comes along and decides it has to make the cutbacks, you are still liable; you can be on the hook for two years from an indeterminate date, basically for ever, as I read it. If you are called upon to meet this liability, which clearly is going to be unlikely to happen unless there is severe financial difficulty and you are already in trouble, you can be fined up to $50,000 if you cannot. If you go bankrupt, that does not go away.
Of course, when you cannot obtain the insurance because you just cannot, I do not think you would feel that was fair or co-operative, but that scenario is exactly what has happened to the small business sector of Ontario with Bill 70. This bill, I believe, imposes exactly the inequities on them that the Employment Standards Act is supposed to protect individuals from having imposed upon them, retroactively without time limitation and without consultation.
I read everywhere that we generally accept that small businesses employ the greatest number of employees and provide the most flexible and rapid growth of employment in the economy and that they deserve our support. I believe this bill is unfair to small business people. Specifically, I think it is poorly written and ambiguous. I am not a lawyer, but what I read of it, I find it very difficult to determine just who is liable and what they are liable for. I really have to comment on the bill as it is, because I am not aware of what amendments are being proposed yet.
Second, the time rules, the one-year rule in subsection 40w(1), the two-year time limitation in subsection 40w(2) and the retroactive transition rules I think are absolutely unfair. It is incomprehensible to me to imagine that if you either sell, resign or are fired from a position, you can still be responsible for its activities for up to a year. You may have left because of something you legitimately disagreed with. The two-year time limitation is from an indeterminate date, as I understand it. The subsection reads:
"(2) No proceeding...shall be commenced more than two years after the facts upon which the proceeding is based first came to the knowledge of the director."
I have no idea whether that in fact imposes any time limitation at all. These facts become the knowledge of a director who knows when?
How can we change the rules after the fact and still be fair and co-operative, really? In June 19th Hansard, Mr Waters, it may have been you who said: "Business has been aware of this since last October, that it was going to be retroactive. This is going to be no surprise when the bill is proclaimed; they have been well aware and can plan for this. I see no problem at all."
I do not know how to comment on that. It is kind of inconceivable to me, because I am in business here and how was I made aware? Were phone calls made from the ministry in October telling me this was going to happen, or were letters sent? When I found out about it on May 22 after reading an article in the paper, I wrote a letter to the minister. I have not even received an acknowledgement that they got the letter. That was over eight weeks ago. I think the bill just indicates a lack of understanding or comprehension of the commitment, work and risk that small business people take. Small business people risk their personal savings and their assets in the course of financing their businesses, not just their time. They personally guarantee the borrowings. A lot of them do not qualify for unemployment insurance. They are not going to get a UIC credit card if the business fails. They are not allowed. They are usually the first on the job and the last to leave. Sometimes their businesses fail. Sometimes they lose their investment and their time and their houses.
None of the business people I know of ever intentionally set out to have his company fail, and I do know some who have had their businesses fail, who have lost their assets. Certainly none that I know of have mattresses stuffed with cash so that they can afford to pay fines. Some have gone personally bankrupt. They lose their self-esteem and they go on the verge and sometimes do have nervous breakdowns. Why? Because they had the bad sense to try to improve themselves by going into business for themselves.
Maybe they were not the best business people and maybe they had no business being in business and maybe they were the victims of other situations, economic situations, or maybe even there was a bad debt, a large one, stuck beyond their control. It really does not matter, the act does not differentiate.
From a personal perspective, I have been in business for over 15 years. I have met payroll for over 15 years, including last Friday. I have made every source deduction that is required on time. That is not always the easiest thing to do and those are the things that sometimes keep you from getting some sleep. Last October -- October 12, in fact -- I gave my own bank additional security. I placed a mortgage on my house. I encouraged my other key shareholders to do the same thing in order to secure the bank's support through last winter because we thought that would be the trough of the recession. At this point I do not think that was correct. Now the rules have changed, but the bank sure is not going to give us back that additional security.
I honestly believe the legislation as it is will make it more difficult to fund small businesses. Small businesses are traditionally funded by the banks upon the personal financial strength and credibility of the major shareholders. When the situation begins to deteriorate, you are the one they call and ask to come on down and see them and fill out a personal net worth statement and see what they can do to make sure the thing is supported. Anyone who has ever filled one out will know what I am talking about here.
I think that making these businesses a higher credit risk in this economic climate really is not what we should be doing. We need to find ways to make it easier to fund small businesses, not more difficult. The banks are willing to co-operate. Further, I think that equity investors are going to be harder to find. Whether you require capital for expansion or turnaround, I think this legislation is going to be much more difficult to obtain. I have sat across the table from venture capitalists. I have had them come into my business. They usually want to come on the board, they usually want to control it. But why should they, in this case?
I think the legislation will impair the ability of officers and directors to enjoy the very lifestyle they are working for. I honestly feel, to anybody who has ever arranged a mortgage for himself, that if you have a contingent personal liability that could stretch into the hundreds of thousands of dollars, you are going to find it very difficult to obtain even a car loan.
The Vice-Chair: Excuse me, Mr Howes. You have been about 20 minutes now and there is a 15-minute time allotment, so could you conclude?
Mr Howes: Okay. It will be difficult to find people willing to serve as officers or directors. I have had one director basically say he does not feel he can. I even think the successful small business owner -- I think this is important -- who has built up a firm and is approaching retirement is going to find it more difficult to sell that company. Whether he sells it to employees who are going to have to arrange the financing or elsewhere, again, a contingent personal liability comes into play. It is going to make it more difficult to do.
On the insurance issue, I have investigated it a bit. In a lot of cases it is just not available, period, and insurance can be cancelled. We are talking about insurance for companies that are in default. It just is not there.
My final point with the act as it is, is that hidden among it all, the ministry has decided to remove the limitation on the penalty which may be ordered against an employer. For some reason there was a limit of $4,000 before. That has been taken out. I do not know why.
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I realize the minister has heard these and many other points and he has acknowledged them, and so has the Premier. The minister has said: "We do not intend to hold individuals responsible for corporate decisions that are made once they have left that position. We have no intention of increasing liabilities for wages that currently exist under the Ontario Business Corporations Act, the Corporations Act and the Co-operative Corporations Act." Unfortunately, that is what the act does. When I asked to see the amendments that were being proposed, I was told they are not available. I think the only responsible amendment is to remove that entire section, section 12, completely. The Minister of Financial Institutions, before the amendments were even announced, said there is no liability in this legislation if they act responsibly, I guess meaning directors. That is not the way I read it at all. There is a definite liability here.
The Premier has written to a friend of mine and said, "The liabilities of directors that now exist under various provincial laws remain unchanged by the EWPP." That is true, it does not change the other liabilities, but this bill in fact increases them dramatically. I believe they are sincere. They really do not want to increase this liability. But if that is the case, how did this bill ever get there in the first place?
We are in the worst recession I have ever experienced, and I have watched the financial security that I had basically be eroded, regardless of the impact of this legislation. I feel kind of at a loss, and I am not alone. There are a great many small business people out there just like me who are being called upon every day to provide additional security for their businesses.
The Vice-Chair: I am going to have to ask you to please conclude, because you are way over and you are cutting into the next presentation.
Mr Howes: Okay. They were not made aware of Bill 70 and I ask you to go and talk to them yourselves, and when you explain the legislation to them, engage their response. I think the legislation will demotivate people from undertaking creative business activity. I think companies will leave Ontario. I do not think it is the best thing to do at all. I have no doubt of it, because they are definitely angry.
I think new businesses will not start. I think employers will perhaps look and make sure they do not keep long-term employees. I do not know. Especially if you have somebody who is not in a very sensitive area, maybe you do not want to have a long-term employee. Maybe you will want to use contract labour, or as attrition happens and people leave for whatever reason, you will not hire. If the net effect is that we will have fewer jobs than we have now, I think we will have defeated the purpose of the bill.
My recommendations are that the bill be withdrawn as it is and reconsidered entirely and that a stand-alone bill should be prepared in conjunction with the Bankruptcy Act, because I understand there are changes there. If this bill is not withdrawn, amendments should be introduced to withdraw section 12 completely and there should be a truly open process in considering legislation which can be brought forward for an employee wage protection program.
The Vice-Chair: Thanks for your presentation. Sorry, I cannot allow questions. It is just so far over at this point.
Mr Howes: I can understand that. I think we did start a bit late, did we not?
The Vice-Chair: Yes, we started about 10 after and there was 15 minutes for the presentation, so we are over that. The next presenter is sitting waiting.
Mr Howes: Well, thank you for taking the time to hear it.
The Vice-Chair: Thank you for coming in and making your presentation to us.
Mr Howes: If you ever want to make any renovations to your house, please see the local rental company in your area, and if you are in Toronto, call McLeod House. Ask for me, 742-8101. Thank you very much.
PAUL HIGGINS JR
The Vice-Chair: Mr Higgins, please. Good afternoon and welcome to our committee.
Mr Higgins: Thank you very much. Before I start, I just want to let you know that I am in the tea and coffee business, so anybody who wants to interrupt my speech to get a cup of tea or coffee, I will not be insulted.
The Vice-Chair: I am going to take the licence and be the first.
Mr Higgins: We are always trying to build consumption, so please do.
Thank you very much, ladies and gentlemen. I appreciate this opportunity. I chose to appear before you today not to cry out that the sky is falling but rather to say that I believe the Ontario government now has a unique opportunity to show genuine economic leadership at a time when this country needs it most desperately.
After last September's election, Premier Rae went out of his way to tell all of us that he intended to forge new partnerships in Ontario society. He promised an open government that was consultative and not beholden to any special interest groups. I believe the government has a duty to stick to that promise and that we electors have an equal duty to speak out in forums like this.
Today I want to hold up my part of the bargain and make a few comments on Bill 70 and the challenge we face in helping the economy of Ontario get back on its feet again. While I am not a lawyer and cannot provide you with a detailed analysis of the legal effects of Bill 70, I can tell you a little bit about small Ontario businesses, the kind of people who take on directorships in those companies and the kind of people who work and prosper in those companies.
Mother Parker's Foods is a family-owned Canadian company that has been in business since 1912. We are a private, non-unionized company with 220 employees working in three locations in the Ontario area. Our business is of the nature of roasting, blending, packaging, labelling and distributing tea and coffee products to the grocery industry and the food service trade across Canada. Our success has come from a proud heritage of always being willing to invest in our business. We are also proud of the fact that we are able to succeed in an arena that is dominated by much larger corporations.
Our directors include my father and my brother, as well as three employees of our company. Mother Parker's has based its success on being an innovator and a good employer. We have always reinvested in the company to ensure that we remain competitive. With our new computerized process control system, we now have the most modern tea and coffee facility in North America, not just Canada, and we will continue to invest in our business and our facilities to ensure that we stay in that position.
Please forgive me if I speak passionately about Mother Parker's, but I have worked as a sweeper, loader, fork-lift driver, shipper, salesman, manager and now general manager of the company, and I am sure that our employees share my enthusiasm for the business. Perhaps the best indicator of this is the fact that so many of our employees have been with us for many years. In fact, almost half of our employees have been with the company 10 years or longer, and we have many who are in the situation of being with the company 30, 35 and 40 years.
As I said, we are not unionized, but we do have a pension plan, dental and medical plan, generous holiday allowances and an above-average wage package for workers in our industry. We have always paid the full OHIP benefits for our workers and we have often provided special assistance for specific personal problems and situations with our employees. We maintain an open-door policy with all of our employees on any issue.
I am not in the practice of making presentations to legislative committees, but when I became aware of Bill 70 and some of the proposed changes to the Labour Relations Act which are currently being considered by the Ontario government, I felt that I should contribute from the perspective of a concerned independent businessman. I do not believe that you can really examine labour legislation without placing it in a broader economic context. One reason you hold public hearings is to examine the real effects that your proposed laws will have on people's lives.
As I was preparing my remarks on Bill 70, I was reminded of the story of the hippo who came to the wise old owl to ask his advice. "I am slow and overweight," said the hippo, "and all the animals laugh at me because I cannot keep up with them." "Then you will become slender and fast like a cheetah," said the wise old owl. "Wonderful," said the hippo, "what shall I do then?" "I just make policy," replied the owl, "I don't implement it."
Bill 70 is a perfect example of how policy decisions have results that can hurt people you are really trying to protect. This committee has before it a package of government amendments which speak chapter and verse to the need to consult with people before you take action.
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First, I would like to make it very clear that I do believe it is important to ensure that individuals get paid owed wages when companies go bankrupt. However, when Bill 70 was introduced, we were shocked to learn that the proposed wage protection fund would be implemented through the extension of personal liability to directors, officers, managers and other individuals on the management side of business. I will not detail the reaction of many of my colleagues, but I will say that it was hard not to see this as a vindictive piece of legislation. I am glad the Minister of Labour has now listened to the not-for-profit groups and the many others who expressed their concerns and has decided to amend the bill.
When the minister announced his proposed amendments to Bill 70 on June 5, he indicated that the changes would ensure the government was not introducing any liabilities "that do not already exist." However, as I understand it, a Ministry of Labour official will now take on an enforcer role with the ability to immediately begin proceedings against a director, even before it has been established that all other sources have been exhausted. The director would not have any of the protections of the Statutory Powers Procedure Act. This sounds like an additional liability to me.
We are also told that businesses will be given a grace period to ensure they obtain liability insurance for directors. It seems to me that it is exactly those businesses that see the most pressing need for insurance to protect directors from insolvency liability proceedings that will have the most difficulty convincing anyone to cover them.
Perhaps a greater concern is the notion we have been hearing lately that Bill 70 is merely a stalking horse for new payroll taxes to fund the wage protection fund, which now has some considerable unfunded liabilities of its own. You must realize that another payroll tax would send a great many more small businesses straight into bankruptcy and put even more individuals out of work. I am sure that is not what you want. I believe most workers would prefer jobs to an employer-funded wage protection fund.
I understand that the Minister of Labour is meeting with the federal government in an attempt to co-ordinate an effort on this issue. He has already encouraged them to bring in an even larger tax than they are already considering. Beyond the crippling effect that such a tax will have on many businesses that are already close to the line, I also believe it is fundamentally unfair to ask successful businesses to subsidize businesses that are not successful. Instead, you should be focusing on the measures that will make us all competitive. I hasten to suggest that perhaps a tax break might be a good idea.
I began by indicating that the government now has a very unique opportunity to demonstrate economic leadership. I believe the first step in that process is to listen to the full spectrum of people who make our economy function and grow. All too often, government listens to the voice of interests and not to the people.
What you can do is to forge a consensus and remove some of the barriers to economic recovery. There is no doubt that the government's current labour legislation agenda looms as a significant new barrier that would restrain small businesses and, I believe, put many more of them out of business. Would time and energy not be better spent by assisting them to fuel the economic recovery of Ontario?
If you consult with people first, I firmly believe that they will tell you they want to see economic growth, new jobs, investment in competitive technology and a well-trained workforce that can use the technology and continue the high standard of living here in Ontario. In short, they want jobs and they want to be competitive. My point is that you cannot legislate jobs and competitiveness.
If the government sticks to its announced agenda for labour reform, this committee will be meeting this fall to review legislation to amend the Labour Relations Act. You would be examining a number of issues which have been put forward by the Ministry of Labour, and I can assure you that you are already having an impact on business decisions made in this province today. Our company recently spent much time and effort reviewing the potential of setting up in Buffalo, and I can assure you it is a very attractive scene. This is the first time in our company history, which is almost 80 years, that we have even considered such an act.
For the men and women making those decisions, it is difficult to understand how any of the following proposals could inspire them to consider further investment in Ontario:
Requiring non-unionized employers to turn over employee lists for the purpose of assisting unions with a certification drive and allowing unions to organize on company property. Not only does this violate the freedoms of small businesses to operate a safe and productive workplace, but it violates the privacy of workers who may not wish their files to be distributed to unknown third parties.
Provisions for automatic certification, fluid bargaining unit compositions and new provisions to prevent employers from communicating with their employees during a certification drive. These proposals are insulting to employers as well as employees, as they undermine fundamental freedoms of speech as well as the freedom to make independent decisions.
Prohibitions against the use of replacement workers during a strike and provisions to allow for sympathy strikes and secondary picketing. Our priority, for all of us, should be to open workplaces, not to close them down.
Provisions to prohibit employers from communicating with employees during a strike. Employers should have the freedom to explain their position to the workers, just as the workers should have the right to hear it. How can this provision ever be reconciled with the Premier's call for partnership?
Extending successor rights so that unions will follow companies and obtain automatic bargaining rights with non-unionized contractors. All I can ask is, will the unions follow the companies to the United States? Because that is where they will be going to find employed workers.
I make these comments because I hope and believe that it is not too late for this government to reconsider its agenda and focus on the real priority, which is economic recovery and prosperity for all of Ontario's people. I am a Canadian. I love this country. I love Ontario. It is a great place to work and it is a great place to live. I dearly do not want to be forced to look at alternatives. I believe that if the government consults with the people of Ontario, it will discover that economic growth, competitiveness and new jobs are the real priority.
Mr Offer: Thank you very much for your presentation, Mr Higgins. On page 3, you say you "believe that it is important to ensure that individuals get paid owed wages when companies go bankrupt." I was wondering if you might expand on that so I do not draw any improper conclusions. Does that mean you feel there is some need in principle that either the fund, as is created here, or possibly through directors' liability, protect those particular wages in a bankruptcy?
Mr Higgins: What I can tell you is that I do believe that should in some way, shape or form be taken care of. Unfortunately, I have put all my efforts and time into running a business and really have not been able to come up with solutions. I certainly will give it my best thinking over the next few months, and if I come up with something, I will be happy to pass it on to you.
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Mr Offer: I appreciate that.
In the word "wages," do you include the wages actually owed, do you include vacation pay, do you include severance, do you include termination pay?
Mr Higgins: I certainly include wages and benefits and vacation, because the individuals have already worked towards that, fulfilling their commitment as far as work is concerned. Termination -- obviously it is not a very good thing for anybody to go out of business. Both the employer and the employee are in a difficult situation. I have not really got a conclusion on whether that should also be included, but it certainly should be considered.
Mrs Witmer: That was an excellent presentation, Mr Higgins. I appreciated the points that you raised. You talked about the labour legislation that is being brought forward, and of course Bill 70 is just one and Bill 116 and now we are looking at the other revisions.
You have taken a look at Buffalo. How many other companies and individuals are you aware of, among the people you know, that are taking a look at the same thing? Is it quite common to be considering this?
Mr Higgins: Without question. I personally have one friend who is in the trucking business who has already made his commitment to set up shop in the US. He will still have business interests here, but he is very nervous about the future. In his business he cannot afford to have all those constraints if he is going to compete for trucking business on both sides of the border.
Mrs Witmer: What is it basically that is encouraging people to look south of the border?
Mr Higgins: I would say it is the changes to the labour laws, which will in my opinion just put handcuffs on people to stop them operating effectively and efficiently. I cannot really see the purpose there because we already have very comprehensive laws in place to protect the employer and the employee.
Mr Klopp: You brought in Ontario labour relations and you brought out some points. However, I guess maybe that has been part of the problem. Are you aware that there are also other proposals that the so-called business side gave to the Minister of Labour? Are you aware of them?
Mr Higgins: I was aware that there were some suggestions. But to be quite honest with you, getting hold of the information is somewhat difficult and some of it is very confusing, so I cannot give you an answer that, yes, I know all of the details.
Mr Klopp: You have only shown three or four points in what was just being talked about and not shown the other side. As a business person I think you should try to look on both sides. As you pointed out, we are as a committee, I understand, going to be looking at those things. I think if you truly care about Ontario you should probably try, as I do, to look at all sides. I believe the minister did ask labour and management to come up with some ideas and he is going to look at them, and this is part of the labour one. The business community, I believe, has a report. I think the labour group actually grabbed it and is going around telling everybody that the minister is going to do all those things. So I hope you look at both sides, because that is what we are going to do. I hope you can follow through too, to help us do that. But this is not what we are doing today; we are talking about Bill 70.
Mr Higgins: I am certainly open to looking at both sides. Obviously with a 15-minute presentation in which I really was designated to talk about Bill 70, I did not feel I should impede upon the opportunity to talk or take it any further.
The Vice-Chair: I am afraid I am going to have to interrupt again, as time is marching on. Thank you very much for your presentation.
Mr Higgins: Thank you for your time. I appreciate it.
The Vice-Chair: It will help us with our deliberations.
ONTARIO CHAMBER OF COMMERCE
The Vice-Chair: The next group is the Ontario Chamber of Commerce. Would you please come forward and -- I guess it is not too difficult. I was going to say "and identify yourselves," but I think that is fairly obvious.
Mr Corcoran: You can figure it out.
The Vice-Chair: It has been a bit of a day.
Ms Barsoski: I am Tom.
The Vice-Chair: Whenever you feel comfortable, just start your presentation, please.
Mr Corcoran: Good afternoon, ladies and gentlemen. My name is Tom Corcoran. I am the president of the Ontario Chamber of Commerce. With me is Diane Barsoski, who is the co-chair of the employee-employer relations committee of the chamber. She is going to speak to the specifics of Bill 70. I would just like to introduce her comments by giving you some of the credentials for our even being here in the first place, and second, give you our view on the process of Bill 70 today.
From a credentials standpoint, the chamber of commerce represents 165,000 members across the province. We operate through community chambers and boards of trade. There are 65 of them that we deal with directly, in each corner of the province. The members represent every size, shape, sector and nationality -- and, I will add quickly, some are unionized and some not. So our credentials, I feel, allow us to represent a significant piece of the business view that you might not normally hear, that of the small and intermediate business person throughout the province.
Our view on the Bill 70 process to date, which has been aptly, I think, described by the previous speaker as an example of the consultative process, is one about which we would say to you, do not confuse the gathering of a lot of information from a lot of different groups -- and, I will add, special-interest groups being some of them -- with the consultative process. You are almost doomed in doing that and then going into a back room and hatching something that you think will solve everyone's problem. You are doomed to having built-in critics, probably on both sides of the ledger. Incidentally, we did participate as a group that provided input early on in the process.
The initial legislation, though, seemed to ignore all of the issues we had raised with potential labour code amendments. The example I would hold up would be the officer liability. The subsequent amendments have addressed many of these very same issues and, as I am sure everyone will be quick to point out, have resolved at least a portion of the issues that were raised by the business community beforehand.
In the current business environment the Ontario Chamber of Commerce sincerely believes that our members and our government should be focusing their energies on economic growth, economic recovery and the creation of jobs. Our members should be getting on with the business of running business and we should not be involved in a debating society around intensive and extensive labour reform.
If there are further rounds of labour reform, I hope, as a group of parties concerned, that we can take a lesson from the Bill 70 process. I hope we can avoid the pain of having to deal with the announced legislation and the cost, both in terms of time that it has taken afterwards to deal with the issues and argue them and then have them amended, and the very significant messages that are communicated to potential investors who do not question the fact. They see very clearly the high-profile initial reaction to the initial legislation, and they will never see the amendments that are buried in the deep pages of the newspaper afterwards. We think this is the wrong message to be sending at this particular time to the business community at large and to potential investors in particular.
With that by way of introduction, I will defer to Diane to speak to the specifics of Bill 70.
Ms Barsoski: Good afternoon. I will be brief. We have essentially 10 points to make, six of which appear to have been addressed directly or indirectly by the June press release. So I am going to simply list those six and spend a few minutes on the other four. You have a brief written submission. I am not going to read it. My remarks in many cases will be in addition to the submission.
1. Starting with the six, we cannot support strongly enough the exclusion of officers of a company from personal liability. Many who would be deemed officers are really just employees and not extremely highly paid at that.
2. We support the limitation of directors' liability to wages and vacation pay and not severance, for reasons I will cover in part later.
We have a concern relative to clause 40s(3)(d). When subsection 40s(3) discusses directors' liability and what they could be liable for, ie, wages, vacation pay and not severance, clause (d) says, "such additional amounts as may be prescribed by regulation." Our concern is that, first of all, we have no idea of what that may mean and we would rather the legislation be reasonably complete on its face and not leave sort of an open door. We do not know what might flow out of that door.
3. We support the limitation of directors' liability to the term of their tenure.
4. We support the limitation of directors' liability to wages and vacation pay, not including other matters which might flow out of the Employment Standards Act, equal pay or violations of Sunday shopping laws and things like that. One of the reasons is, few directors, if any, would be involved in that kind of detail in the operation, so they would have had no involvement at that level of minor sort of compensation issues. We support the position that directors of not-for-profit companies be exempted. Obviously there is some current liability and we accept that.
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The four points I want to highlight are these. Subsection 40s(2) states, "Despite subsection (1), the employer is primarily responsible for an employee's wages but proceedings against the employer under this act do not have to be exhausted before proceedings may be commenced to collect wages from officers or directors under this part."
The employer is primarily responsible but even if that is not exhausted, proceedings can be commenced against directors. When I look a little more carefully at the bill I see that subsection 40u(1) says, "If an employment standards officer makes an order against an employer...he or she may make an order to pay" wages "against some...of the directors." So it sounds to me like you can make an order against the employer, not even have commenced much proceedings or know whether those are collectable or not from the employer and, almost simultaneously but as step 2, take a proceeding against directors.
Of course there are all sorts of appeal procedures and so on, all of which for a director would require legal counsel, because a director of a company in terms of exercising his or her right under this act is not going to represent him or herself. So our concern is that prior to even knowing if these moneys are collectable from an employer, directors could be involved in some extensive legal complications.
The second issue along the same lines is subsection 40w(4). That is the section that says, "If a judgement has been obtained against the employer..." and it goes on to say a "director from whom the program administrator has recovered...."
That contemplates that a judgement has been obtained against an employer but a director has already paid, and it gives the procedure by which the director can then get his or her money back. But you know, the director may have already undergone some extreme financial hardship. We have to remember that directors of corporations, according to Peter Cooke of the Globe and Mail, make on average about $12,000 a year from their directorships, and I think that sort of after-the-fact remedy could lead to substantial unfairness. Therefore our point is that we think all the action against an employer ought to be exhausted before we come after directors.
Our second point relates to the conceptual underpinning of the legislation. As we understand it, if money cannot be recovered from the employer or directors then the funds would come from consolidated revenue. Indeed severance pay, even under Bill C-22, can only come from employers or the fund, because it does not come under Bill C-22 and it does not come from directors. In the case where we are taking money from taxpayers via consolidated revenue the concept of minimum safety net should apply. It is one thing to have certain definitions for recovery from employer and directors; when we are starting to talk about taxpayers, all of Ontarians paying, we think there should be a concept of minimum safety net, ie, the provisions should be less generous. I am going to tell you why.
Under wages, we think in this case -- and I am talking consolidated revenue fund -- that wages should include weekly regular pay plus commissions. We would actually not recommend paying vacation pay out of the fund, and my reasoning is this. Say there are two employees on the point of closure. One may have taken all his vacation time; one has not. They are on an equal financial footing in terms of dollars having come into their pocket. One got paid for working, one got paid for part work and part vacation. The problem on the closure is that the person who did not take vacation in retrospect is the lucky one because he will still have some money owing to him for unused vacation.
We think when we are talking that the taxpayer is shelling out the money, that is not necessary. However, if one says, "No, we have to pay vacation pay out of the fund," we would say, "Pay it in accordance with ESA entitlements." Here is the reasoning. Certain employers -- mine is one, for example -- have very generous vacation provisions and we have negotiated these for our own purposes and reasons. For example, with my employer we have five weeks' vacation after 13 years. The Toronto Star has five weeks after 10 years. You are talking about 10% vacation pay, not 2%, 4% or 6%.
Why should Ontario taxpayers pay out vacation pay at such a premium and indeed, in these cases, one that few of them enjoy? The taxpayers could be paying higher vacation pay in a payout situation than most of them would earn themselves. So we say, "Pay vacation pay in accordance with ESA entitlement." The same thing applies to holiday pay.
For overtime, again we would recommend that in terms of a minimum safety net we not consider premium payments such as those out of the consolidated fund. If we are going to, we say, "Pay on the ESA entitlement." For example, with my employer under certain circumstances employers are entitled to four and a half times pay for overtime. Why? Provision negotiated, we all know, in a different era, high leverage, etc. Again, few Ontario people would be entitled to that kind of a premium, so why should they fund that high a premium? We say, "Pay every time in accordance with employment standards entitlements."
Termination pay and severance: Here it says that the minimum safety net concept would be unemployment insurance. Our reading of the bill suggests this: Suppose that someone is entitled to six months' severance under ESA and suppose that, in accordance with moneys available and able to have been recovered, a person already has received from the employer five months. Our reading then is that out of the fund could come the top-up of the extra month such that the ESA entitlement would be fulfilled.
The irony here, though, is that once the person receives that extra month there is every probability the person is already working. In that case the severance payment -- and indeed many severance payments if they are fairly extensive and someone gets a job fairly quickly -- is a windfall gain, ie, you can use it for your mortgage, use it for something else, you have certain entitlements to lock away, to put tax-free into a retirement savings plan. Why should the taxpayer fund that extra gain, is our point? When the top-up is paid the person might be working already. What I am trying to establish is, when we are talking about taking money out of consolidated revenue or, worse, payroll tax, we say, "Pay a minimum safety net." UI provides the safety net, while this is debatable in some cases, not providing too great a distance then to look for work.
In any event what we have proposed in the brief is -- I have not gone through any of that kind of detail in the brief -- a cap of $2,500 on payment.
Two more points: We vigorously oppose any move to fund this program by yet another payroll tax. If you would add up, and I have not for today's purposes, all the taxes that have hit the employer in recent years, we are just really saying, "Enough." To make the alarmist statement, how many disincentives can we give business for them to still want to locate here or invest here?
Our final point relates to Bill C-22. It has been suggested to me, and I do not know the answer to this, that as things stand, it is not clear that there might not be double payment of recovery. Hopefully, that will be taken care of. That would be absurd, of course. But our position is that first recourse should be to C-22, and to Bill 70 only where the funds are not otherwise recoverable, either because of the subject matter, ie, it is not a bankruptcy, or the amounts.
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Mr Corcoran: Not attempting to open up the previous presenter's comments, but rather to anticipate a question on the management report that was prepared and submitted in combination with the labour report, I will just close by saying that I personally wonder how fair it is to ask the Mr Higginses of the world what they think of the management reports, because once they have finished reading one, there are probably a dozen other reports.
This is an industry that is built up in terms of the informed arguments around the subject. The Mr Higginses of the world, I would like to think, are running their businesses and they are relying on the Ms Barsoskis of the world, who have spent some time reading both sides. The only comment I would make on the management report versus the labour report is that the reason there is so much focus on the labour report is because that is the one where the minister was quoted in the press as saying he supported the positions outlined. I think it is very important that the legislative process not be confused in the eyes of business to accomplish what the arbitration process has failed to accomplish or has rejected. That concludes our presentation.
Mrs Witmer: Thank you very much for your presentation. I am wondering if you have any comments about the fact that Bill 70's maximum payment will be changed by regulation.
Ms Barsoski: I did not notice that, to tell you the truth.
Mrs Witmer: The public really will have no opportunity for input. It can simply be changed.
Ms Barsoski: Then my comment would be identical to the one I did pick up, whereby the wages could be changed by regulation. Let's know what we are getting here. Let's not leave doors open so later we have no idea. I really feel very strongly about that.
Mrs Witmer: Okay. The other thing is, I do not know what investigation you have done, but in trying to obtain insurance for directors, it is my understanding, in the work that we have done, it is going to be extremely difficult for those companies that are already on the verge of bankruptcy. They are the very ones that are going to need the protection. I just wondered if you have had any reaction from your membership as to some of the problems that could be experienced in obtaining insurance for the directors.
Ms Barsoski: I do not know that we have had a reaction. We have tremendous and utter panic, and I think "panic" is the right word when you realize that what we are talking about is people, and not necessarily fat cats -- I think that is sort of a stereotype in this recession -- people who have mortgages and are not a special breed. They know that by virtue of having accepted a directorship their personal financial life could be ruined. You can imagine the reaction. As to the specific issue, I do not know if we have any research on that.
Mr Corcoran: No, we do not have any research.
Mrs Witmer: I know we have done some, and apparently it is almost going to be not there for the companies that need it the most. That is the big concern.
Ms Barsoski: Then we came here alarmed and leave more alarmed.
The Vice-Chair: Is that it, Mrs Witmer?
Mrs Witmer: Yes, it is.
The Vice-Chair: I have been trying to set up a rotation so that people come first, second and third. Do you have anything that you want to ask?
Ms S. Murdock: I just actually wanted to make a couple of comments. I think it is important in terms of the possible negotiation with the federal side that was discussed yesterday by both the minister and the deputy minister, where they are still negotiating, what their plan would be. What the deputy suggested yesterday was that the administration of the wage protection, in conjunction with whatever Bill C-22 ends up to be -- having said that, given that the feds have promised some kind of wage protection legislation for 25 years and still have not come up with anything -- the negotiations are on the basis that it would be administered through Ontario, with what was owed on the bankruptcy and insolvency coming from the federal side and being paid back into the Ontario plan. So we would top up what the first recourse would be. That would be the plan, but there would be one administrative facility for more efficiency. That, I think, responds to the one thing you said.
The other thing is your cap of $2,500. I have some difficulties with that because statistically, and from what the employment standards branch at present had in terms of information in situations where closures have occurred, either because of bankruptcy or otherwise, it is about 66% -- 64% I think -- on bankruptcies. The rest are other kinds of closures, leaving, walk-aways or whatever, and the employees are left. We have got about 16,000 of them right now sitting waiting for some kind of money. The cap is $5,000, and it has been determined that the average would be about $4,200, with about $2,000 of that coming from the federal side. Really what the wage protection plan would be protecting would be your severance and termination.
My question in terms of severance and termination would be: Why do you feel that that is not owed money?
Ms Barsoski: I take the view on severance and termination that the underpinning and the concept behind historic negotiations -- I am obviously a negotiator -- was a stopgap. So it was, "My God, someone will be on the street and have no income," as opposed to deferred income. If you believe that it is sort of an earned entitlement, which I do not, then you will take a different view from me. If you believe that the severance provision is designed as a protection from loss of income, then you can understand my view. But I do know there are two ways of looking at it.
Ms S. Murdock: In the example that you gave, the employment standards officer would go in and look at the situation. If someone had used four months' or five months' allowance, the employment standards officer makes a determination as to what is owed. If the amount for that year has been used, then it is no longer owed. Do you see what I mean?
Ms Barsoski: I may be incorrect here, but what I thought was, given the definition of severance and termination -- I always forget how those two interrelate. But let's say the maximum employment. Because of length of service, I am owed six months' severance in accordance with the ESA provisions. It does not matter whether I used it. At the point when I left that employer, I should have been given six months, because that is my ESA entitlement. My concern was that, suppose the employer had been otherwise able to pay or paid me five months -- my example was that six months, I thought in this reading, would still be owed to me because that conforms to the definition of severance under Bill 70. No matter what, I would get my extra month. Why are you shaking your head?
Ms S. Murdock: Sorry, it is just that the application --
The Vice-Chair: Excuse me, Ms Murdock, but could you make this point quite concise and clear, because Mr Offer has some questions.
Ms S. Murdock: The employment standards officer would go in on every application from an employee and make a determination as to what is owed that employee. So if the employee had already used up or had not earned that whatever time on the date of closure, then the determination would be made by the employment standards officer. I will talk to you out in the hall.
Ms Barsoski: Yes, because I think we are talking at cross-purposes. Okay.
The Vice-Chair: Are you both happy?
Ms Barsoski: I think we are both right.
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Mr Offer: Thank you very much for your presentation. I would like to continue on this line of questioning. I do not know that the issue is whether severance or termination is due and owing. I think it is clear that in any one particular circumstance or instance, it could readily be determined whether severance and termination are due and owing. That, to my way of thinking, is not the issue. The issue is that in the event that dollars are owing on account of severance and termination, and under the amendments to the legislation they cannot be recouped from directors, should they then be paid out of the fund which is, in essence, taxpayers' dollars. I think, in principle, that is the thing we have to grapple with.
Ms Barsoski: You have stated my point exactly. Our position is no, when you are at the point of asking taxpayers to provide protection, then talk minimum safety net, and minimum safety net is provided by UI. So we say the fund should not provide severance or termination pay.
Mr Offer: We have the parliamentary assistant and ministry staff here, and maybe I did not understand it correctly, but generally I understand the process to be, where there is a business which has difficulties, an employee can then make a claim to the employment standards branch and have it determined how much is owing to that employee on account of wages, vacation pay, termination and severance. It is my understanding that when an order is issued and no review or appeal has been levied or filed, the branch will pay out the money to the limit, and then they can go after the employer. They can then, without exhausting all the remedies, go after directors or whatever; it is up to them. The reason I bring this up is because I think I heard you say that before it comes out of the branch they have to go through the employer and the director, and I do not think that is exactly how it works.
Ms Barsoski: No, but I see your concern, and the answer is that if we say at the point when it is going to end up in the final analysis that no reimbursement is paid out of consolidated revenues, we say then a more stringent definition should be applied. How can that be, since the fund is already paid out and you are talking about trying to get that money back from the liable parties? The only sensible answer I can give to that, and we thought of that, is that at the first instance you pay out on the minimum, and if recovery in excess of that minimum that has been paid out materializes, then a second payment is made which pays the extra, because you can get more from the employer. That is my answer to that.
The Vice-Chair: I would like to thank you very much for your presentation, and it will definitely go into our considerations over the next few weeks as we work this bill through this section.
CANADIAN AUTO WORKERS
The Vice-Chair: Our next presenter is the Canadian Auto Workers union. Mr Nickerson.
Mr Nickerson: My name is Bob Nickerson and I am secretary-treasurer of the Canadian Auto Workers' Union, and with me is Lewis Gottheil, who is our counsel. We want to make sure the committee clearly understands that the process this government has put into place, based on consultation, we think is very long overdue and is a process that we think is going to work for the future for legislation.
Finally, I think the point has to be made that a number of briefs have been presented here on behalf of individuals who happen to have positions with management, directors, etc, and in corporations. We happen to be an organization that represents the workers for these organizations, the workers who have gone through a lot of the throwbacks of losing their vacation pay, the moneys they were owed from that employer, and vacation and severance pay. A lot of this had taken place long before the severance pay provisions ever came into place.
The other point I would make before we present our brief is the fact that we as a union have been involved in making presentations to the federal government for the last 20 years about changes to the Bankruptcy Act, to no avail. I know I have personally written at least 10 letters to 10 different ministers asking for changes to that legislation, which I do not think has been changed since 1918. We do not bother writing any longer, because every time we go forward a few steps, for some reason there is a backward step and somebody decides not to go forward with the legislation.
We are going to touch on that somewhat in our brief today as well. I would ask Lewis to read our brief and then we will be open for any questions. I may add a few remarks at the end.
Mr Gottheil: The National Automobile, Aerospace and Agricultural Implement Workers Union of Canada, commonly known as CAW, is pleased to appear before the committee today to comment on Bill 70, the employee wage protection program.
As you may know, the CAW represents over 125,000 workers in Ontario in a wide range of industrial, service, office and technical occupations.
Unfortunately, we and our members have had a long history of being familiar with the circumstances which attend business and corporate failures and the subsequent impact on our members and their families. Canadian and Ontario workers are currently faced with unprecedented economic insecurity. The enactment of the free trade agreement with the United States, the proposals for a North American free trade agreement, the continued rash of mergers and rationalizations and the increased globalization of many industrial sectors, along with the continuation of the misguided federal policies of high interest rates and an overvalued dollar and the virtual abandonment by the federal government of its responsibility for a secure safety net, all of these factors together have resulted in severe social and economic penalties for workers and their families in this province and across the country.
It is all too depressing to once again have to recite to you the statistics associated with this made-in-Canada recession. Business bankruptcies have increased by 73% in Ontario in 1990, personal bankruptcies are up by 83%, there has been a loss of over 180,000 jobs since June 1990, and there were over 95,000 manufacturing jobs lost in this province in 1990. There is a current unemployment rate of 10.2%, with over 544,000 persons unemployed, and there are the extraordinary increases that we have seen in welfare cases. Behind these impersonal statistics, however, there exist real human tragedies and real human hardships.
Laid-off workers suffer from an immediate income loss. In addition, benefits such as medical and pension plans are likely to be lost or reduced. When alternative work is found, it is often at significantly lower pay with fewer benefits. There may be, along with these factors, significant relocation costs.
In smaller communities, a large closure will have a relatively large economic impact and will strain the capacity in that community and the capacity of all people to respond to social needs.
For individuals, the loss of income and benefits is painful enough, but perhaps equally important is the loss of worth felt by those for whom a job defines a large part of their lives.
In our society there is no mechanism for ensuring that the social and public costs of closures and layoffs are appropriate considerations in corporate decisions. This applies equally to companies that decide to close in order to pursue higher profits somewhere else, as well as to financial institutions that make decisions that result in bankruptcy or receivership. It is against this background and in this context that Bill 70 has to be and must be assessed.
In 1990, 51 CAW workplaces, with over 5,000 employees, were closed down, the majority of them in Ontario. So far in 1991 we have had 28 workplaces either close or announce their intention to close, affecting approximately another 5,000 workers, again mostly in Ontario.
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In several of these instances, firms have either gone bankrupt or have entered into receivership with substantial sums of money being owed to their employees. A partial list -- and this is just partial -- includes Forest City International in London, Elan Tool and Die in Chatham, Bourque Consumer Electronics in Toronto, IBL Industries in Hamilton, V & V Stampings in Burlington, Manutec in Brampton, Wyleside Products in Brantford, Rolmaster Conveyor in Kitchener-Waterloo, and Brant Castings, Windsor Bumper and Welles Corporation, all in the city of Windsor.
It may be instructive to recall the history of earlier legislative changes. The wave of plant and office closings in the late 1970s and early 1980s led to both political and union pressures for legislation. There were, in fact, some beneficial changes resulting in the establishment of a statutory right -- and I underline that -- to severance pay and pension protection. We should remember, however, that before any Ontario workers became entitled to severance pay, many thousands of workers lost their jobs and received no severance whatsoever. It is disappointing as well to note that no other provincial jurisdiction has seen fit to follow Ontario's lead with respect to establishing a statutory right to severance pay.
At that time, in the late 1970s and early 1980s, we were told that legislating severance pay would mean plant and office closures and a loss of investment and jobs. Instead, in the 1980s we enjoyed a generally good period of growth in both investments and jobs. When critics of this bill predict that it will result in a loss of investment or cause firms to move their operations and for these reasons it should not become law, they are implicitly saying that as a society we must continue to force workers to bear the costs of unpaid compensation, and that their statutory rights should only exist in theory and that their only recourse be to look for another job. We do not believe that that is an appropriate response in these circumstances.
Let's be clear about what the employee wage protection program is intended to accomplish. It establishes a mechanism and procedure for ensuring that workers are paid at least part of their unpaid wages, vacation pay, termination pay and severance. The bill only deals with ensuring that workers get what they are entitled to receive by way of statutory right.
Indeed, if I might just divert for a second from the brief, the Employment Standards Act makes clear, through its various provisions, that we are dealing in that act with minimal guarantees for workers, minimal standards for workers that have to be recognized and, in a sense, a constitutional system of rights for workers as a minimal guarantee.
For many years we have witnessed the absolutely unacceptable spectacle of workers who have been given entitlement to both termination and severance pay by an act of the Legislature, in recognition of their investment in their job or occupation, but who have not been paid one cent because of the inability of the employer to meet its obligations. We simply cannot continue to have legislative protection for workers that does not have any practical application in cases where companies become insolvent or bankrupt.
Much as we may deplore the causes of such business failures, there should be no argument about the right of a worker to his or her compensation for work already performed. The hardship which accompanies the loss of a job should not be compounded by a failure to pay moneys already due. The same must be said for a worker's statutory compensation, namely, termination and severance pay.
We applaud this government for taking such timely action to help workers attain what they have been promised through contracts and through legislation. This is a welcome difference from the sorry spectacle of what can only loosely be referred to as reform of the federal bankruptcy legislation. For many years we have witnessed successive federal ministers make hesitant moves to improve conditions for workers and then subsequently decided to back off from even minimal improvements.
Finally, the federal government has introduced amendments to the Bankruptcy Act. Unfortunately, these proposals will not address the real needs of workers. The scope of the proposed federal changes are simply too limited to adequately deal with the severity of the problem. In the first place, the $2,000 maximum is too small. Second, we are concerned that the federal scheme will only cover 90% of any claim to the stated maximum. As well, neither severance nor termination pay appear to be covered by the federal proposal.
Having said that, we believe there is an opportunity for the provincial and federal governments to harmonize their wage protection schemes in a manner which will increase the protection available to workers in Ontario beyond that contained in Bill 70. In other words, the protection offered by Bill 70 should be in addition to whatever protection is available under federal legislation. We would also urge the provincial government to continue to advise the federal government to change its absurd policy of deeming severance pay to be earned income, and thus delaying or effectively denying UI benefits to many workers. We understand that payments from the employee wage protection program will be treated in the same way, and we again support the provincial government's intention to seek modification in the UI regulations.
We have several comments which we wish to make with respect to the details of this legislation. While we recognize that certain limitations are necessarily required, we are concerned that the restriction to a maximum of $5,000 under the program will result in significant hardship and inequity to a large number of workers.
For example, some employees at Elan Tool and Die in Chatham are entitled to as much as 20 weeks of severance, which would be about $12,000. They are unlikely to collect anything from the employer and will only be eligible for 42% of their severance pay. In addition, many of these workers are also entitled to termination pay, which in some cases amounts to another $4,800. Having exhausted the maximum of $5,000, it is again unlikely that any more will be recovered for such employees, leaving them with only 30% of what they are entitled to by statute.
Therefore, we urge this government, once this legislation is passed, to carefully monitor the degree to which it covers workers' total entitlements in order to ensure that the maximum benefit payable is raised, if necessary, as quickly as possible. We already know that over 13,000 claims have been filed with the employment standards branch of the Ministry of Labour since October 1990, and this gives us an immediate opportunity to assess the adequacy of the proposed maximum benefit.
We also recognize that the government has responded to the concerns raised about the impact which the original legislation might have had on not-for-profit organizations as well as on officers of companies. While we acknowledge that there are some legitimate concerns in this respect, we also note, as have others, that currently directors of many not-for-profit organizations are already liable for a specified amount of unpaid wages. We urge the government to continue to look for means of extending liabilities for unpaid compensation in cases where principals of companies, whether they be directors or officers, manipulate corporate and business affairs in attempts aimed solely at avoiding their responsibilities to their employees.
We also believe that the government should give serious consideration to an alternative form of providing the necessary funds for this program. It seems to us to make much more sense for there to be a direct payroll tax levied on employers rather than generating these funds from general revenues. The responsibility for ensuring that employment-related compensation be protected should fall directly on all employers rather than taxpayers in general. In that context, we note that the federal government program will be financed by a payroll tax on employers of .024% of insurable earnings.
We are especially pleased that the minister has introduced an amendment to the appeals procedure. While the original legislation required a hearing within 45 days of filing, the proposed amendment will require impartial referees to make their decision within 90 days after the initial hearing. This should go a long way towards ensuring that the regulatory framework for this legislation will result in timely responses.
In conclusion, we support the principal aim of Bill 70, which is to ensure that workers are compensated for their work and are provided with their statutory rights and, I should add, minimum guarantees under the act.
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Mr Nickerson: I might just add that the protection that has finally come forward in this legislation for workers certainly is long overdue. It is more or less a regulation that is supplementing the separation pay that is in place. We have had nothing but problems with employers, trying to get the money for the workers once this thing has been closed down and once the plant is gone and once the directors have left the country.
A lot of these decisions, by the way -- and I have heard some reports earlier -- are made in the United States. They are not necessarily made in Canada by these corporations. They are not made in Toronto or in Montreal. They are made in other countries and affect employees in Ontario in particular. That is the result of what we have seen recently with a lot of the plants that have closed owing to the recession we have just gone through.
I want to stress once again the important part of the bankruptcy legislation. When we deal with bankruptcy, because it is federal legislation, certainly the bankruptcy legislation should take priority, so the $2,000 or whatever the amount of money is that finally ends up in the bill that is passed, should take priority and then this should be over and above that legislation that is in place when it comes to bankruptcies.
Mr Dadamo: I want to mention that there is a clipping out of the Windsor Star that I received this afternoon that directly relates to our topic here this afternoon. It says: "About 20 workers claim they are out of a job. They fear they will never be paid money owed to them after a Windsor robotics company laid them off and ceased production last week."
They spoke to a couple of employees who worked there. Forty-eight-year-old Neil MacDonald said the company owes him about $3,000 at this point. They fear now that they are not going to get any severance or vacation pay, etc. Andy Flannigan, a production worker, says the workers will probably look for relief in the province's newly announced employee wage protection program, which covers workers' severance when a company goes bankrupt. He says some of the workers have been employed there since the plant opened about 12 years ago and that the layoffs come as no surprise.
Do you think the $5,000 cap we are addressing and speaking about covers things like severance and vacation pay? Do we go quite high enough?
Mr Nickerson: If you have a situation where you are talking about 12 years, you might be close to the $5,000, but in most cases when we are talking long term, anything over 15 weeks, besides vacation pay and the wages that are owing to the employee, $5,000 will not be adequate. It will not cover it. We gave you an example in our brief.
Mr Dadamo: No, and I live it at home. We have talked about this with other people. For someone with 20 or 25 years and more, that $5,000 just does not seem to cut it.
The Vice-Chair: In this particular case we have about five minutes for each party, so if there is anyone else who wishes --
Ms S. Murdock: It is not in relation to your brief actually; it is in relation to other jurisdictions and legislation.
Part of the thing we have been hearing, particularly this morning, was the lack of consistency for Ontario having this kind of legislation where we are leading the pack and that we are giving businesses problems in terms of having this kind of legislation in place. I was just wondering. You probably have some knowledge of other jurisdictions and other countries that would have legislation that would be similar or even more stringent. Do you know of any?
Mr Nickerson: Ironically, I was watching TV at lunch today when a program came on that was talking about investing in Italy. The first thing they were talking about was the fact that what you have to do as a business person is ensure that you make the right contacts with people in that country, because once you hire the employees, you do not have a right to discharge them. You cannot terminate the employees unless you have a large amount of severance pay that you are going to have to put away for each and every one of those employees.
We went through the whole question of dealing with the aerospace industry, especially the two companies that want to buy de Havilland. Both of those companies made a very strong point with us in the hearings we had during that presentation that if there were going to be layoffs, they would be looking to Ontario because in France they are obligated to continue employment for the workers at those plants. They cannot lay them off. They have guaranteed employment for workers in those countries. There is no way you can get at that kind of situation, because the workers are guaranteed employment and they are not going to be laid off.
We know that when they had a strike that took place at Airbus, when they shut down the main plant in France, they did not lay the workers off, because even with a strike taking place in another country, they could not lay those workers off, by the law.
They are going through the same process under the new provisions in Europe -- you can speak to that -- which they are now putting into place. All this legislation is going to guarantee these workers their incomes.
Mr Gottheil: If I can follow up, the ministry issued a discussion paper in December 1990, so in terms of this information I give credit where credit is due regarding the research. In response to the question of which jurisdictions currently operate wage protection funds, the discussion paper indicates that throughout Europe, in the majority of the European Community jurisdictions, there is a wage protection fund in place. In Norway, France, West Germany, these countries that I have just mentioned set up their programs in the early 1970s, all the way to Greece in 1981, Iceland in 1984 and Portugal in 1985. They set up wage protection fund programs.
In Canada there are some programs already in place. For example, in the Quebec construction industry there is a wage protection program, which by the way is funded through an employer payroll tax. There is legislation in Quebec but not yet proclaimed, for a wage protection fund for the industrial sector. I underline that my understanding is that as of yet it has not been proclaimed, but a general wage protection fund has been set up under the administration of the labour standards commission.
I think it is fair to say then that many other industrialized jurisdictions in what we might call the west have these kinds of programs.
Mr Offer: Thank you for your presentation. I think it is good that the committee periodically throughout the day is reminded that what we are talking about is people who are no longer working, who are owed some dollars, and through the legislation previously in existence are entitled to certain dollars. What we are grappling with is how we can make this bill as good as it possibly can be in the time we have available to us.
I would like to ask a couple of questions dealing with your submission. It states on page 4 -- I am really just asking for full clarification on this -- "The bill deals with ensuring that workers get what they are entitled to receive by way of statutory right." Do you see, as a result of that statement, that the bill is somewhat limited or flawed in that it does not call for full entitlement of employees to what is their statutory right, in your own words?
Mr Nickerson: Let me understand your question. Are you talking about the present law that says severance pay is paid at a certain point? Is it that bill or this bill?
Mr Offer: No, I am talking about this particular bill. This bill has a cap of $5,000. There is a statutory right which you have alluded to on the second and third lines of page 4 which would, in certain instances that you would be most familiar with, be more than $5,000. Is it your position that the bill is limited or flawed because it does not embrace the full statutory right of employees in this province?
Mr Nickerson: I think it is limited, obviously. It is limited by the cap of $5,000. As far as the individual is concerned, the individual should be entitled to every cent that he is entitled to under the legislation for severance pay, the same as he is entitled to his wages, his vacation pay and all the other benefits that he has earned on each of the entitlements.
Mr Offer: All I am trying to do is get a full appreciation of your position. Is it your position that the bill should be amended to up the cap of $5,000?
Mr Nickerson: We have said that in our brief. One of our examples in the brief is that the $5,000 in fact can be met very easily by a person who would be losing his job by not having the termination pay, not having vacation pay, not having a regular payday and the severance pay benefits; no question about that.
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Mr Offer: The next question I want to ask -- and I think this is clear in your presentation on page 5 -- is that we have heard a lot of talk about harmonizing this legislation with the federal legislation. We have more control, obviously, over the provincial legislation. When we talk about harmonizing the federal legislation, I sort of think we are trying to lasso a cloud. We can see it, but we really cannot grab hold of it and we do not know what it is going to look like. It just might dissipate into nothing.
If it proceeds as it now is, you are clearly saying that the $2,000 that is federal, no matter how you view that dollar figure, should be in addition to the $5,000 for a worker's claim, as opposed to its being a total $5,000 cap, with the provincial government claiming $2,000 from the federal government. I apologize for that question, but it is the only way in which I could put it, because I believe the minister and the deputy said yesterday that in terms of speaking with their federal counterparts, they were looking at getting a recoup of $2,000 from the federal government in areas where the claim has been justified, which would lead one to believe that the minister and deputy are looking at a total of $5,000.
Mr Nickerson: I, like you, will be very leery about whether or not there will be any harmonizing whatsoever between the federal and provincial governments. Second, in saying that, the point in question is if you have a bankruptcy situation, you are dealing with a bankruptcy law. Once you start to get entwined with the whole bankruptcy procedure, we are talking about priorities. Now we are talking about where the workers' priorities are going to be as far as the bankruptcy is concerned and it is going to be limited to $2,000. That is bankruptcy legislation federally that has to be met federally and should be paid to the employees. Then we should be talking about the $5,000 on top of that. So we are talking about stacking the $5,000 on the $2,000; no question about that. They are entitled to it.
Mr Offer: You do not believe the provincial government should look upon this as an integration of some sort?
Mr Nickerson: No.
Mr Offer: My last question talks about page 7, "The responsibility for ensuring that employment-related compensation be protected should fall directly on all employers rather than taxpayers in general." Do you feel in principle it is unfair that this particular potential liability falls on taxpayers in general, as per your statement?
Mr Nickerson: No. I think the principle, first of all, should lie with the employers and the employers should be responsible for a system where there is going to be a tax on payroll to take care of this situation. If we cannot have that and we cannot put that in place, then it should be the government that stands behind that, and the employee gets his money; no question about it.
Mr Offer: From the taxpayers?
Mr Nickerson: Yes, but I would suggest the way it should be is a payroll tax. In fact, I had one employer call me -- it had nothing to do with this -- who was talking about the minimum tax the NDP is talking about and said: "Do what you can to make sure there are no provisions coming in, because we like the tax system in Ontario. We don't want to see any changes in the tax system. We like it the way it is. It's a reasonable tax system."
Mrs Witmer: Mr Nickerson, as I listen to yourself and I listen to the other presenters, I am becoming extremely concerned, because I see that in the presentations people are coming from two very differing points of view. We hear on one side people saying that the maximum of $5,000 is too much. They are concerned about the directors' liability. They are concerned about many other parts of Bill 70. I hear you saying that the $5,000 is not enough, etc.
How can we in this province make sure we establish a more effective consultation process between the employer and the employee? If we continue down this path, I see more uncertainty created in this province and I see businesses moving away and I see a further loss of jobs. I have to tell you I am feeling very concerned today as I listen to those presentations, because I see two totally opposing points of view.
Mr Nickerson: Let me give you some examples of those opposing points of view, because we led a charge on the whole question of concessions and on the basis of stepping up to the responsibility of whether you are going to have jobs or not have jobs. We have watched the process of employees who in fact have made concessions to employers on the basis that they are going to continue to have employment. In 90% or 95% of those plants and those operations where there were concessions made, the end result was that two to three years later the plant was shut down and the employees lost their jobs anyway.
Mrs Witmer: Ninety per cent?
Mr Nickerson: Yes. We watched it and saw exactly what took place. In other words, the very simple process of somebody coming forward as an employee and giving money to be able to maintain his job does not work because the whole question of the free enterprise system does not allow that to work. It allows only the employers to be able to have work if they have the product they are selling at the time. That is the problem you have with it.
Of course, at the point you are talking about an amount of money, you are always going to have an argument between management and labour of whether it is too little or too much, and that argument is going to take place for a number of years. But I do not see any fears of any jobs that are going to be transferred out of Ontario as a result of this legislation that is coming in. After all, we are saying here, "Give the employees what they are entitled to under the legislation -- the severance pay." There are very few executives who do not get the severance pay they are entitled to, very few. They all get their severance pay and they go on to other jobs in the same province, or other jobs in Canada. We have no fear that they are going to move anyplace out of this country as a result of this legislation, similar to what we said when the legislation was brought in about the severance pay.
Mrs Witmer: I will just mention to you that we had one presenter this afternoon who indicated that his company was looking to Buffalo because of what it feared to be the overregulation and the overtaxation. I can certainly tell you that in my own community I have had good, honest, hardworking business people say to me that they are concerned about the air of uncertainty in this province and that they are looking. So I have to tell you, I am concerned --
Mr Nickerson: They may be making the observations that they feel there is going to be some concern with some legislation, because I heard the remarks. It was mostly dealing with labour legislation, which was not a place for that to be presented today. There may be concerns they are putting forward, but I would challenge you to go ahead and find the people who are moving to Buffalo. I see all kinds of ads, I see all kinds of people threatening. I would like to know what the tax system is in Buffalo for that employer because I know that in Ontario it is very lucrative to locate here because of the tax system.
Mrs Witmer: So you do not feel we will lose jobs as a result?
Mr Nickerson: No.
Mrs Witmer: Thank you very much.
The Vice-Chair: I would like thank you, Mr Nickerson, for coming before us, and also you, Mr Gottheil.
Mr Nickerson: Thank you for the opportunity.
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BRIAN A. GROSMAN
The Vice-Chair: The next presenter we have on our list -- and we are not doing badly, we are only running close to 15 minutes behind -- is Grosman, Grosman and Gale. If you would step forward.
Mr Grosman: Maybe I should begin by telling you what my name is. It is Brian Grosman, it is not Grossman. I am no relation to any Grossman living or dead.
The Vice-Chair: I apologize for that.
Mr Grosman: Maybe I can clear the air on that point. I am also senior partner of a law firm called Grosman, Grosman and Gale, not Grossman. This law firm has specialized for over 10 years in the area of employment law. I have published a number of books in this area. The most recent book came out last week -- a little advertising. Employment Law in Ontario, A Guide for Employers and Employees was published last week.
This is an area where I have devoted a great deal of time and thought. I hope I avoid the polarities which Mrs Witmer has just referred to. We represent both employers and employees, which is rather unique. We do not do labour law, but we are representing employees on a daily basis. We are engaged in disputes with employers, be they wrongful dismissals, human rights, occupational health and safety, and all the other pieces of legislation -- pay equity, future employment equity, etc.
As a result, we have been very busy over 10 years, because there is no more dynamic area of the law than employment law in Ontario. There is no area of the law, in my opinion, which has undergone as much change in Ontario as the legislation and laws relating to employment in this province.
Under those circumstances, what has happened is that employers, who of course are risk averse and who are looking for stability, are continually engaging people like myself to gaze into a crystal ball and say what the future holds. My answer is I do not know. Similarly, employees, who are under enormous risk in this province of losing their jobs in light of the mergers, takeovers, sellouts, etc, many of which I have been involved in, are very concerned about what their rights are, their minimum rights, their maximum rights. We are advising these people, again on a daily basis, in this regard.
So I come to you today, as I did last fall before any legislation was prepared, to plead the case for a structured advisory process, not one that is ad hoc, where you invite associations which are union dominated or management dominated to meet from time to time to deal with specific issues, but rather, what I was involved in many years ago. As you will notice from my credentials, I am the founding chairman of the Law Reform Commission of Saskatchewan. I served under the premiership of the Honourable Allan Blakeney.
During that period we had a co-ordinating committee on criminal justice and the job of that committee -- because criminal justice was a very dynamic area in those years, 1975 through 1979, when I served as chairman. We had a co-ordinating committee, so the left hand and the right hand would always know what is going on in order to bring some stability, continuity and consistency between the Solicitor General's department, the Attorney General's department, prisons, criminal law, etc. So there was continuity, because the last thing we wanted in the criminal law field was discontinuity, so that people did not know what their rights are.
Similarly, I suggest to you that in the labour-employment field, since it is the most dramatically changing area of the law and it will change, in my opinion, even more in the 1990s -- as we now have part-time contractual employment, we are going to see 50% of our workforce female; we are going to see large percentages of minorities, some of whom understand rights, some of whom do not; we are going to see active human rights interventions -- we should have in this province a committee of very independent-minded individuals who are not perceived as having a particular political axe to grind, be it union or management, and this committee be available to the ministries that deal with human rights, labour legislation, etc, as a preliminary advisory group that looks at legislation and makes preliminary comments, so that legislation does not go forward until this group makes those preliminary comments with regard to it.
I think that because business is so oriented to stability and because as soon as you put forward legislation and then you have to withdraw it, business becomes extraordinarily nervous about long-term continuity, how it is going to be treated by government, by legislation, etc.
So my first pitch in the paper which I have delivered to you -- and I am not going to refer to this paper, by the way. I do not believe in reading papers to committees. I never enjoyed it when I sat on committees. My first pitch is that I think some kind of very strong, independent co-ordinating committee ought to be set up that is in the labour-management employment law field. Because it is such a dynamic field, just as criminal justice was in the 1970s, labour law and employment law will be the dynamic field of the 1990s, in my opinion, extraordinarily dynamic. That is why government that owes a duty both to business and to labour, to employees, to be consistent and, to minimize risk to all sides, should do that by way of good, solid, independent advice. That is point one.
Point two, and I deal with it in my submission to you -- I am going to move away from personal liability and go directly to directors' liability. We have in the Employment Standards Act of Ontario a definition of both employer and employee, and for the purpose of directors' liability, or any other liability, by the way -- and I make the pitch in the paper that liability should be based on some kind of fault, in any case -- there are two problems. For example, how do you define "employee"? Who is an employee for the purposes of the Employment Standards Act? What is an employee?
We have had a recent case in Ontario which says a manager or, if you like, owner/manager of Becker's, is an employee for the purposes of the Employment Standards Act. It came as a surprise to some of us, but that is a recent case and it is referred to in the recent book. Similarly, what about "employer"? The definition of employer under the Employment Standards Act not only deals with the direct employer of the individual who suffers as a result of the company going under, going into bankruptcy, whatever, but any company which is directly or indirectly involved with this employee. Indirectly goes a long long way, so that if you like to look at hierarchy, it is not only the main company which may have a lot of subsidiaries, but it may be a subsidiary in Mexico of the company in Canada and those directors, according to the definition under this act, might very well be liable to terminated employees under this legislation. So the net is cast very wide.
Going back to my original point, if you are looking to encourage investment in Ontario, the people who are investing, directors, companies, must have some understanding of what their downside is. Are they going to be liable because some company in Sudbury has a problem and goes under? Does that mean there is going to be additional liability on a company that shares a few directors? Not all the same directors, because they talk in the legislation about indirectly, so that they are liable if they are indirectly associated.
One of my recommendations is that the people who are drafting this legislation take a very close look at the definition of "employer" and the definition of "employee" for the purposes of the employee wage protection fund. Do you want a manager/owner of Becker's to be able to tap into this fund? If you do, then the present definition of "employee" is probably adequate. If you do not, then you had better look at that definition again.
With regard to companies, do you want all companies associated with the company in trouble, whether directly or indirectly, to put their directors at risk? If you do, say so. The present act says so. That is a very broad net. I suggest it should be limited to a more direct connection than that one.
Let me say that I agree with the employee wage protection fund. I think it is a good idea, because there are many employees who face enormous problems when a company goes bankrupt and indeed, they do need a bridge. These are the same employees who do not engage senior, experienced expertise to represent them. I think they need that bridge and the bridge would be provided. However, I have heard other submissions which talk about mitigation and whether there should be double recovery or, someone said, a windfall profit, by somebody collecting the provisions under the legislation, then maybe suing and collecting a second time.
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We have had a recent case in Ontario, very recent, which says that you cannot have double collection. You cannot collect, under the Employment Standards Act, your severance and termination pay, and then sue your employer and not have that deducted. The most recent case says that must come off the top. So you cannot have double recovery.
If that is the principle, then I do not think there should be a windfall profit built into this legislation. If somebody is let go and within two weeks is re-employed at the same wage, then I do not know why that person ought to dip into the taxpayers' pocket for a windfall profit.
The whole area of employment law is based on contract. Contract means that if you suffer damage, it is just to compensate you for what you actually lost over a reasonable period of time. It is not to provide you with exemplary or special damages in order to take care of a rainy day. It is merely to compensate you. On that principle, I think mitigation should apply to all legislation, and that is, if you are gainfully re-employed you should not collect twice.
The problem with that, of course, is that there is no motivation for people to be gainfully employed if it means it is going to cut into their minimum requirement. There are ways around that. We do it every day with regard to employment contracts, and I would be happy to go into those at some future date when we are looking at specific amendments. There are ways to encourage people. For example, in the law generally, as you know, if you mitigate your damages by finding re-employment, you of course do not collect the notice period that you might be entitled to, ie, 18 months, but employers have found a way to encourage these things.
Those are my submissions. I am really here in the hope that you will have a few questions for me, and maybe I can be helpful in that regard. I thank you for listening to me patiently.
Mr Ramsay: Mr Grosman, I really like your idea about setting up some sort of consultative group. I had such a group when I was the Minister of Correctional Services, and it was just a personal -- and maybe you are talking about something more expanded -- advisory group of people who did not represent any particular advocacy group out there. They were people from the church community, from the criminal justice community, but they did not have titles. You are right: The trouble with labour law and that discussion in this jurisdiction is that everybody has an agenda. So you have, obviously, heads of unions with their agenda, and, of course, their own following that they have to satisfy, and in the other case you have people as head of the chamber of commerce who are out there making threats that everybody is going to go to Buffalo, and so you get this adversarial situation on both sides that is not really constructive.
I think that is a very good idea, that you get basically people from the community that are obviously sensitive to a social, democratic society and contribute ideas but without putting forward these specific agendas that, unfortunately, build distrust from people on the other side. I think that is a good idea, and I would hope that the minister's staff that is here would certainly pass that on to him, because I think this government has a lot to do to build some trust in the general population. That might be one way of doing it so that it does not look like he or the ministry is representing one side or the other, but is basically reaching out to the community to bring people together.
Mr Grosman: When I have worked on these types of committees, if it is not a public quorum and if people are not taking positions for cosmetic or political or other reasons, I am always surprised at how well they can work together. So I am suggesting a committee of intelligent people. For example, on one of the committees that I served, it was chaired by the deputy minister, and there they had myself, chairman of the law reform commission -- but I had no particular agenda at all -- and they had an academic, a professor of economics on the committee, and they just went out and said: "Who are people whom everybody respects? Let's put a group together that we can get a consensus on." When they were not talking to the public and there were no microphones and there were no recordings, I was always amazed at how much we accomplished. An enormous amount of good will.
Mr Offer: Mr Grosman, thank you for your submission. I have a question dealing with the whole issue of directors. I do not want to misread what was in your presentation. I will re-read it. Do you feel that in any one particular corporation which, for instance, goes bankrupt -- we will use that example, a company goes bankrupt and it has a certain number of directors, not all of whom share in the same day to day operation of the company -- there should be some mechanism for some of those directors, who are potentially liable under this bill, to argue before a tribunal or something, some mechanism, that on the basis of reasonable care they should be exempt? Right now, under the bill, there is not, and I would like to get your feeling as to whether that should be something available to directors.
Mr Grosman: Generally I believe that fault should be a governing principle, although I do not see that as workable under these circumstances. I think if you are a director, you are a director for all purposes. I agree with a comment I heard earlier that insurance is going to be nearly impossible. That is my reaction as well. So it is going to be very difficult to get this kind of insurance. But I cannot see a reasonable way of excluding some directors and including others on the hands-on principle. Some directors are outside directors. Do you exclude outside directors? Some directors are also officers of the company. Do you nail them and exclude outside directors? No. I do not see that. I think if you take responsibility as a director, you have to take responsibility for all purposes, and under the amended legislation I do not see that as particularly onerous.
Mr Offer: I very much appreciate that response. On the issue of mitigation, I wonder if you can take me through that again. It seems you were saying that an employee who is able to prove a particular claim may have that claim reduced or mitigated in the event that the employee has obtained employment, because the corollary is that many will argue that that person is entitled to those things whether he gets employment or not.
Mr Grosman: No, let me be clear. Under the Employment Standards Act you have that entitlement whether you are re-employed or not. That is called a minimum entitlement.
If you are asking for an employer to pay more than the minimum under the Employment Standards Act, that is, 12 months, 18 months, you have been there 20-some years, etc, then there are two duties that cut in. You have a duty to make reasonable efforts to seek out re-employment. If you do not, a court can say you are not entitled because you have not been looking. On the other hand, if you look and you find, whatever you earn during the period of reasonable notice, be that six months or 12 months, is deducted from the top.
What companies do, just so you know, in order to get over the hiatus of having somebody who is either not going to look for a job or someone who is penalized by re-employment, is that the majority of packages we put together for companies are based on -- let's say an employee is entitled to six months. Under those circumstances, if the employee is re-employed during that six-month notice period, he or she gets 50% of the balance in order to encourage him to seek out re-employment. That is so that they do not sit on their hands over that period. So to that extent, yes, there is a small windfall profit, but then, at the same time, you are encouraging the employee to seek out re-employment and the employer ultimately benefits by not paying out the full term. I suggest that that principle might very well be integrated in some of this legislation.
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Mrs Witmer: I thank you for your presentation, Mr Grosman. I appreciate the fact that you have restored some of my faith, and you have suggested ways in which we can improve labour-management relations. That is certainly, as I pointed out before, a concern I have. This committee you talk about, would you see that being appointed by the Ministry of Labour?
Mr Grosman: Yes.
Mrs Witmer: How large a committee are you thinking of?
Mr Grosman: No more than a dozen. To be sure that people can attend the meetings, you need about a dozen to be sure that six or eight are always there. I would say about a dozen.
Mrs Witmer: You would see this committee discussing legislation and changes and, I guess, avoiding some of the unnecessary publicity that has been generated as a result of Bill 70 and also as a result of the two reports on the Labour Relations Act.
Mr Grosman: I am convinced that if those had been submitted to this kind of committee, there would not have been the public problems and the perceived business problems that followed that legislation.
Mrs Witmer: I hope the government does take your suggestion under very serious consideration. I think it is an excellent one, and I think it could have the effect you have intended.
Ms S. Murdock: I just want to go back to your mitigation comments as well, On the minimum standard under the Employment Standards Act for termination and severance -- I am specifically talking about those two areas. I do not know whether I am understanding you totally, in that whether your problem with the area is because it is being funded by the taxpayers of the province or whether it is because of --
Mr Grosman: I have no problem with the area whatsoever.
Ms S. Murdock: -- the windfall, the windfall aspect.
Mr Grosman: Oh, the windfall aspect.
Ms S. Murdock: Yes. Which one is it, because I guess our view is that termination and severance are something that is owed to you; you have earned that. Just because you were smart enough to go out and get a job after your company closed or whatever happened, you should not be penalized. You have already earned that time. That was part of the deal and there is a minimum requirement under ESA that guarantees you certain minimum amounts of time. So I am having problems seeing it as something where the worker is beating the system by getting paid twice.
Mr Grosman: The difference between us is that I am looking at the historical background of the law in this area and how it developed. It was always compensatory. What have you actually lost? We will try and reimburse you for your loss. That has been the law for 300 years in this area.
Social engineering and social planning now say, "Well, no, we're not going to compensate you for your loss; we're going to compensate you for the fact that, unfortunately, you've been fired, even though you've lost nothing. You have gone from one job directly into another." In this day and age there is no such thing as being born into a job and dying out of a job. It is a revolving door. You are in for two years and you are out. You are in for four years and you are out. If every time you leave, for whatever economic reasons -- and they are usually purely economic reasons; they have nothing to do with your competence or lack of competence -- why should you then be entitled to a benefit beyond the compensation which you get, in any case, because you have been bright enough to find a job? Are we going to reward indolence by saying, "You don't need to find a job, because even though you can walk from job A directly into job B we're going to pay you anyhow"?
Ms S. Murdock: Another comment you made earlier was about certainty and stability and the whole point of setting up the employment standards guarantees in terms of time allotments: "If you work for me for 10 years I'm going to guarantee that you're going to get this much time." An employee then stays with that company, builds up all kinds of years of experience and seniority with that company. The company closes, for whatever reason. That employee may have considered, at some point in time, going out and getting something else, and did not because he stayed there and was gaining seniority and gaining rights he believed he had and benefits that were due him. We are looking at it from two opposite ends, because the way I look at it he or she has earned that time and therefore it is owed. It is not some little favour they are granting to them, regardless of whether they go out the next day and get a job with another company.
Mr Grosman: We do not disagree, to this extent: I think there should be some minimal provision that is not subject to mitigation. That was not my pitch. The Employment Standards Act provides that. Where I was responding is that if you have a separate fund, should someone go into that fund -- and it may very well be to a maximum of $7,000, that is, $5,000 plus $2,000, if you work it out that way -- for $7,000 of taxpayers' money after he has already received his employment standards minimum benefits and has moved directly into new employment? Should mitigation not apply?
Ms S. Murdock: But that is not what Bill 70 says, at least I do not read it that way. What you just said would not occur under this bill. In this case, there is a $5,000 cap.
Mr Grosman: But I am putting the $2,000 from the feds on top.
Ms S. Murdock: The minister and the deputy yesterday said they would work it as one central application system -- if they ever agree with the federal government -- where they would get the $2,000 funded back to them, but the provincial government would pay it out initially.
Mr Grosman: I was not here, so I did not realize that.
Ms S. Murdock: It would be $5,000. When the employment standards officer took your application and made a determination as to what benefits you were owed, part of that would be your termination and severance out of that $5,000, but it would not be over and above that.
Mr Grosman: Quite right. We agree.
Ms S. Murdock: Minimum provisions; I got it.
Mr Grosman: I think I have probably overstayed my welcome. Thank you, Mr Chairman, and thank you, members, for your patience.
The Vice-Chair: No, you are just about on time. I thank you very much for your presentation. You came at us from a different perspective and we much appreciated that.
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ANTHONY BRATSCHITSCH
The Vice-Chair: The next person to present is Mr Bratschitsch. If you are ready to make your presentation, feel free to start.
Mr Bratschitsch: I appreciate the opportunity to make my presentation. I am a co-owner of a small Ontario manufacturer that exports most of its products to the United States, and in a couple of weeks' time we are going to be celebrating our eighth anniversary.
I strongly agree with ensuring that the workers get paid when their employers go bankrupt or simply disappear. I experienced a nasty situation in 1984 when I was a director of an Ontario company that was associated with an American one through common ownership. At that time, those companies were going through what is today called rationalization. The Ontario company's demise was inevitable. For a long period of time, business decisions were made in favour of the American company at the expense of the Ontario one. We had orders obtained in Canada that were being transferred to the United States. We purchased new equipment and, lo and behold, it would be shipped on trucks to south of the border. Furthermore, the Canadian company was purchasing very expensive items worth hundreds of thousands of dollars and shipping it to the United States, and I was convinced there was no intention to ever pay for it.
I transferred down to the United States and worked for the American company. I applied for and received immigration papers for both my wife and myself, and my first son was born down there. In 13 months, I had acquired 23 orders for the company, but I personally transferred 21 of them up to the Canadian operation. Finally, I gave up. I quit my employment. I came back to Canada and sought employment somewhere else.
About a year afterwards, I was contacted by the Canadian company's bank and was informed of some serious problems. I was still a director and I came down to the company to resolve the problems. I found that as a director I was powerless to do certain things, but on my initiative the bank and I made an agreement. If I would put the company into early receivership, the bank would ensure that the workers were paid. I was financially devastated and I never even considered trying to benefit myself. I also had previously ensured that certain Ontario suppliers had their interests secured so they were able to get their products back from the United States when the Ontario company went under.
In my mind, there is no question that workers must be assured they will be paid for their work, but I strongly disagree with Bill 70's proposals and implications for these reasons.
Certain portions of the bill would further affect businesses' ability to compete, especially when we are exporting to such areas as the United States. In my opinion, the payroll tax would be a regressive tax in that it has to be paid whether the business makes a profit or not. Furthermore, once a tax is in place business expects government to increase it. We have to be sensitive about our ability to compete in the United States. The United States buys more from Ontario than it does from Japan. That marketplace is our most important source of revenue, but we are battered by monetary, taxation and social policies that are destroying our ability to earn those revenues. I could tell you what nightmares the GST is causing manufacturers in Ontario such as myself, stuff you may never have heard of.
Five years ago, we manufacturers held a 17% wage-cost advantage over the Americans. By 1990, our position eroded to where we had a 10% disadvantage. How can we expect to generate revenues when the Americans will buy goods from elsewhere because of better pricing? As salaries represent about 60% of most companies' cost of production, a payroll tax will further erode our ability to sell to the Americans.
I heard earlier the gentleman from CAW mention comparisons with Italy, France, Greece, and I am sure that is fine, but I would like to remind you that we are in the shadow of the United States and we must deal with the United States.
Unless I am wrong, Bill 70 would provide for unimpeded access to directors' assets without notification or without going after the failing company's assets first. This is wrong, in my opinion. This is just as bad as not paying the workers. If such a proposal is in place, most people would probably choose not to be directors, but we need directors in business. This idea smacks of some form of vindictiveness and categorizes directors as immoral and obscenely wealthy business people, which is not true. The average pay for business owners is $28,400 per year, which is only between 3% and 4% more than the average employee's income, and this is for working longer hours with substantial risks. I got that information from the Canadian Federation of Independent Business, of which I am not a member.
The idea that successful businesses must pay for the failures of others is upsetting. That is what really gets my goat. To me, this is as if you are punishing soldiers because their comrades fall in battle. All you are going to do is weaken those who are left.
According to the recent report issued by the federal Liberal Party's task force on the economy, Ontario has lost almost 140,000 jobs because of various reasons. These jobs must be replaced and they can only be replaced by successful businesses, and I intend to be one of those businesses that employs more people.
My presentation is based on personal experience. As I stated earlier, I am a co-owner of a small manufacturer and I export to the United States. I am very sensitive about what prices I have for the Americans. My perspective is that of a small businessman who believes that three out of every four new jobs are created by small businesses. I am here on my own, speaking for myself, not for any business or political group. I feel like I am just one little stick in a bundle. On my own, I am nothing, but you take a bunch of sticks like me and put them into a bundle and that bundle is what keeps this country strong.
Big business will do things I cannot answer for, and so will big unions. But to give people a chance to be employed, we have to generate revenues. That comes from being competitive.
I would like to recommend a possible solution for ensuring that workers do get paid. Maybe it is not a new idea, but it comes from my personal experience. I would recommend that companies be bonded for the average amount of wages they would be owing at any one time should they go under. Right now, because I have to deal across the border, my company must post a bond. I go through the bank on that, and the value of the bond comes out of my company's operating loan. That is not a bad idea, because the banks are always watching our receivables or payables, our asset ratios and so forth; they are always monitoring the situation. If they know something is wrong with my operating line of credit and something is not going well, they will keep us honest. I know this is probably a federal jurisdiction, but it seems to me it is one of the simplest ways to make things work; after all, it does work with my bond. When I made the proposal to the bank manager in 1984 about honouring the wages of the employees, he agreed. I do not see anything wrong with it.
I think Bill 70 is a very important factor, because it sends a signal to the little sticks in society. I have no form of communication with my counterparts in society, but I know if it is sunny outside I will go to the beach and have a good time, and if it is raining I will stay indoors, close the shutters and wait till the sun comes out. I feel Bill 70 is a signal. That signal could say, "Hey, guys, it's going to be raining for a while."
When I hear of somebody moving to Buffalo, I do not put much faith in that. I have been to the States, and in the last year I have examined moving back to the States. As a manufacturer, New York state is a lousy place to go. If someone says North Carolina or Tennessee, maybe you should watch out. I read a report, and it may be a subjective report, which stated that of the 48 mainland states and the 10 provinces in Canada, Ontario ranked last as a place to go if you want to locate a manufacturing business. I heard earlier that Quebec has a wage protection fund, but Quebec was ranked second-last.
I am here because I feel strongly about my province. I believe we are all products of the same society, and I think we have to be very careful about what signals we give to society.
Ms S. Murdock: In relation to your bond issue, I had the president of Neon Casting, the head office of which is in Toronto, but he operates out of my riding of Sudbury, who was very concerned about Bill 70. We had lengthy discussions on it. His suggestion with regard to funding was that the companies themselves set up in a five-year phase-in plan a funded liability fund, either operated through the government or through some bank or let employers do it themselves. Had you given that any thought, or would it be along the same lines as your bonded issue?
Mr Bratschitsch: I am not aware of what kind of bonding you are --
Ms S. Murdock: I do not know how the bond things work, but would it be along --
Mr Bratschitsch: Make it very simple. Banks are very good at watching finances. They would be the first ones to see that their clients' financial stability was being threatened. A bond would be money set aside for whatever contingency. Let's say I have 15 employees -- which I do not -- and if my partner's and my liability for whatever obligations, wage protection, whatever, was going to be, say, $100,000 or $1 million, that is going to be set aside. The bank is going to say, "Hey, your line of credit is $10 million, but you can only use $9 million because we've got $1 million here that is bonded."
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Ms S. Murdock: Okay, so the concept is not very much different, then.
Mr Bratschitsch: It is very simple, though. Besides, what is a better vehicle than the bank, because a bank is not in business to take risks. They are in business for equity funding, so they are going to watch themselves.
Ms S. Murdock: You are supporting the payment to employees. I am just wondering, then, other than what you have stated, how would you guarantee payment to employees who have worked?
Mr Bratschitsch: When a company is going to go under, usually the bank calls in the loan, and that money is ready, held in reserve. If I have a $10-million line of credit with a bank, $1 million -- I am using these arbitrary figures -- could be set aside as an average figure that would be going --
Ms S. Murdock: But it is not right now. Right now, if you go bankrupt, it does not matter. There is no money set aside for employees, and they certainly are not preferred creditors by any stretch of the imagination. They are not even included on the list, except somewhere down below. So what guarantee do employees now have?
Mr Bratschitsch: They have no guarantee today. After all, there are no guarantees.
Ms S. Murdock: You stated in your own submission that you support the payment of employees for work done.
Mr Bratschitsch: Yes.
Ms S. Murdock: I am asking you how today, other than this legislation, can you guarantee that?
Mr Bratschitsch: There is no guarantee. I have learned that in my own bitter experience.
Ms S. Murdock: This legislation is it, then.
Mr Bratschitsch: This legislation brings government into businesses' affairs, and I do not think it belongs there. This bill will add to my cost of doing business, and I am just a typical manufacturer who sells to the United States. I have to keep my prices as competitive as possible. Right now, what is being proposed is perhaps a 1% payroll tax, but that could be 3% or 5% years from now. I can see from your reaction I am not addressing the point of your question.
Ms S. Murdock: I am just thinking --
Mr Bratschitsch: If a company goes under today, there is no guarantee its employees get paid. There is no guarantee.
Ms S. Murdock: No. You answered that. How is this cost of business in the sense that right now everything that is in this bill, or amendment, is already legislated?
Mr Bratschitsch: You mean as of today legislated?
Ms S. Murdock: All the guarantees and so on, and it is not at present costing the employer anything.
Mr Bratschitsch: I know there is a limit for directors' liability, but so far, to the best of my knowledge, there is no payroll tax.
Ms S. Murdock: No, there is not.
Mr Bratschitsch: No. And I am concerned too about -- in my case, back in 1984, I was history, yet I was still a director. Decisions were being made that I had no influence over. The problem is, someone could come to me and take everything I had and I had nothing to do with it. That is not fair. At that time, I spent a lot of my own money trying to keep the Canadian company going, foolishly. Really, directors, the ones who are the cagey ones, you just have to find your way around it. So you are not going to solve anything.
Mr Ramsay: How are we for time?
The Vice-Chair: We have a couple of minutes.
Mr Ramsay: You are the first person who has come up with another sort of suggestion. I think what many of us are grappling with is how to do this, because I do not know of anybody who does not agree with the principle of this bill, as you do.
Mr Bratschitsch: Yes.
Mr Ramsay: Obviously, workers are entitled to what is due them, and that is what this government is grappling with in this bill.
I am just wondering, with your experience in the export business, in having to secure a bond, what would the difference in cost be to a business to build in a guarantee through the security of a bond, which may ultimately be a payroll tax? What does that cost? How do you deal with the bank?
Mr Bratschitsch: It is not much, because if I establish a line of credit with a bank, I do not have to spend it. If I establish a $10-million line of credit, at that time the bank deemed that my company was worth having a $10-million line of credit. If a wage protection bond was set up for my particular company that had a value of $1 million, then I could see where psychologically I will have to adjust my line of thinking that my line of credit is now $9 million, not $10 million. It is the bank's responsibility, it is part of the business relationship, it makes money if I make money, that I am still worth while to honour that $1-million bond if it comes true.
That is the way my bond works now with customs. The bank is financing my bond. Now, my bond is only worth $5,000 and my line of credit is only $50,000, because my company is very healthy and we do not like to use the bank's money, but that is what it is. So it is not really a factor. But certainly it is a very simple method that you put in the hands of qualified people who are trained to handle finances. Of course, it is a federal jurisdiction probably.
The Vice-Chair: I will end the questioning there, because we are out of time. I would like to thank you once again for coming and making your presentation. It is quite interesting, this thing about the bonds; a different perspective.
Mr Bratschitsch: Just trying to do my part. Thank you.
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ONTARIO FEDERATION OF LABOUR
The Vice-Chair: The Ontario Federation of Labour, Mr Wilson, please.
Mr Wilson: Thank you, Mr Waters, and to the members of the committee for allowing us this opportunity to make our presentation on the subject of Bill 70. I would like to introduce my colleague, Mr Chris Shanks, who is the research director of the Ontario Federation of Labour. My name is Gordon Wilson and I am the president.
I believe we have circulated a copy of our presentation in written form through the clerk. If I can, I would like to review that initially with the committee and then we are prepared, obviously, to respond to any questions the committee may have for us.
The Ontario Federation of Labour welcomes the government of Ontario's decision to hold public hearings on the issue of wage protection, specifically the proposed legislation, Bill 70. As our submission documents, the issue of wage protection, in the context of a severe structural recession and the consequent adverse effects on working people, is of vital importance.
This submission reflects the views of the OFL and its 800,000 affiliated members under two main headings: first, the nature of the problem, and here our intention is to document the problems faced by workers in Ontario confronted by economic dislocation and the resulting need for wage protection, which we believe will be of interest and importance to the members of the committee; and second, the proposed solution. Here the appropriateness and viability of the employee wage protection program will be discussed in our brief, together with several suggestions for further improvement.
First, the nature of the problem: In the OFL's view, there is a very real and pressing need for wage protection in our province. This recession is without question the worst recession to hit Ontario since the Great Depression. Job losses in the province have totalled 214,000 people in the first year of this recession compared to 89,000 in the first year of the 1981-82 recession. The number of jobs in the manufacturing sector dropped by 97,000 in Ontario last year, compared to a drop of 76,000 at the depth of the 1981-82 recession. So Ontario's rate of job loss has been over twice that of the national average, accounting for about 80% of the jobs lost across the entire country.
It is important to note that many of these jobs are gone for ever. In 1990, 65% of reported permanent layoffs were due to partial or complete plant closures. In the first five months of this year, 59% were due to partial or complete closures. By contrast, in 1982 only 24% of permanent layoffs were due to shutdowns. The remainder was the result of companies temporarily reducing the number of their employees.
The following table is composed from the figures issued by the Ministry of Labour's office of labour adjustment. The severity and increasing depth of the problem is shown, yet the figures underestimate the problem, as only those closures affecting more than 50 employees are recorded by the ministry.
I just want to quickly refer to table l, which is the comparison of the figures on closures. If the committee looks at the complete and partial closures and their totals in 1981-82 and the number as compared to 1989 and 1990, you will see there has been a considerable increase in the number of closures in the cyclical recession versus the structural one we are currently engaged in.
Table 2 documents the numbers of workers affected by plant closures in Ontario, and here also the figures show an increasingly severe problem, but again the figures underestimate the problem. Table 2 shows only Ontario closures affecting 50 or more employees. Recorded are permanent and indefinite layoffs from full and partial closures, not temporary layoffs from reduced operations.
Again, to draw the committee's attention to the period 1981-82, if you total full and partial closures in the column on the right at the top, you will see that total is approximately 18,000 workers. If you compare that to the two-year period 1989-90, that figure is a little over 33,000. I believe it is 33,238 workers.
The following page shows the same statistics in graph form. Framed this way, one can easily visualize the structural extent of the current recession in comparison with the more cyclical downturn in 1981-82. For the column on the extreme right of this graph, 1991, I ask the committee members to be cognizant of the fact that 5,958 is only to the period ending in May, so the first five months in 1991.
Like jobs in the resource sector, manufacturing jobs are hard to replace. The average wage for manufacturing jobs in Ontario is $630 a week, considerably more than the industrial average of $542 per week and the average in the service sector, where most jobs have been created over the last decade, of $511 per week.
During the current recession, bankruptcies in Ontario, business and personal, have soared. Business bankruptcies increased by 73% in 1990 compared to the year before. In the same time period, personal bankruptcies increased by 83%. In the first two months of 1991 there were 24% as many bankruptcies in Ontario as in all of 1990.
The employment standards branch of the Ministry of Labour has already received more than 13,000 potential claims for compensation for workers since the Premier announced the government's intention to create a wage protection program. The applicant workers are unable to collect their earned wages and other entitlements due to their employers' insolvency, closure or 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 in fact qualify for compensation.
Judging by the severity of the recession, a portion of those 50,000 citizens of this province will no doubt be found in virtually every community across the province, particularly those which contain a manufacturing sector. Economic dislocation is not just limited to one city or to any region of the province. It has been estimated that 95 cents of every dollar is spent within a 50-mile radius of a consumer's residence. So an increase in purchasing power to those workers in compensation in those communities should translate into some form, we would hope, of a reduction in bankruptcies. Receiving up to $5,000 in compensation for lost wages and other benefits will help individuals and their communities survive the economic dislocation in their midst.
All of the data highlighted above indicate that the people of Ontario are experiencing a major industrial restructuring as well as a downturn in the economy. The implications for the future are sobering and considerable, not only in terms of levels of unemployment, but also in terms of actual living standards and in the general quality of life in Ontario. In short, a highlighting of basic economic statistics shows that the recession has hit Ontario particularly hard.
Beyond the cold facts of plant closures, bankruptcy or failure-to-pay statistics, however, is the human element, best revealed in the specifics of actual cases wherein the need for wage protection is apparent.
The case of Best Outerwear, a Toronto clothing plant, is important, not because it is an exception but because it is much more likely to be the rule. In early 1988, Best Outerwear became insolvent. That means it could not meet its bank payments. The Bank of Montreal, citing the authority of its loan contract, appointed a receiver.
A receiver's job, obviously, is to take whatever action is necessary to secure the bank's loan. That could mean reorganizing the company, selling it or closing down and liquidating the remaining assets. Closing down is usually what happens, and in the case of Best Outerwear, that is exactly what did happen.
When a receiver closes a company down, the cash box has usually been emptied by the former managers. The company's property and machinery are pledged to the mortgage holders or leaseholders. The only assets that can be turned into cash are inventory, work in progress and accounts receivable. So who gets the corporate leftovers?
Under our Employment Standards Act, back wages, termination notice and severance pay have precedence, but only up to $2,000. The Ontario government's own task force reported that as many as 70% of workers who lose their jobs because of an insolvency closure may also lose out on moneys owed to them. That is what happened as well to the workers at Best Outerwear. The Bank of Montreal exercised its legal and contractual rights to secure as much of its loan money as possible and did so at the direct expense of moneys owed to the immigrant workers who made up Best Outerwear's workforce.
This was a small establishment whose employees were, in the main, immigrant women, including visible minorities and single parents. In contrast to many enterprises, however, it was unionized. The International Ladies Garment Workers Union met with bank officials, made representations to the Minister of Labour, brought in legal counsel and even organized demonstrations in front of the Bank of Montreal in an attempt to highlight the plight of Best Outerwear employees.
The employment standards branch wrote to the Bank of Montreal requesting that it honour the moneys owed to the employees, even though the bank could use its contractual powers to put its interests ahead of those of needy employees. The bank made it abundantly clear that the interests of its shareholders took precedence over the interests of Best Outerwear's laid-off immigrant workers. The former employees of Best Outerwear have yet to receive any compensation. Three and a half years later, without any form of wage insurance, their case languishes before the courts. It is the view of the OFL that such situations, of which we have given but one example, should not be allowed to continue.
Concerning the proposed solution, that of the employee wage protection program, when the Minister of Labour, Bob Mackenzie, introduced legislation creating Ontario's employee wage protection program on April 11, 1991, 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 that, "Workers are entitled to receive the money they have earned, and they must be assured that this money will be given to them." We agree with these views. The workers of Ontario are entitled to receive all the compensation owed to them. The employee wage protection program initiated by the government of Ontario is meant to provide a mechanism to compensate workers in an expeditious manner for unpaid wages, vacation, termination and severance pay as a result of employer bankruptcy or abandonment or any other failure to pay.
Authored by both business and labour, the Premier's Council report entitled People and Skills in the New Global Economy noted, under the previous government, that there are three main ways in which wages can be protected: first, "a deemed trust or statutory lien on wages, which in effect gives the workers preferred creditor status"; second, "legal action for personal liability against the directors and the officers of a corporation for wages"; and last, "a wage protection plan that would pay employees' claims and attempt to recover these amounts from employers." This is on page 210 of the report. The government of Ontario essentially chose the latter option, although elements of option 2 concerning personal liability existed prior to their announced withdrawal on June 5, 1991.
Bill 70, as we perceive it now, contains two main elements. The first is compensation to employees for lost wages, to a maximum of $5,000. The program would cover earned wages and vacation pay and would cover the minimum amount of termination and severance pay outlined in the Employment Standards Act. The second is the creation of an expedited appeals process for employers and a new adjudication system for employee appeals. Such legislation promises a dramatic change from the previous practice wherein interests of financial institutions were put before the interests of working people.
With regard to compensation for lost wages, 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 for a maximum of $4,000 plus severance pay. But despite their best efforts, it often proves impossible to collect the money owing. A worker entitled to wages, vacation pay, termination or severance is an unsecured creditor of an insolvent or bankrupt company.
I would bring to the committee's attention that the claims of workers in the pecking order -- the Bankruptcy Act as currently structured puts workers' claims behind those of the funeral expenses of the directors of the corporation if they die in the interim, while the proceedings are under way. That act has not been revised since 1949, under a number of Liberal and Tory governments.
Because workers' claims rank behind those of secured creditors such as financial institutions, the preferred and priority claims allowed in bankruptcy or insolvency are not very effective. Many workers are therefore unable to collect wages, vacation pay, severance or termination pay owed them, as we saw in the earlier example of Best Outerwear. The inadequacy of this situation has also been documented by a number of reports, including the Premier's Council report People and Skills in the New Global Economy, mentioned before.
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Recommendation 30 of the Premier's Council report, entitled "Protecting Dislocated Workers' Legal Entitlements," states:
"Ontario should provide a wage protection advance to all workers who are owed earned wages, vacation pay, contributions to benefits and pension plans, termination pay and severance pay by employers who shut down and default on their legal responsibility. Ontario must then vigorously pursue recovery of the funds by all legal means available.
"Changes should also be made to the federal Bankruptcy Act to protect earned workers' wages by giving them priority creditor status."
This is on page 211 of the report, and we have also included it in an appendix to this presentation.
In 1985, the Brown commission report, or Commission of Inquiry into Wage Protection in Insolvency Situations, also recommended changes so employees would have increased rights over money owed. Key data from the Brown commission documenting the extent of the problem, the average loss per affected worker and the commission's estimate of the millions totally lost can be found in appendix 2 attached to this presentation.
Given the severity of economic dislocation, with its consequent human suffering, and taking into consideration the views expressed in the Premier's Council report and the Brown commission -- both commissioned by the previous provincial government -- the Ontario government has now moved to make workers better able to receive moneys owed them.
In regard to the appeals process, the government of Ontario has moved to ensure that compensation owed to employees is paid in an expeditious manner. Appeals may be initiated by employees, by employers, by officers and directors or by the director of the employment standards branch. An employee can now file a complaint with his or her local employment standards branch office. To ensure the timeliness of payments from the program, hearings on appeals by employers will be required to be scheduled within 45 days of the time an application to appeal has been made. Impartial referees will be required to make their decisions within 90 days of the initial hearing.
Employment standards officers in area offices will investigate all claims for unpaid wages, vacation pay, severance and termination pay, as is current practice, and will identify employees' eligibility for payment under the program. In most cases, no payments from the program will be made before the conclusion of appeal proceedings. However, an adjudicator or referee hearing an appeal will be able to order an interim payment for any portion of the wages which he or she finds not to be in dispute. The payments will also be made to workers while an appeal by directors or officers about their status is proceeding.
The program will be administered through the employment standards branch of the Ministry of Labour and financed out of general tax revenues. By financing the wage protection fund via general revenues, what is really happening is that the government, at least in this first instance, is paying the debts of business with the tax moneys primarily paid by workers and others. If workers defaulted on their debts, the scenario would be very different, and so would the penalties.
The OFL's position is that the program would be better paid out of a payroll tax. Indeed, the government's consultation paper noted that payroll financing is predominant in European Community jurisdictions and is currently utilized in the Quebec and Manitoba construction industries. It is also estimated that the magnitude of such a tax would be one tenth of 1%. In the current economic climate, this translates into 18 cents per $1,000 of covered payroll to secure wages and vacation pay. This is not a significant cost. In our view, it would not impact on Ontario's economic recovery, certainly not adversely. Even though payroll financing would be a political challenge in the current economic downturn, it would also be accompanied by program benefits: first, as employers would be forced to police each other to ensure honesty and maintain low costs; and second, as any extension of personal liability would be unnecessary.
There is one further critical point, beyond that of the method of financing, that the Ontario Federation of Labour would like to make before concluding this submission. This concerns the issue of indexing. The issue is a simple one. Without some form of indexing -- the consumer price index (CPI) or one of the other indices of average wages -- in four years or so the real purchasing power of the $5,000 cap may well decline significantly. The regulatory ad hoc changes envisioned do potentially allow some relief for working people across Ontario, but the past experience of the trade union movement suggests that without proper indexing, workers will see a considerable shortfall over the coming years.
In conclusion, in this submission we have presented the views of the OFL on, first, the need for wage protection given the severity of the recession in Ontario, as can be seen by the statistics on full and partial plant closures and their accompanying human impacts across the province; and second, why we support the initiative of the Ontario government in amending the Employment Standards Act to establish an employee wage protection program.
When the Minister of Labour introduced the legislation creating the program, he noted that it was both "an important step to strengthen the rights of all employees in Ontario" and "an integral part of the government's comprehensive approach to labour adjustment." The Ontario Federation of Labour concurs, and we sincerely hope the government of Ontario will continue its efforts in this regard. We look forward to the day when the people of this province have a comprehensive system of labour adjustment in place. In our view, the establishment of the employee wage protection program is a major step in this direction.
Mr Offer: Thank you for your presentation. There is a great deal of information contained in it and only a very short period of time to deal with it today. Of course many will be rereading the presentation.
During this day, we have heard a number of people talk about what is being covered, how it is being covered and how it is being financed. We should be looking at that not only in terms of the actualities but in terms of the principles underneath that.
You say on page 17, dealing with the plan being funded by taxpayers, that what is really happening is the debts of business are being paid for with the tax moneys of workers. If one extends that principle, does it not hold true that the bill should include all of the rights of workers under the Employment Standards Act, as opposed to the limitation of $5,000 now imposed? If one extends this principle to its logical conclusion --
Mr Wilson: All moneys owed workers?
Mr Offer: Yes. If one takes that principle, is it not your position that the rights of workers to all due and owing under the Employment Standards Act should be protected?
Mr Wilson: Let me respond this way. I guess what my mind works from is the logic of common law, common justice, common practice. It is accepted in our society that a debt is a debt that, if it can be paid, should be paid. What we have seen, however, is workers bridled more severely than any other creditor -- in the structure, for example, of the Bankruptcy Act that I referred to earlier -- and seemingly no attempt by any jurisdiction in this country to relieve that shackling or find a way to open up the logjam so workers can get what they are entitled to.
This government has now moved in that direction. I would be inclined to say that I think every worker in this province should receive all money that is owed. That is not straying from the principle of any other relationship between workers, for example, and the people they are indebted to, for example, finance companies, banks, mortgagees.
I listened very carefully to a previous presentation on this very same point, two presentations ago, I believe. Mr Grosman spoke about how if workers find employment, they should not get full compensation; there should be some carve-out. That is an interesting concept. I wonder if he would prepared to apply that, for example, to a mortgage company where 90% of the mortgage is paid off and the worker at Chrysler is laid off in Windsor and cannot pay his mortgage. Does that mean the bank no longer has the right to seize his property?
I guess what we are trying to get to here is a question of equity, and it says that if the money is owed the worker, the money should be paid to the worker. What I am personally upset about as an individual in this province, as someone who pays taxes as you do, is that it is the people of this province who have to assume the debt created by employers, a debt they should be meeting in the same way that I meet my debts and I assume you meet yours.
Mr Offer: Hence I get back to the first point, and this matter has been brought up earlier. I do not allude to the representation of Mr Grosman because I think, in fairness, that in the end he said he did not actually recognize that the bill was styled in the way in which it was. I do not know that this is a matter of: Is the worker entitled to wages? Is the worker entitled to vacation pay? Is the worker entitled to termination? Is the worker entitled to severance? That is decided. The branch, the board, will make that determination. There is no argument that a particular employee in a particular matter will be potentially entitled to those four categories of dollars.
The question becomes -- and I am asking for your position on this -- should that employee, after that determination has been made and the dollars are determined to be due and owing, be paid out of the fund all the money due and owing? It is not an issue as to whether the person is or is not owed; it has been decided.
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Mr Wilson: What you are addressing, Mr Offer, is the cap.
Mr Offer: Exactly. The reason I ask the question if I might --
Mr Wilson: If you ask me my position and the federation's position, we think the workers should be entitled to all that they are owed.
Mr Offer: Okay, that was in fact my question.
Mr Wilson: Now my question to you is, is that the position you are going to advance in the House?
Mr Offer: My position right now is to ask you the questions, with all due respect.
Mr Wilson: You are not nearly as menacing without the mantle of cabinet around you. You are actually a pretty nice guy.
Mr Offer: That certainly will be in my next householder. And I thank Hansard. I hope they did not miss that.
Mr Wilson: "Nice" is a subjective judgement. It is not a qualitative or objective appraisal.
Mr Offer: Look at that, he is now trying to qualify it.
Mr Wilson: You gave me the opening. I will be off the hook.
Mrs Witmer: I would like to express my appreciation to you, Mr Wilson, for a very thorough presentation. I think you have made your position well known. I really do not have any additional questions.
Mr Wilson: If I could, Mr Offer, you have said it is a very large chunk to try to bite off in a very short period of time. Let me just indicate to you and to other members of the committee, if you want further dialogue on our submission, we would be more than happy to make ourselves available.
Mr Huget: Thank you, Mr Wilson, for a very informative proposal here. As one who has had the experience of a very close friend of mine being out several thousands of dollars in terms of not being able to collect wages owed to him -- and in this case it was thousands of dollars -- the resulting catastrophe that happened after that person could not collect what was rightfully owed to him, losing his house and in the end losing part of his family and his marriage due to a long-term financial struggle that started with being owed several thousand dollars that no one can collect, and to this day he cannot collect, I have to make the comment that this wage protection program is an extremely important part of legislation for that individual. Had it been in place then, I think there would be some different scenarios in his own circumstances.
To get to some of the presentations we have heard today, I think there is a general understanding that people can accept wages and vacation pay as being something owed to workers and something that should be paid out of the fund. There is not that same understanding when it comes to severance and termination. I wonder if you could give me your views on why severance and termination should be included in that whole package.
Mr Wilson: If you speak to severance and termination, again they qualify under the general terms we have been discussing as moneys owed to workers. Second, when you look at what is happening to workers in the workplace, those workers desperately need that money to assist them in whatever form of transition is available to them, and that is scant enough today. There is not an overabundance of job opportunities out there in the province.
Quite frankly, I see no distinction between the two. I have difficulty with the view that somehow paying workers what is owed them is going to discourage investment in this province, because that is to say that no one has an obligation to pay their debts, and I have concern with that principle as well.
Mr Huget: Following what I consider to be a good business practice, that is, paying your debts, paying workers who are owed vacation pay and wages, severance and termination and all the rest of that, could you see a situation where that would provide an uncompetitive or a bad situation, a negative situation, in terms of business itself in general in this province, simply by paying an obligation that it already owes?
Mr Wilson: No more than I would think a business would view an obligation to meet its tax obligations or for that matter any other obligations it had, or to extend that principle to individuals. I really have difficulty with people who say they are pulling up stakes and moving to Buffalo. My allegiance in this province is certainly to those people who live and work here and to those businesses prepared to make a commitment to remain in this province and to help generate wealth which can be distributed among the people who live in this province. When people say, "If you do this, I'm leaving," I am almost tempted to say, "If that is your decision, go ahead."
I want to tell you what I would do if I were the government of this province. I would make sure they would have one heck of a hard time getting their products back into the Ontario market and I would use whatever device I could find that was within legal grounds or within ethical practices to make sure they were discouraged from peddling their wares to the people they had just deserted when they left this province.
Mr White: Very briefly, Mr Wilson, in my riding, as you well know, there are a large number of plant closures directly related to the free trade bill, auto parts manufacturers, etc, for General Motors and of course Chrysler. I am wondering if you have any thoughts about how this particular program would affect closures of companies that want to move, as you say, to Buffalo.
Mr Wilson: In the case of General Motors, as an example, and I live in the Whitby area as well, it is fairly clear that the corporation's strategic decision is to put a considerable amount of investment, as they have -- almost $1 billion if not more -- into the Oshawa facility. That plant is technologically sound and will remain so as a state-of-the-art plant probably for a decade, maybe a little more, maybe a little less. The difficulty, however, is when they make the next investment decision, as that decision will come up in virtually every auto assembly facility in this province.
It is now completely discretionary on the part of the corporation to determine whether it wishes to make that investment in this market. They now know, because of the trade agreement, that notwithstanding that decision, they will still have access to our market. That is the point that is particularly grating. If you were to say to me, "Is General Motors likely to be upset by this?" I cannot see why. First, they have negotiated substantial provisions with the union involved, the Canadian Auto Workers, in which the CAW has negotiated with General Motors substantial provisions to cover like situations. It would take General Motors in Oshawa determining it was closing down its facilities to really have an effect on this, or certainly a considerable number of the workers who work there. Would General Motors be impacted unduly by this? I cannot really see it.
Mr White: It is really not General Motors I would be concerned about so much -- I am certainly aware of their situation -- but the number of feeder plants to that corporation, some of which are closing at the moment.
Mr Wilson: Yes. There is no doubt there is clearly a record out there, when you look for the period, say, from about 1988 forward, that a considerable amount of the automotive investment in parts and supplies followed the assembly plants as a result of the auto trade pact negotiated by the federal government in 1965, I believe. You look at the growth of that industry and it happened from 1975 and continued on a growth curve until I would think the recession hit in 1981-82. Then there was a stalling out and a levelling out, but now we have seen a straight line down because the trade agreement has again opened the doors. They no longer have to be here to have access to the market, so they can close their doors and say, "Goodbye, I can make more money in Mexico or South Carolina." So this now comes into play and there will be some costs attached to that.
That is the point I tried to make earlier. I would urge this government and the members of this assembly to make it clear to businesses in this province that when they decide to take advantage of the situation solely and exclusively in their own interests by maximizing their profit or by marginally increasing it and therefore that is the impetus for moving south of the border, or to Mexico or indeed anywhere else, that they do so without any co-expectation that they are likely to be treated kindly when they try and get their product back to the Canadian market.
The Vice-Chair: Thank you very much, Mr Wilson, for your presentation. Some interesting concepts, I must admit, Gord, with me sitting here and you there.
Mr Wilson: It is not difficult to understand. If I was a small business person in any community in this province and I looked at what is likely to be my salvation in terms of my economics and my business, I would have to wind up with the people who are going to live here because that small business person, by and large, is going to live his life in the community he is in, or not too far away from it. His allegiance ought to be with the people who are going to have remain here, and that includes us, and that is why we are in to make a presentation.
The Vice-Chair: Thank you again for your presentation.
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UNITED STEELWORKERS OF AMERICA, DISTRICT 6
The Vice-Chair: The next presenters are the United Steelworkers of America. I assume Mr Hynd is going to do the presentation. Welcome to the committee, Mr Hynd. Whenever you are ready, the floor is yours.
Mr Hynd: I would like to make a presentation on behalf of the United Steelworkers of America, District 6, which is essentially Ontario. We, the United Steelworkers, appreciate the opportunity to appear before this standing committee to express our strong support for Bill 70. District 6 of the United Steelworkers represents approximately 70,000 working men and women in Ontario. The vast majority of the employees we represent work in the private sector, and many of these are vulnerable to losing wages and benefits when companies that employ them become insolvent. In this presentation we shall show why Bill 70 is so important to these workers, and why the Steelworkers welcome this measure and applaud the priority the government has attached to it.
Bill 70 is needed because in Ontario between 4,000 and 5,000 workers lose out every month on wages and other employee benefits that are rightfully theirs. Each year for some 50,000 to 60,000 workers, their rights are purely notional. What previous legislators did was confer on workers statutory entitlements to wages and employment-related benefits, but took no adequate steps to ensure that those entitlements would be paid.
The majority of workers almost always receive the wages and benefits to which they are entitled, and which this legislature intended them to receive. For workers in the lower tier, however, it is a different story. The majority of workers in the lower tier of the labour market are employed by smaller companies. A longitudinal study by Statistics Canada of private sector firms concluded that, over an eight-year period from 1978 to 1986, 36.1% of the companies employing between 5 and 20 workers exited.
It also should be kept in mind that firms employing more than 100 workers are more likely to have assets or market shares that are attractive to other businesses. For these reasons, these companies more often exit from the market by being taken over, rather than by being wound up. Smaller companies, however, are more likely to exit by being wound up, usually involuntarily.
The Brown report provided estimates of the number of workers who suffered wage and benefit losses as a result of business insolvencies. A more current estimate of the number of workers whose employers will be unable to meet earned wages and benefits is contained in the Ministry of Labour's Wage Protection Fund Discussion Paper, released in December of last year. In 1990-91, therefore, the proportion of job losers whose employers will default on wage and benefit obligations will be around 10% of those who are unemployed.
While the trade union movement has been vigorous in its advocacy of wage protection measures, members of the standing committee should keep in mind that the majority of men and women who will benefit from the guarantees provided by Bill 70 are not likely to be members of trade unions. The men and women whose employers default on wage and benefit entitlements are therefore likely to have below average incomes. From what we know about segmentation in the labour market we can also infer that workers who lose wages and benefits are more likely to be women, more likely not to speak English as a first language and more likely, as well, to be drawn from visible minorities. Bill 70, therefore, is very much about protecting the economic rights of those who are not even getting the economic share they were promised, let alone the share they deserve.
The recession makes the enactment of Bill 70 a matter of urgency. Steelworkers welcome the priority the government has attached to this measure. We applaud, as well, the government's decision to make its guarantee retroactive to the day on which it took office.
The average loss on defaulted wages and benefit claims is the equivalent of 3.8 weeks of wages or salary. Wages in the small business sector tend to be lower than average for the province. The actual average loss is therefore likely to exceed 3.8 weeks. In other words, 3.8 weeks is a conservative estimate.
The most significant losses are often those associated with default and severance compensation. The majority, though admittedly not all, of the workers who lose out on severance benefits are older workers. It is older workers, therefore, whose losses are likely to be the greatest when their employer defaults on statutorily promised benefits. From numerous labour market studies, we know it is also older workers who have the greatest difficulty in finding re-employment and are most likely to experience substantial wage loss in their next job. Losses of this magnitude would impose hardship at any time. These losses, however, are added to other hardships associated with permanent job loss.
On the following page we have summarized five cases drawn from Steelworkers Files. These cases illustrate the scale of economic hardship that wage and benefit defaults impose on ordinary workers. In one instance, the average loss per worker is $14,447.32. For us, these workers are not statistics. They are workers who belonged to the Steelworkers, often for many years. The losses these employees suffered are not theoretical issues for us. They are real. We have difficulty in conveying the anger and frustration we feel about having been able to do so little for these workers.
The former government had before it the findings of the Brown commission. They had, as well, the findings of two investigations carried out at the federal level. Of course, former governments also had the unending stream of reports from their own employment standards branch. Moreover, the previous government even had the support of its own blue-ribbon Premier's Council. Why no action was taken is inexplicable to us. Only the members of the former government can explain why they failed to act in the face of such convincing need and in the face of the impending recession in the Ontario economy.
Under the procedures set out in the current Employment Standards Act, there is often a lengthy delay between filing a valid claim for back wages and the payment of that claim. The widely reported case of Bilt-Rite Upholstery, manufacturer of the Bauhaus label, is illustrative of the delays that stem from the current Employment Standards Act. At the time of its insolvency, Bilt-Rite owed 486 workers approximately $4 million in back wages and benefits. This represents approximately $8,200 per worker. Although operations are continuing in the United States, not one cent of the workers' earned wages and benefits has been received for more than 16 months.
Especially with the amendments announced by the minister on June 5, 1991, Bill 70 will establish one of the most expeditious adjudication channels of employment law in any Canadian jurisdiction. Had the situation at Bilt-Rite been governed by Bill 70, up to $5,000 would have been paid to each employee within 15 days of an order being issued to the trustee in bankruptcy unless that order were appealed.
Bill 70 clearly represents a substantial improvement in adjudicative procedures and in the implementation of a remedy. The time frames that are to be added to Bill 70 represent a useful standard for expedition in other adjudicative procedures regarding settlement of employee claims.
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One of the aspects of Bill 70 that has drawn attention has been its application of directors' liability to defaulted wage and benefit claims. There is nothing novel about directors' liability. A version of that liability has long applied in both the Ontario Business Corporations Act and the Canada Business Corporations Act.
Because of the absence of class action procedures in Canada, claims must be filed individually. The litigation expense and the time to enforce a valid claim are sufficiently deterring to discourage most claims. This occurs even though existing statutory provisions recognize both the validity of workers' claims on directors and the legitimacy of the principle on which these claims are founded. Bill 70 will facilitate enforcement of those claims by subrogating them to the Minister of Labour.
As members of the standing committee are aware, directors' liability applies in Alberta, Manitoba, British Columbia and Saskatchewan. Directors' liability was not invented by Bill 70 nor by Ontario's NDP government. Indeed, enhanced directors' liability was one of the devices recommended in the report of the Premier's Council.
Steelworkers have a particular interest in directors' liability. Our interest arises from the case of Bilt-Rite Upholstery. Bilt-Rite's insolvency was contrived. Bauhaus upholstered products have not disappeared from the market. Martin Silver, the principal figure in Bilt-Rite, has not in any real sense gone out of business. The name Bauhaus continues to play a leading role in the upholstered furniture market. The products, however, are made in factories in the US. The Bilt-Rite bankruptcy was really an elaborate business reorganization, a reorganization carried out largely at the expense of Bilt-Rite's workers.
The $5,000 ceiling established in section 40i will be sufficient for the preponderance of claims under the employee wage protection plan. However, the $5,000 ceiling will pose difficulties for some employees. The proposed section 40i allows the government to prescribe a higher ceiling from time to time. We urge the government to indicate its intention to raise this ceiling. In the first place, it is important that the real value of the ceiling not be eroded. This will require linking the ceiling to increases in either the consumer price index or the average weekly wages and earnings.
Finally, the government may wish at some point to revisit the method of funding the employee wage protection plan. Pursuant to the directive of 20 October 1980, most of the member states of the European Community have established guarantee funds financed in whole or in part out of payroll taxes. This method of finance is attractive because it facilitates increases in the benefit ceiling.
Steelworkers support Bill 70. We welcome the employee wage protection plan it establishes. We applaud the government for taking these steps and for the priority it has given to this legislation.
Mr Arnott: Thank you, Mr Hynd, for coming here this afternoon with your opinion on Bill 70. I have one question with respect to the first page, "Bill 70 is needed because in Ontario upwards of 4,000 to 5,000 workers lose out every month on wages and other employment benefits that are rightfully theirs." That number, I would assume, is quite current.
Mr Hynd: We think it is correct.
Mr Arnott: No, current. It has gone up, I would presume, in the past number of months given the recession.
Mr Hynd: I would assume the figures we have can only substantiate that amount.
Mr Arnott: It is an estimate. Are these 5,000 people who will never receive any remuneration for what is owed to them without the benefit of --
Mr Hynd: They may receive some, but they may not be paid all their benefits. As the legislation is retroactive, it will cover the people who are currently being affected and those affected up to the time the NDP --
Mr Arnott: Can you tell me how you generated the estimate?
Mr O'Grady: I am John O'Grady with the Steelworkers. The estimate is generated by the Ministry of Labour. That is the estimate of the Ministry of Labour expressed on a monthly basis in the event of a severe recession, which I think most would concede is what we are currently experiencing. What gives one further confidence in the Ministry of Labour's estimates is that they are largely consistent with estimates made about 10 years earlier by the Brown commission that was set up by the Conservative government. When you have two separate sources coming up with essentially the same orders of magnitude, I think you can have a measure of confidence in that estimate.
Mr Gerard: Our experience has been that during this recession a large part of our membership who have been thrown out of work as a result of either real bankruptcies or contrived bankruptcies have ended up getting nothing. Part of the reason they get nothing is that they are so far down the list of who collects first. Banks never give a break. They take their chunk first, and after they have had their chunk very seldom is there anything left for anyone else, let alone to collect things like severance pay and vacations. We sometimes get portions of wages, depending on how expeditious the owner has been in slamming the door shut.
Ms S. Murdock: Mr Hynd was commenting that it was going to be predominantly women, immigrant women whose first language is not English, and non-unionized employees who are affected by Bill 70. Other people have commented too, and I think there is a mistaken belief that it is the workers who belong to big unions who are going to benefit. Not only is it going to be the people you mentioned and unionized workers as well, but any worker in this province is going to be affected by Bill 70. That is something your report brought out that no one else has put forward, and I thank you very much. It was excellent.
Mr Hynd: Quite frankly, no worker will benefit from this legislation. Workers would much rather continue to be workers than thrown on the garbage heap, either by the recession or by what is happening in bankruptcies, business insolvencies and contrived insolvencies. We believe that nobody is benefitting from this. What workers may achieve is what they are entitled to, and what they are entitled to is very small. It is the wages they earn, it is the laws that are in effect, and their entitlement to receive what the law provides. Surely that is not a benefit. Surely that is only a minimum.
Ms S. Murdock: I stand corrected.
Mr Offer: Thank you for your presentation. I have one line of questioning, and that has to do with the ceiling of $5,000 not being eroded. This is a recent point brought forward by you in the second place, but first by the Ontario Federation of Labour which made a presentation just before you. I think you were here, so you would have heard their position that the dollar ceiling should be indexed. Is the point you are making on page 15 of your presentation, when you are urging government that the real value of the ceiling not be eroded, are you in essence saying that the ceiling should be indexed?
Mr Hynd: If there is any way to continue real value; one method is indexing according to the consumer price index.
Mr Offer: In the legislation there are regulatory-making powers given to the government, the first to prescribe other payments that are wages, which I will leave for a moment, and another to provide for increases in the amount of compensation which the employee wage protection program can pay. Ostensibly, this type of increase might be able to fall under that regulatory-making power. My question to you is, would you find it objectionable if that type of regulatory-making power were taken out and put into legislation? In other words, when it is a regulatory-making power, it does not have to go through the Legislature. There is no real means for input and consultation. Would you be opposed to taking this part out of the regulatory power and put into the legislative section so that it still could be dealt with, but only after it went through legislative processes now?
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Mr Hynd: Certainly. It would be, in my view, just another way of delaying due process. If in fact $5,000 is the limit that is payable today, then surely it does not make a lot of sense to allow the $5,000 to be eroded by the increase in the cost of living. The legislative process, as we have seen, in many instances can tie things up for a long time. We are in favour of the process, and the thing that really annoys me is that we are talking about this at this time and date. I am not surprised this is the first time we have had a piece of legislation that guarantees to workers wages earned. I find that very difficult to struggle with. I find it difficult that we have passed laws in the Employment Standards Act that entitle employees to benefits and there is no way they can get the benefits. That we allow them to get the benefits on paper does not do workers any good. That I find objectionable. I am glad that, at least today, we are struggling with that objection and, hopefully, we can some day get it that workers will receive their entitlement both under the law and for wages they earned.
Mr Gerard: By way of a further explanation on your question of removing it and subjecting it to the Legislature, Harry says it would just be added delay and I suspect it would be a hell of a lot more than that. We have waited years to have some government with the courage to bring this in and would hate to have years before some government has the courage to give the increase that is needed. I guess government members' pensions are subjected to the regulatory process and the indexing of their pensions is done by regulation. I do not see where there is any difference between what government members' pensions get by way of index, and what workers' legal entitlements to their earnings, vacations and severance should be. There is no reason to do that.
Mr Hynd: If you tied it to that kind of index, then I am sure directors would be happy with that.
Mr Offer: Just as a result of that last comment, taking that final response, would that hold true of one other regulatory power, which is prescribing other payments that are wages for the purposes of this plan? It just gives a scope and a breadth to government not only to increase the amount in the plan, but also to extend its breadth to talk about some other types of payments. Would your position be the same in terms of that area?
Mr Gerard: Yes.
Mr Offer: Interesting.
Mr Gerard: We just feel we should be dealt with no less judiciously than members of Parliament.
The Vice-Chair: I thank you for your presentation and your time.
Mr Gerard: I apologize for being late. It was the people's airline. When it was actually owned by the people, it ran on time.
GOGI BHANDAL
The Vice-Chair: At this point, I would like to call Ms Bhandal. Thank you for coming before the committee in advance and the floor is yours and you are free to carry on at your leisure.
Ms Bhandal: My name is Gogi Bhandal. I was the past president of Local 32U of the United Steelworkers of America, which represented employees of Bilt-Rite, of Bauhaus. I appreciate the opportunity to appear before this committee to express my strong support of Bill 70. I know my members would not benefit from this bill, but at least my brothers and sisters will.
In this presentation, I wish to tell you how difficult it was for the workers of Bilt-Rite when Bilt-Rite declared bankruptcy and the workers lost their jobs with decent wages. The financial strain and emotional stress from these circumstances was far too great a burden to expect one to endure.
Workers were not informed. They worked a full shift, which ended at 4 o'clock on March 16, 1990. They went home and received phone calls from the supervisor that the company filed for bankruptcy.
I am sure you must have read about Bilt-Rite in newspapers. Bilt-Rite was one of the largest manufacturers of upholstered living room furniture in North America. The company had been in business over 50 years. When I started with the company -- I started the job in 1977 -- it employed approximately 50 or 60 people.
The employed numbers grew over the years to the peak of 700 unionized employees, not counting the office staff. Seventy per cent of the unionized workforce was piece-workers whose average earnings were $10 to $20 per hour. The majority of workers were new immigrants whose first language was not English. They could not speak English.
In 1988, numbers started to decline after the inception of free trade and the opening of a new manufacturing facility in Mississippi in the United States, although we were assured by the company, through a letter to the union, that the new facility would not have any effect on our jobs. Unfortunately, that was not true. We started to get less work and we were sent home early without pay. In 1988, we received UIC assistance.
From mid-September 1989, we were forced to endure shortened workweeks, which resulted in reduced earnings. On average, the shortened workweeks amounted to 25 hours of work per week. The company continuously assured the employees, and our union, that the short workweeks were temporary, thereby encouraging the employees not to seek employment elsewhere.
The union on numerous occasions requested that the parties jointly apply for assistance through the UIC work-share program. Even though the parties had previously requested and received such UIC assistance, the company adopted the callous position that if the union paid the company payroll department to do the paperwork on a weekly basis, it would be prepared to consider the UIC work-share program. As a result of the company's imposed short workweek over the period of six months prior to being laid off March 16, 1990, the employees were faced with a greatly reduced unemployment insurance benefits entitlement.
I can give you a simple example. For one of the workers whose regular pay used to be $8.52 per hour, amounting to weekly pay for 40 hours of $340.80, not including overtime, the normal entitlement at 60% would have come to her as $204.48 in UIC benefits. Instead, because of the severe reduction in normal working hours, her unemployment insurance cheque was only $88. We wrote several letters to the minister, who happened to be Barbara McDougall, but our appeal was denied.
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In our opinion, Bilt-Rite's bankruptcy was well planned. The company did not give us any information. They treated us as less than human and stopped paying our pension premiums and extended health care premiums from the summer of 1989. Union dues were deducted from our paycheque, but they were not paid to the treasurer of the union. Workers did not receive the last week's wages after the bankruptcy; no severance pay, no notice pay, no terminations pay. Nothing was received. The union filed claims with the employment standards branch. An investigation was conducted and the outcome was that workers are to be paid. The company hid all the money in Bauhaus and numbered companies, and continues to operate from its US plant up to today. Workers have not received a cent. They had to pay medical and dental bills from their own pocket.
I can never forget my workers walking into our office with $2,400 in medical and dental bills. Because the company did not pay our premiums, the insurance company did not pay the bills. Workers were getting phone calls from their dentists, "If you don't pay, we will give it to a collection committee." They were forced to pay, and they did not have any money, because the company did not pay the last week's wages, and they had to wait for unemployment insurance for six to eight weeks.
As a result, our workers have lost their houses and cars, and families broke up. By my calculation, an average worker is owed $8,200. I will conclude by saying that our union has done a fantastic job for our members. The union approached the federal and provincial governments. An adjustment committee was formed. I was on the committee. Through that committee office, we helped our laid-off workers. The company was invited, but elected not to participate. They were very unco-operative and did not give us the list of all non-union members they had in other Bilt-Rite companies. They did not give us the list, so we could not help those members. Through our office, we could help only unionized members.
It was very difficult to find jobs for our people, because the majority were unskilled. The majority did not speak the language. Because the furniture industry is almost dead, we could not find jobs in the same industry. It was a tough job, and the committee was in operation for almost 15 months. Our union paid the expenses for the office. Government helped us. Through that committee we were able to find employment for about 75% of the workers.
I strongly support this bill. I think this bill should be passed and workers should be paid.
Mr Huget: Thank you for a very personal and moving presentation. I have three or four very short questions, and perhaps one longer one. Are the owners of the company still operating a company in Ontario now?
Ms Bhandal: No, they are operating in the US.
Mr Huget: To the best of your knowledge, what did they lose out of this whole exercise?
Ms Bhandal: I do not think they lost anything.
Mr Gerard: Not a damn thing. In fact, I will tell you that they sold themselves, because they had everything held in different numbered companies. The Jaguar the plant owner owned was held in a numbered company. He sold it back to himself before he left at a rate that was obscene. Having seats on the board of trustees, we objected to him selling himself his Jaguar at a highway robbery rate, yet he did it.
Mr Huget: Was there in your view money somewhere that could have paid those obligations to the workers?
Mr Gerard: Gogi did not expand on this: Through the pressure of our local union and the pressure of the district and various regional offices of the union, we managed to -- I will not use the word "force" -- condition the Ministry of Labour employment standards branch to proceed with charges. The hearings on those charges were resolved a few weeks ago and the numbered companies were found to be liable. As to the owner, Marty Silver, the court held we could not hold personally liable. We are now 18 months since the closure and subject to appeal, which may take another 18 months to two years. Our members have received not one damned thing.
Mr Huget: That was going to be my next question, have you received anything at all after the bankruptcy? It does not look, at least in the immediate future, like you are going to receive anything even now.
The last question I would like to ask, and it may a little difficult for you to expand on it, is could you tell me from your personal experience some of the things that have happened to the workers in that plant after the bankruptcy?
Ms Bhandal: After the bankruptcy?
Mr Huget: Yes.
Ms Bhandal: It was hard for them to find employment and more or less they were forced to pay bills. They did not have any money because they did not receive any wages for the last week. Then for UIC benefits they did not receive full entitlement because of the forced short workweek prior to the bankruptcy. Every time we had meetings with the management, they said, "It's temporary, it's temporary," and they did not agree to apply for the UIC work-share program. They did not co-operate.
Mr Huget: So many of those workers have lost a great deal.
Ms Bhandal: They have lost their homes, lost their families, lost their cars.
Mr Huget: There was a comment made in a presentation today that people agree with workers being entitled to wages that are owed them and that this is something society needs to look after, but there was a reference to some greater need of society, that perhaps if we had the luxury of allowing workers to recover their wages, that would be fine, but we may not have in today's society and perhaps there is a bigger need to look after other aspects of bankruptcy. What do you think people in this province should do?
Ms Bhandal: They should look after basic needs. There should be moneys available for basic needs. My members, if they have $5,000 or $3,000, do not have to go through hard times. They would not have to lose their houses and they would not have to lose their families.
Mr Gerard: I do not know of any other piece of legislation in Ontario except legislation that applies to workers, whether it is the Employment Standards Act or the Labour Relations Act, that implies you have some right and then gives no vehicle for enforcing that right, or gives such an inferior vehicle to enforce the right that you have raised up some sort of expectation that will never be met.
For the workers at Bauhaus, at Bilt-Rite whom Gogi refers to, the first language for the majority of them was not English. The majority of them had shorter terms of seniority because of the major expansion that had happened in the last 15 years. The majority of those workers to this day do not understand how they could immigrate to a society that allows something to go on like what went on at Bilt-Rite when the owner -- I say it whether we are in private government hearings or not, because I would love to be sued; it would be a great place to have a fight -- contrives a bankruptcy and works with the union, which Gogi did not say. We worked with the owner and the government and even attempted to get relief from workers' compensation and to work with the owner to try to get work-sharing and to do all of these kinds of things, while he was going through nothing more than a charade and setting up shop somewhere else and in fact disappeared in the dark of night, set up a whole bunch of holding companies under numbered companies and went and did what he did.
Do you want to ask me what kind of law we have? That guy ought to be tracked down, charged as a criminal and put in jail. That is the kind of law we should have. Directors' liability, in my view, does not go far enough. This guy ought to be in jail and the government should be taking steps to put him there for what he has done to these workers. If he did that in any other kind of decent society, he would be in jail.
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Ms Bhandal: There were three other plants that went bankrupt with our plant, and they were non-unionized. That company did not give us a list of those members so we could help them from our office. We have some members from our plant who are in school. They are learning English. They have taken other training courses. It is too bad we could not help those brothers and sisters because the company did not co-operate. The Minister of Labour tried to get a list from them. They said no. They did not give it to us.
Mr Offer: Thank you for sharing the experience with us. I think it is important that we hear these experiences. I think there is nobody who has not had experiences in his or her own riding, certainly in the last while, with the ravages of the recession.
My question is going to be something else on Leo's last point. I want to talk about the last point you made on this issue. You said you should be able to go after the directors, and you went, to a certain degree.
Mr Gerard: I will go as far as you want me to.
Mr Offer: This bill, when originally introduced, imposed a liability on directors and officers. I will take the officers out of the picture, but it did impose a liability on directors of a personal nature, not only for wages and vacation pay, but also for termination pay and severance pay. That liability, we are anticipating from statements by the minister, will be reduced to a liability for directors potentially of only wages and vacation pay and not severance and termination. Can you share with me your thoughts on those amendments.
Mr Gerard: My immediate thought is that I should preface my remarks by saying I chaired the adjustment committee of the Premier's Council that came up with the amendments, the Premier's Council report that suggested expanded directors' liability. So I can share with you what was in our mind, or in particular my mind, at that point in time.
What was in my mind was that there would be a fund that would be established by the government whereby workers would be able to receive their legal entitlements. By legal entitlements, I mean all of your legal statutory entitlements that are defined as wages, termination pay, severance pay, that whole bundle of wax. It would then be up to the government, through its regulatory process, to go and recoup whatever it could.
Certainly what was in our mind were the numerous Bilt-Rite, Bauhaus kinds of situations. This is a unique situation because you are hearing it from one of the people, but it is not a unique situation because it goes on regularly in small, non-unionized shops with a majority of women, a majority of new Canadians. We have all kinds of contrived bankruptcies and corporate reorganizations in the name of a bankruptcy. You know it goes on; I know it goes on.
Our view was that the government then would have all the legal mechanisms at its disposal to go and recoup that money, including a legislative vehicle for making directors liable, including an expanded directors' liability that if you were found to have participated in a contrived bankruptcy in an attempt to defraud your workers of their legal entitlement, that became a criminal act and the government would then use the full force of the Criminal Code to go after those kinds of people.
I can tell you in all honesty that it was certainly not my role as the chair of the committee of the Premier's Council to think of some director who was trying to sell widgets and nobody was buying widgets and he worked like crazy to try and make that company survive and the company did not survive. It certainly was not my view that director should lose his or her home and go to jail. It was the right of the government to pursue that and make that decision on its own. Whether it wanted to pursue it to the full extent of the law or to a lesser extent of the law would be at government discretion. If they had the kind of circumstances we are talking about with Bilt-Rite, with Bauhaus, I know what my recommendation would be, whether I was in the government or whether I was in the union chasing the government to do something. This kind of circumstance should have been enforced to the fullest extent of the law, using what I believe and others believe should be directors' liability. What went on would have been a criminal act.
Mr Offer: But the point I was asking is, we basically have before almost us two bills, the bill as it was originally introduced, which had a much wider scope and latitude, dealing with directors' liability, and the second bill, the bill as amended, which cuts it down, cuts officers out and cuts directors out. On the basis of the example and the experience of Gogi Bhandal, are you in favour of those amendments which were presented?
Mr Gerard: We came here as a union earlier to tell this committee that we are supportive of Bill 70 as it is currently proposed. I would have much rather had more support from the Liberals and Conservatives on the full scope of the amendments as they were originally proposed. If the Liberals and Conservatives on this committee would like to write a minority report suggesting that the full pressure of the directors' liability be reintroduced into legislation, I would support you on that.
Mr Offer: So you are in favour of the first bill.
Mr Gerard: You have heard what I have said.
Mr Offer: You are not telling me again.
Mr Gerard: If you put it into your minority report that you think it should go back in, I will support you on it.
Mr Arnott: Thank you, Ms Bhandal, for coming in today to share your very personal testimony with us.
Ms Bhandal: Thank you very much.
Mr Arnott: It is a perspective I have not heard before, frankly, and I appreciate the fact you have come in.
Ms Bhandal: We went to Mr Rae and we went to several MMPs in the circumstance when Bilt-Rite went bankrupt.
Mr Arnott: To Mr Gerard, I am just somewhat intrigued by your idea of reintroducing a form of debtors' prisons, in a sense, when you talk about throwing people in jail for not paying their employees.
Mr Gerard: We are not talking about that. I will tell you again. You can listen to me again. You have a circumstance where the government, in enforcing its right to make a claim and to recoup its payment, finds there was a contrivance of a bankruptcy in order to attempt to defraud workers of their legal entitlement. If I try to defraud you of your legal entitlement, have I not acted like a criminal? If an owner of a corporation acts in such a way as to attempt to defraud his workers of their legal entitlement, is he or she not a criminal?
Mr Arnott: Do you intend to continue to pursue that particular perspective?
Mr Gerard: No, we have apparently lost that debate and we are prepared to support the legislation that is currently before us.
Mr Arnott: But in the future are you going to continue to pursue --
Mr Gerard: We will attempt to work with the legislation when it is passed and see how effective that is first.
The Vice-Chair: Everyone has had an opportunity, so I would thank you again for coming before us and giving us this personal experience. I think it is the first one we have actually had, someone who has been through it. I know it was a very emotional time.
The committee now stands adjourned until 10 o'clock tomorrow morning.
The committee adjourned at 1808.