Former Nortel workers call for amendment to BIA

Melanie Johannink, who was dismissed by Nortel earlier this year without severance pay or continuing healthcare benefits, is calling for changes to the Companies’ Creditors Arrangement Act, (CCAA), the Bankruptcy and Insolvency Act (BIA) and the Investment Canada Act (ICA).

The petition calls on Parliament:

a) to amend the Companies Creditors Arrangement Act and the Bankruptcy and Insolvency Act to protect the rights of all Canadian employees, and to ensure that employees laid off by a company, receiving pension or long-term disability benefits during bankruptcy proceedings obtain preferred creditor status over other unsecured creditors; and
b) to amend the Investment Canada Act to ensure employee-related claims are paid from proceeds of Canadian asset sales before funds are permitted to leave the country.

“It came to me on a sleepless night after I was let go with no severance, with little money coming in to help support the household finances,” says Johannink. “I was distraught that, after 18 loyal years of working for a company, they were legally entitled to do this. There had to be a tipping point and a petition to Parliament was a means for the voice of the people to have an impact for everyone in Canada.”

Nortel is currently being liquidated under CCAA bankruptcy protection and its cash in Canada will be distributed according to priority rules set by the BIA.

“The premise of balance in Canada’s bankruptcy laws between employment-related claims and bond claims is as obsolete as the horse and buggy,” says financial analyst Diane Urquhart, who has studied the Nortel bankruptcy situation closely. “Since the credit default swap (CDS) market was invented in 1997, bond owners are able to insure their loss from possible future bankruptcy, by buying CDS contracts. In fact, many hedged bond owners can make a profit from the bankruptcy process.”

According to the Nortel Retiree and former employee Protection Canada, (NRPC) the bankruptcy proceedings for a company with international operations such as Nortel become problematic. The NRPC says Nortel’s business units are being auctioned off to foreign buyers with no agreed mechanism for the division of sale proceeds and other assets between its operations in Canada and abroad.

“Company pensions in the U.S. and U.K. are guaranteed by federal government agencies,” says the organization in a statement. “These agencies are aggressively pursuing Nortel’s assets worldwide to recover their financial commitment to the pensioners. While the U.S. and U.K. governments are stepping up to protect their people, Canadian pensioners, long-term disabled and severed employees are increasingly concerned about not getting equal cross-border cash settlement within the courts.”

Urquhart says the federal government should protect the benefits of Canadian workers by setting conditions on the approval of the foreign purchases of Nortel’s businesses, including allocation of sale proceeds to the Nortel Canadian pension, health and long-term disability plans, as well as a severance fund so as to ensure net benefit to Canada.

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