UNITED FOOD AND COMMERCIAL WORKERS INTERNATIONAL UNION
GROCERY PRODUCTS MANUFACTURERS OF CANADA
INTERNATIONAL LADIES GARMENT WORKERS' UNION
GUELPH AND DISTRICT LABOUR COUNCIL
PATTI PARSONS AND CECILIA GRANGER
LABOURERS' INTERNATIONAL UNION OF NORTH AMERICA, ONTARIO PROVINCIAL DISTRICT COUNCIL
COMMUNICATIONS AND ELECTRICAL WORKERS OF CANADA
OWEN SOUND AND DISTRICT LABOUR COUNCIL
PROVINCIAL BUILDING AND CONSTRUCTION TRADES COUNCIL OF ONTARIO
CONTENTS
Wednesday 31 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
United Food and Commercial Workers International Union
Grocery Products Manufacturers of Canada
International Ladies Garment Workers' Union
Guelph and District Labour Council
Patti Parsons and Cecilia Granger
Labourers' International Union of North America, Ontario Provincial District Council
Bates and McKeown
Timmins Nickel Inc
Communications and Electrical Workers of Canada
Owen Sound and District Labour Council
Provincial Building and Construction Trades Council of Ontario
Minicom Data Corp
Retail Council of Canada
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
Clerk pro tem: Manikel, Tannis; Carrozza, Franco
Staff: Luski, Lorraine, Research Officer, Legislative Research Service
The committee met at 1009 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.
UNITED FOOD AND COMMERCIAL WORKERS INTERNATIONAL UNION
The Vice-Chair: Can we call the committee to order? Our first presenter this morning is the United Food and Commercial Workers International Union. The floor is yours, at your leisure.
Mr Connolly: My name is Kip Connolly and I am the industrial sector director for the United Food and Commercial Workers International Union in Canada.
Some of you will be pleased to know that, while we had originally asked for 45 minutes, we have cut our presentation down. I think it is six pages plus appendix A, so it is seven pages in total. So I for one am thankful that we are a little bit late getting started. I have copies of our submission for each of you, if you want to follow along.
The United Food and Commercial Workers International Union, UFCW Canada, is pleased to have an opportunity to appear before the standing committee on resources development to present our members' views on Bill 70, the proposed amendments to the Employment Standards Act to create an employee wage protection program.
UFCW Canada is Canada's largest private sector union, representing some 180,000 members in this country. UFCW members are employed in more than 20 sectors of the economy, including the retail, service, meat packing, food processing, brewing and beverage production and distribution, fishing, general merchandising, health care, shoe and leather manufacturing and banking industries. UFCW represents more than 70,000 women and men in Ontario.
Over the past several years, the people of Ontario have gone through a period of unprecedented change. This change has been made more severe by the economic recession which has hit Canada, and has been particularly damaging in Ontario. During this time we have seen the loss of hundreds of thousands of jobs. Bankruptcies have reached record levels.
Our union is very concerned about the dramatic increase in the number of job losses in Ontario. More than 5,000 UFCW members employed in various sectors have been affected by layoffs or closures in the past two years. In these unsettled times, workers are concerned about their jobs and about the security of the wages and benefits they are earning through their employment. An example of a case in which UFCW Canada members in Ontario were affected by a bankruptcy situation will be discussed later in this presentation, and you can note that example in appendix A.
UFCW Canada is convinced that in the future more UFCW members in Ontario will lose their jobs and will face difficult situations due to bankruptcies or receiverships. UFCW is strongly interested in and supports the development of an effective employee wage protection program that will ensure that our members and other workers are provided increased security.
When employers fail to fulfil their responsibilities to workers, whether because of bankruptcy, receivership or abandonment of a business, it has been the individual worker, his or her family and members of the community who have had to bear the financial burden of unpaid wages and benefits. The proposed EWPP seeks to remove some of this burden by strengthening the security of workers' earned wages and other compensation. We believe the proposed employee wage protection program is an important step forward and will provide an appropriate mechanism for a much-needed statutory protection for workers. We appreciate this government's efforts in creating such a fund as part of a comprehensive and integrated effort to provide for more effective programs that will assist workers, communities and employers affected by the recession and by the substantial changes and industrial restructuring that are occurring in the economy.
The need for a wage protection program: There is a significant need for enhanced wage protection in this province. The reasons for an employee wage protection program are many:
The current recession is the worst recession to hit Canada and Ontario since the Great Depression.
More than 200,000 jobs have been lost in Ontario during this recession.
Ontario's rate of job loss has been twice the national average, accounting for 80% of the national loss in jobs.
The majority of the jobs lost in this recession have been permanent ones. In 1990, 65% of reported layoffs were due to partial or complete plant closures.
Business bankruptcies increased by 73% in 1990 compared to the year before. In the first two months of 1991, there were 24% as many bankruptcies in Ontario as in all of 1990.
The existing Employment Standards Act has failed to ensure that all workers receive full wages and benefits earned and owed in cases of bankruptcy and insolvency.
The federal government has failed to amend the Bankruptcy Act to protect workers from loss in cases of bankruptcy or receivership. In fact, it has been 25 years since the Bankruptcy Act has been amended, in spite of a widespread recognition of the urgent need for changes, particularly in terms of protection or priority for workers. The changes to the Bankruptcy Act proposed by the federal government under Bill C-22 will be inadequate. This fact reinforces the need for an effective provincial program.
There are currently 13,000 potential claims in Ontario for compensation from workers who are unable to collect their earned wages and other entitlements due to their employer's insolvency, closure or failure to pay.
New approach to dealing with change: During recent years, the pace of change in the economy of Canada in general, and in Ontario in particular, has increased significantly. This change has brought with it great technological advancement and many new benefits. It has also brought new problems and challenges. Economic downturns have become more frequent, bringing with them high unemployment, inflation and crushing interest rates. Companies come and go with startling regularity, disrupting the lives of thousands of working people, their families and their communities in the process.
While some of those changes are positive, many also have the potential to seriously and negatively affect workers in this province. Working people are the ones who suffer most when a company does not do well and must scale back its operations. Working people are the ones who pay the price for corporate restructuring, sales, mergers and takeovers, and companies going out of business.
UFCW Canada is not opposed to change and fully recognizes that for there to be economic and social progress, change must occur. At the same time, we recognize that if the economy and the labour market are to change, we must find more effective and more equitable ways of dealing with that change. We must find ways of dealing with job loss to reduce the burden which it places on workers and their families and on the communities in which they live. We must find ways of assisting workers in their transition to new jobs and ensure that they have the skills required to find new employment. We must also ensure that workers are able to move to new jobs that pay good wages and offer good working conditions. Under such conditions, workers will be able to respond to changes which occur in the economy and the labour market more positively, and the hurt and disruption created by layoffs, closures, bankruptcies or receiverships will be reduced.
In Ontario, we must find new ways of dealing with the bankruptcies and receiverships. We must prevent situations from occurring in which workers lose their jobs and also lose the wages and benefits they have already earned. The present situation represents the worst form of double jeopardy, and new strategies must be put in place.
UFCW Canada applauds the efforts of the provincial government in seeking to develop fair and effective programs to facilitate the adjustment process in this province. The government is, in our view, showing great vision and strong leadership in moving Ontario towards a system in which changes occurring in the economy and the labour market are dealt with progressively, not brutally and without any thought as to where those who are affected may end up tomorrow. Such a system will enable Ontario to move ahead more effectively and take better advantage of our strengths in competing in world markets.
We are quite frankly at a loss to understand the hysterical reaction which has come from some quarters of the business community. Some would have us believe that a wage protection program is a radical idea which will destroy the economy and cause businesses to flee the province. Such arguments are preposterous. The proposed wage protection plan has been discussed by business and labour for years, specifically in the context of the long-overdue and much-promised amendments to the federal Bankruptcy Act. In fact, a form of wage protection fund has been proposed by the federal government, although it appears to be somewhat less viable than Ontario's.
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UFCW Canada believes it is a given that workers who have earned their wages and benefits should be able to recover them when their employers go bankrupt. Why should workers be left holding the bag and suffer from both job loss and lost wages and benefits?
Workers must be protected from wage and benefit loss, and they should receive this protection through a separate program. Workers should not be grouped in with a company's creditors because they are not creditors per se. Unlike lenders or suppliers who are in the business of making profits from money lent and risks taken, workers receive no return on money earned but not paid. Workers certainly do not agree to risk their earnings and should therefore not find themselves at the bottom of an impossibly long list of creditors.
UFCW believes the employee wage protection program is a logical and progressive step forward. We commend the government for proposing such a program and firmly believe the program will prove beneficial to all affected parties including the business community and workers.
To the nay sayers we say that the proposed employee wage protection program will be of benefit to Ontario. It is not the wage protection program that business should be worried about, but rather the irresponsible companies which close plants with little or no notice and leave workers without the moneys they have earned and the kinds of adjustment assistance they require. The wage protection program will take away some of the burden that has unfairly fallen upon workers and serve to make the adjustment process that much easier for all concerned.
In the remainder of our presentation, UFCW Canada will address four issues in relation to the proposed fund: coverage, cap, financing the fund, and recovery of funds owned; also the example we have included in appendix A.
Coverage: The UFCW believes that any and all moneys a worker has earned, including wages, benefits, vacation pay, termination and severance pay or other payments belong to that worker and must be paid to the worker. Bankruptcy or receivership should not change this fact.
In terms of protection, the coverage offered by a wage protection program should not be seen as a benefit for workers. Recovering money that has already been earned is not a benefit. Workers should be guaranteed that they will receive their money and not, like other creditors, be expected to suffer loss in cases of bankruptcy or receivership. Workers should not be forced to take risks with money they have earned through employment.
UFCW Canada believes it would be appropriate that the employee wage protection program secure the payment of wages, vacation pay, termination and severance pay. While workers should not lose benefits, we acknowledge that providing for the inclusion of benefits at this time would be very difficult considering the complexity of and variance in benefit coverage from workplace to workplace. The UFCW position is that workers should recover the wages, vacation pay, termination and severance pay they are owed, through a wage protection fund.
The cap (maximum $5,000 benefit): While we are pleased that our concerns about the protection of wages, vacation pay, termination and severance pay have been addressed through the proposed EWPP, we are concerned about the proposed $5,000 maximum limit. This limit might not be a problem for those who were seeking unpaid wages or small amounts of unpaid vacation pay, but $5,000 will not go far when termination and severance pay are included in the amount owed to the worker.
The proposed program is a step in the right direction, but the $5,000 limit should be revised, if not now, then according to an established review mechanism or schedule which you set out in the legislation.
Imposing a maximum limit means that workers who are owed more than the $5,000 will still have to take a risk with the rest of the money that is rightfully theirs. Even with the employment standards branch of the Ministry of Labour making every effort to attempt to retrieve the total order of payment from employers, there is no guarantee for workers that the additional amount owing to them will be retrieved.
Financing the fund: The government has proposed to finance the employee wage protection program through general provincial revenues. UFCW Canada supports this proposal as being the best option available at this point in time.
Our main concern with regard to funding is that the employee wage protection program should continually have funds available to ensure that workers will not lose money they have earned.
Recovery: It is essential that the province implement effective methods to recover moneys owed by employers. These steps must be effective in recovering money, but at the same time must be administered in a fair manner and not burden good employers.
It is very important that the employment standards branch of the Ministry of Labour and its officers have the power to enforce the recovery methods set out in the legislation. Recovery methods must be effective and efficient enough to retrieve the total amount that is owing to workers, without delay.
In some cases, workers will be owed more than the proposed $5,000 limit. In this situation it is imperative that every effort be made to retrieve the total order of payment and not just the costs borne by the fund.
If you could flip over to one of the examples we include, it concerns Royal Dressed Meats, a beef slaughtering plant in Guelph, Ontario, that used to be part of our UFCW Local 617P. In 1987 Royal Dressed Meats, a beef slaughtering plant in Guelph, Ontario, declared bankruptcy. There were approximately 51 UFCW members working at the plant when it closed.
At the time of the closure, the company owed these members a combination of vacation pay, pay in lieu of notice and severance pay. Fortunately the payment of wages had been up to date. However, the amounts of money that were owed to the employees ranged from $500 per individual to more than $10,000 per individual.
The employees of Royal Dressed Meats, with UFCW Local 617P representing them, made claims against the bankrupt employer. The employees' claims were subsequently added to a list with approximately 150 creditors who all had appeals and legal action of their own against the bankrupt company. As a result, it took three years for the employees to receive any money.
After three years the employees of Royal Dressed Meats received 70 cents on every dollar owed. The money paid out to the workers and others had been in the bank for three years collecting interest. Had the employees received the vacation pay, termination and severance pay that was owed to them in 1987 when Royal Dressed Meats closed, the employees could have had their money in a bank collecting interest for them. Instead, these workers were forced to wait through a very lengthy and uncertain recovery process.
The workers at Royal Dressed Meats lost their jobs, as well as money owing to them, and were left without the necessary assistance required to make the transition to new employment.
This is just one example of a group of people who would have benefited from an employee wage protection program. The majority of these workers would have retrieved the entire amount owed to them from the fund instead of waiting three years, only to receive 70% of what was owed. In addition, the existence of such a program would have greatly improved the adjustment process for these workers.
I would like to thank the standing committee for allowing us to present the views and concerns of UFCW Canada and its members during this public hearing today on what we consider to be a very important and timely topic. UFCW is pleased that the government has taken an important and long overdue step in creating the employee wage protection program.
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Mr Arnott: Mr Connolly, thank you very much for coming in to present your concerns. I have two specific questions. The first is that you have touched a couple of times on the federal government wage protection initiative, Bill C-22, I believe it is called.
Mr Connolly: Yes.
Mr Arnott: Unfortunately I have not had a chance to study it in great detail. Can you elaborate on some of the concerns you have with respect to that bill in that it will not adequately meet your needs?
Mr Connolly: Bill C-22 in comparison with the provincial one: Number one, we are concerned about the amount of money. The federal legislation does not go as far as what is proposed by the provincial government because it does not cover all four categories. The federal bill just covers wages and vacation pay, I believe, and does not go a step farther to cover notice of termination and severance pay itself.
Mr Arnott: The second question I have with respect to the example you gave as appendix A in Guelph is that I am privileged to represent the riding of Wellington, which is all around Guelph. I would think that there are people in my riding who may have been affected by this. The most repugnant example that we hear, and that I think we all feel the same way about, is when there is a bankruptcy, workers are owed wages, benefits, etc, and resources exist yet they do not get the money; they do not get what is owed to them.
I was just wondering, is this the most recent specific example of where your UFCW membership has been affected in this way?
Mr Connolly: No, it is not. We are having a lot of problems. I think some of them are going to surmount maybe into bankruptcy actions. Because of downturns in the furring industry we have East West where we have just completed the arbitration process in collecting moneys owed. We may be in the Supreme Court of Ontario trying to ensure the result of that arbitration, that our moneys are coming, but the employer really has not declared himself.
One of the other concerns I have is through Local 617P, the same local union that is used in this example, that JL in Hamilton is going to be closing the door now and going into bankruptcy. The difficulty there is that they have been a good employer with respect to paying the wages, and the severance and the notice to our members as they have been winding the plant down. The difficult situation we are going to be faced with in the very near future is that the local union president was informed that when it comes to paying all the requirements with respect to termination notice, severance pay, vacation pay, and possibly wages, we may be in bankruptcy court trying to get that money for the senior employees.
I think one of the other problems I foresee is when we have gone out and negotiated seniority provisions and collective agreements and you have your employer taking a long time going through the bankruptcy action. We could be left, which really concerns me a lot and which I probably should have addressed in the brief, trying to recover full moneys for a lot of the senior workers working in the plant. As they wind down, they lay off. We end up fighting for the more senior workers. On the federal level, we have had Taggart transport, the Bankruptcy Act and possible sale to Meyers. That is federal, and we have had others. We have not had that many, but we are seeing more on the horizon. They are starting to come to the surface more.
Mrs Witmer: Thank you very much, Mr Connolly, for your very sincere presentation. I appreciated that. You talked about the financing of the fund, and you indicated that at the present time you were satisfied. What type of financing would you favour in future?
Mr Connolly: I guess I would still favour it coming out of the general coffers.
Mrs Witmer: As opposed to a payroll tax?
Mr Connolly: Yes, I favour that.
Mrs Witmer: Just one other quick question: Yesterday, I expressed a concern about the two poles that business and employees seem to be coming from, the difference in opinion. Would you support the establishment of some sort of a committee that would be comprised of individuals representing all people in this province that could take a look at some of these labour initiatives before the public had information about them? You mentioned that there is hysterical reaction in the business community. I think that if some of these things were looked at a little more closely before the media got hold of them, there would not be this hysteria. I am wondering if you would support the establishment of such a committee that would be composed of people representing management, labour, etc?
Mr Connolly: Yes, I would not be opposed to the formation of that type of committee. Quite frankly, I think one of the difficulties is the initial reaction when you are talking about taking $150 million to $175 million to establish this type of program and this type of protection for workers. I guess that by the same token maybe the public should be made aware with respect to the number of companies that have left employees stranded with respect to moneys owing them. I think the public would be shocked.
Mr Huget: Thank you very much for a very informative presentation. I just have to come to a very brief point. In terms of the immediate effects on your workers right after that bankruptcy, could you give me some indication of how it impacted on those 51 workers at Royal Dressed Meats?
Mr Connolly: In 1987, the job market was a little bit better. I think the worst thing was the uncertainty and waiting the three years, not knowing whether they were going to get anything. Needless to say, we had some relatively junior workers and some relatively senior employees, but it was primarily the uncertainty of their vacation and severance that we got most of the calls about.
I have to say this too: I think, if my memory serves me right, in that action there was roughly $2 million that was available to a list of over 150 creditors. I think when it came to the employees recovering money, the only reason they got paid or they got adjusted in the end was because the initial $2 million had been allowed to sit for close to a three-year period and accumulate the interest, which opened the door to another $500,000 or $600,000. By the time it got down through the whole list of creditors, because of the fact it had sat, that was one of the instrumental reasons they were able to get 70 cents on the dollar.
Number one, it was money that they were owed. It was the uncertainty and not knowing whether they would recover anything after it was all over. The pendulum could have swung the other way.
Mr Huget: Do you think it is fair for wages for working people, which are essentially bread and butter and roofs over their heads, to be treated in the same fashion as those other 150 creditors?
Mr Connolly: No. I guess it is just wishful thinking, but I am a firm believer that workers go ahead of financial institutions.
Mr Huget: There is some hysteria, I guess you could call it, from the business community in terms of the reception of this wage protection fund. Could you give me an idea of why you think that is, and why there was no hysteria over the fate of those 51 people at Royal Dressed Meats?
Mr Connolly: I think the hysteria is created by the employers as a result of -- I do not know if this is a fair comment, but I am going to make it anyway -- the financial liability that is being imposed if you are a director. I am also a firm believer that corporations will move to correct that liability that they are concerned with by reducing the numbers of directors or maybe terminology or the whole question of -- you know, I do not know. There has been a lot of talk about the different amounts of money that it costs for the liability insurance, but not every employer is bad. We have experiences with various companies that we represent that have been very decent. They have closed the plant for whatever reason and have provided the employees the proper notice and their commitment entirely.
I guess the concern from the employers' side with respect to the directors' liability is that maybe they are concerned that after the implementation of this, there might be a move to go towards an employer tax rather than a general revenue tax. That is about all I have to say.
The Vice-Chair: We are out of time.
Ms S. Murdock: You said we had four minutes. We have one minute left.
The Vice-Chair: I am afraid you counted from a different spot than I did.
Mr Offer: Mr Connolly, thank you very much for your presentation. It really does cover some of the very major aspects of the bill, and I do very much appreciate how you focused in very clearly as to what your position is, some of the concerns and some of the things that can be done in the future. I think that is going to be very helpful for us as we deal with this bill, and certainly through the clause-by-clause deliberations in the next few weeks.
My question deals with the $5,000 cap and your concern, and also your position that workers should recover wages, vacation pay, termination and severance pay they are owed through the plan. The way the fund is currently structured, as you know, it is only a $5,000 cap, and as such, the concern you have dealing with termination and severances is quite obvious. The question I have is, on principle, do you believe that the taxpayers of the province should fund, or pay for, the termination and severance pay of potentially every worker in the province?
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Mr Connolly: Yes, I do. I think the taxpayer will not mind sharing in that type of liability. With previous governments, you may not have agreed, but certainly you allowed some of the eccentricities of other governments. I quite frankly wish that I was in a position to be able to do something, not only with this but with bankruptcy legislation in general, to move workers ahead of financial institutions with respect to being first in line as creditors in a bankruptcy situation.
Mr Offer: Yes, we heard yesterday concerns about the whole question of the ranking in bankruptcy legislation. I certainly appreciate your response. We all recognize here that we do not have any jurisdiction to change that. We can only deal with what we have before us.
As you know, the bill as it was originally introduced made directors and officers -- and I will take officers out of the frame for a moment -- liable for the wages, vacation pay, termination and severance. Then it was amended to limit their liability to just wages and vacation pay. Do you believe in principle that directors, if they are to be personally liable for wages and vacation pay, should also be liable in that same vein to severance and termination?
Mr Connolly: Yes, I do.
Mr Offer: Though of course you are in favour of the legislation in principle as before us, you would rather have not seen those amendments?
Mr Connolly: Let me just say it so it is crystal clear. My position on that issue was that directors should be liable, and with respect to officers, I concur that officers of companies should not be liable.
The Vice-Chair: I am afraid the time for questions has expired.
Mr Offer: That is fine, but thank you very much for a very clear focus on this particular legislation. It will be very helpful.
The Vice-Chair: I thank you for your presentation.
Mr Connolly: Great. Thanks a lot for the time.
GROCERY PRODUCTS MANUFACTURERS OF CANADA
The Vice-Chair: Our next presenter will be the Grocery Products Manufacturers of Canada. They seem to have slipped out of the room for a moment. Would you please come forward and introduce yourselves to the committee and for Hansard.
Mr Fleischmann: I am George Fleischmann, president of the Grocery Products Manufacturers of Canada. I have with me Mr Bill Frakes, who is the vice-president, human resources, of Unilever. Also with us in the back is Sandra Banks, who is the vice-president, government relations, with the GPMC. Subsequently, during the question period, if you have any questions, any of us would be glad to help.
We welcome the opportunity to comment to the standing committee on resources development concerning the employee wage protection program.
The Grocery Products Manufacturers of Canada is a national association representing more than 140 companies engaged in the manufacturing and marketing of branded products generally available through retail and food service outlets.
The industry is an essential part of the Canadian economy. We represent approximately 10% of the gross domestic product of Canada, as well as being a very vital link in the agrifood chain. In Canada, our industry provides just under 250,000 jobs, and I am talking about direct jobs. If you were to consider the spillover effect, there would be many jobs that we are responsible for in farming, in the packaging industry, in distribution and in advertising. The food and beverage industry alone ranks second to the automotive industry in Canada in terms of value added and in terms of its combined sales. The Ontario food processing sector itself accounts for just under 90,000 jobs, so it is a very large employer in this province.
In principle, GPMC supports guaranteeing earned wages to individuals who would otherwise lose them due to bankruptcy, receivership or abandonment of business. We do recognize the importance of providing income security to workers. Any initiative to do so, however, has the potential to impact other government programs, the deficit, the level of taxation or investment and jobs in the province.
We believe that the strongest protection for workers is to maintain a viable manufacturing sector in the province. As such, GPMC is concerned that the government's focus on labour reform and adjustment initiatives will not lead to long-term job retention. Indeed, it may hasten the flow of jobs out of the province and at the very least reduce current and future investment to the province.
GPMC's human resources council, which is comprised of the senior human resource managers of our member companies, such as Mr Frakes on my right, is following closely workplace initiatives proposed by the Ontario government.
Before we make specific comments on Bill 70, I think it is important that we do so within the context of the industry at large. What I would like to do first is give you a snapshot of where that industry is today and, in particular, where that industry is today in Ontario. I think this is important as we approach Bill 70 and as other pieces of legislation are developed, because we really should develop these in the context of the larger picture. What I am going to do is outline some of the priorities and challenges that our industry faces.
First of all, I want to say at the outset that we are committed to maintaining the greatest possible number of jobs in Canada and, in particular, in Ontario, which is the heartland of this industry.
It is important to remember, however, that three quarters of our members are transnationals and that all of these have facilities in both the United States and Canada, as well as in many other countries of the world. At the same time, it is also important to remember that most of the people running these operations are Canadians and these Canadian managers, believe me, have a fervent desire to maintain and indeed enlarge their Canadian manufacturing facilities.
We are committed to working with our employees and with their representatives to do everything necessary to enable us to survive in the open world market that is unfolding around us.
I notice that the previous witness was Kip Connolly of the UFCW. We have just had a meeting with Kip and with Cliff Evans, their president. We spent half a day with them and the GPMC discussing these types of issues and how we can best work together. Indeed, we are having a subsequent meeting on August 16 to further these. I can say that the labour adjustment area and these are very much considerations we would like to come together to the government with in a reasoned approach.
We are committed to providing the highest level of compensation and social and security benefits to our employees. We have to, because with the labour shortages that are just around the corner, how else are we going to be able to attract and retain quality people?
Just a word about how our industry is responding to some of the economic trends that we have been witnessing in the world, especially in the last decade.
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As we move towards more open trade, the result has been a dramatic restructuring of our sector in Canada. I want you to know it is not just the move to open trade; there are very specific things happening in Canada that are causing this. I will just mention three of them that you all know about. Tight monetary policy, a high Canadian dollar and very high Canadian interest rates as compared to those in the United States all contribute to this restructuring. Of course, the end of domestic protection brought on by GATT's efforts to reduce tariff and non-tariff barriers as well as by the Canada-US free trade agreement have also been our impetus. This has resulted in major reconfigurations in almost every manufacturing sector in Canada, especially, I can say, in our sector, the grocery manufacturing sector.
It is interesting to note that the GPMC was one of the very few business trade associations that did not support the free trade agreement. We did not oppose the free trade agreement either. Our association took no position on it. We could not, because the potential consequences of this agreement were so diverse for our different members. One thing is for sure: We were concerned from the outset that while the agreement was going to open the border, input cost differentials resulting from programs such as supply management in Canada would remain.
Unfortunately, that is exactly what happened. To the consternation and frustration of consumers and workers and manufacturers, dairy and poultry prices are still much higher in Canada than in the United States. Indeed, in a recent study by the Retail Council of Canada on cross-border shopping, dairy products were the second most important incentive for shoppers to go across the border. The first was gasoline; the second was dairy. The high input costs as a result of supply management were a direct factor in this.
Every transnational company operating in Canada, whether Canadian- or foreign-based, is now deciding either to reposition to manufacture from a stronger base in Canada or else to pull manufacturing out of Canada altogether and supply the Canadian market either from the US or elsewhere offshore. The grim reality is that you do not have to make it here any more to sell it here. That is a fact.
Grocery distributors have also told our members that they are now purchasing more goods directly from the United States, bypassing Canadian manufacturers, because they are going to provide these products to their consumers whenever they can at lower prices. We are genuinely concerned about this trend. Our objective is to maintain the strongest possible grocery manufacturing base in Canada, along with all the quality jobs that go with it.
Cross-border free trade with virtually no tariff or non-tariff barriers has forced every Canadian manufacturing operation to review its cost structure. Many of our members are even faced with the difficult task of having to compete for production runs with their own sister company plants just across the border. Bear in mind that many of these US plants, especially in the northeastern part of the US, have extra capacity so that their marginal costs of production are very low. You might ask where this extra capacity comes from. It is obvious. There has been a tremendous movement from the northeastern United States down to the Sunbelt, to states like Georgia, Florida, Texas and California. As a result, this has left tremendous excess capacity in many of the plants just across the line from us.
What we have to do in Canada to survive is limit costs in three areas, inputs, operations and administration, at the same time as we increase our productivity. If we reach levels comparable to our world-leading competitors in these areas, we are going to be able to maintain, and in fact enhance, the Canadian production base. If we do not, our jobs and facilities are going to continue to disappear.
In a barrier-free world, costs of manufacturing are compared and facilities are inevitably located where the highest return can be achieved. In our view, being competitive does not mean providing low-paying, low-quality jobs. Being competitive means being smarter and managing our businesses better than our competition. It is critical that the government play a role in fostering an environment that welcomes investment and renews business confidence.
Before turning it over to Mr Frakes for some specific details, I would also like to say I was very encouraged to hear Mr Connolly indicate in response to a question, I believe from Mrs Witmer, that the UFCW advocated continuing this fund out of the general revenues of the government. This is a position we also very strongly support.
I would like now to turn it over to Bill Frakes to discuss for a moment some specific comments on Bill 70.
Mr Frakes: Before I begin, I too would like to add my thanks to the standing committee for this opportunity.
For those of you who may not be familiar with my company, Unilever Canada, it is comprised of 15 consumer product companies throughout Canada with over 6,000 employees in Ontario alone. Some of our companies include Lever Brothers, Thomas J. Lipton, Chesebrough-Pond's, Elizabeth Arden, Shopsy's, A & W and there are many more that go on. I think we have a pretty good cross-section of the consumer products companies that are represented in Ontario itself.
In regard to Bill 70, the GPMC recommends that all the amendments that have been put forward by the Minister of Labour earlier this week be included in the final legislation, particularly those related to directors' and officers' liabilities. As indicated in previous submissions, the GPMC supports the amendment that directors' liability be restricted to earned wages and vacation pay. The program should be viewed as a wage loss protection/replacement fund, and therefore severance and termination pay should not be covered.
Additionally, given that the government is currently reviewing its severance pay provisions and other labour adjustment issues, changes in entitlement could have a significant impact on the liability of the fund. The GPMC also supports the minister's decision to limit directors' liability to debts, that is, unpaid wages and vacation pay, incurred during their term of office.
Regarding the question of financing, the GPMC is concerned about the financing of the employee wage protection program beyond its first 18 months, until which time it will be funded through the consolidated revenue fund. In our earlier submissions to the government, we indicated support for a system that would spread the payroll across the general fund and could not support an individual flat payroll or corporate tax. Clearly any additional costs of doing business will have a negative effect upon our ability to compete in the total North American marketplace.
The impact of the legislative action that is proposed must be viewed on the basis of two things: where our members compete and with whom. As George mentioned, almost 75% of our companies in the GPMC are multinationals. When we talk about competition, we are referring to two arenas in which we must compete.
The first is the marketplace. We must be able to provide our consumers with what they want, when they want it, at a price they can afford. If we are not able to do that, we will not be competitive.
The second arena in which we must compete is our own companies. We must be able to provide our stakeholders with what they want, when they want it, at a cost they can accept. If we are not able to do that, then we will not be competitive. A recent Canadian Manufacturers' Association report that was released in April of this year found that one half of its members surveyed had compared the cost of operating in Canada relative to the US. More than a third found that it was cheaper to operate in the US. If a company in Canada is unable to compete in the marketplace, it will lose its business. If an operation in Canada is unable to compete internally, we too can lose our business.
We urge the committee to consider the legislation in the context of the totality of the labour reform being proposed and the two arenas in which our businesses must compete. We are certain that all stakeholders would agree that the best wage protection is to ensure that businesses in Ontario remain vibrant and competitive.
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Regarding the process again, I would like to say we are very pleased to have had the opportunity to present our views today to the standing committee. The grocery manufacturers' industry is committed to providing high-quality jobs in this province. Towards this end, we have initiated constructive discussion with our major unions, as George indicated, so that we can collectively ensure a strong future for our industry.
We feel we have an important role to play also in the development of the process itself -- pragmatic, progressive and workable policies. Given the challenging and volatile times we face, it is important that we set our priorities and have achievable goals in the area of social justice initiatives. We are committed to participating in consultations on labour reform and continuing the discussions on labour adjustment. It is vital, however, that substantive discussions such as this occur prior to the introduction of any legislation. We thank you for this opportunity.
Mr Klopp: With regard to your preamble on the big picture, you said that during the free trade thing you were not sure which side, whatever, so you took no side. But as you go on in your discussions, you said you were generally concerned about the trends. Are you now supporting the idea that the government should get out of this free trade agreement and push against that?
Mr Fleischmann: We are definitely not doing that, Mr Klopp. What we are supporting is that the government should recognize that it is not just free trade and enhanced free trade with Mexico, but we are living in a world in which global trade is every day becoming an increasing reality. In the light of that increasing reality, the government should now do what it should have done before the free trade agreement was entered into; namely, readjust input prices and the way farmers are compensated so that Canadian companies will be able to compete effectively with competitors across the line.
Mr Klopp: It says here you do not want to provide low-paying, low-quality jobs. Correct?
Mr Fleischmann: That is correct.
Mr Klopp: Yet you are saying to farmers that what we are telling them is that they should supply us with low commodity prices so that we can make a profit.
Mr Fleischmann: That is absolutely not what we are saying. What we are saying to farmers is that the way that farmers should be compensated should be fairly, the same as it is in other countries of the world, as in the European Community and in the United States and in Australia and in Japan. In all of those countries, the consolidated revenue fund compensates farmers. In Canada, in the dairy and poultry industry, it is the consumers alone who directly subsidize the farmers in an unfair form of taxation, in that you and I and an unemployed person would each pay the same extra amount of money for a litre of milk in the store, part of which goes toward subsidizing the farmers. All we are saying is that they should indeed be provided with a decent income, but it should be done consistent with the way it is done in other countries of the world, so that the price of the input will be available to manufacturers in a competitive fashion.
Mr Klopp: I suggest to you, sir, that they are not being subsidized by the people. It is ironic that you want to say it is the consolidated fund and yet you do not want the thing to be passed through as it properly should be done with the poultry and dairy. In fact, the consumer is not so much worried as manufacturers are. They do not want to see government subsidize things, and the farmer does not. Those programs are working well. In the United States the farmers there are now asking for supply management. Indeed, in Europe they made one mistake. They did not create a supply management thing. They are looking towards those things.
I think to say here that supply management is causing the problem -- the consumers have said many, many times that they think farmers should get a fair price for their product, and they will pay to the store, as long as the farmer gets it. Indeed, many of the reasons why White Farm and many of the companies have gone broke in this province is because farmers cannot buy new trucks. They cannot buy things. Indeed, your industry does well. In fact, last week or two weeks ago in the paper, when every company keeps saying that it is losing money because of the recession, one of the food companies expounded on how it was making money. I do not think it is a surprise. No matter how tough it gets, we all have to eat, but I really think you are going at it wrong and I take exception to that.
Mr Fleischmann: Mr Klopp, with all due respect, I assure you that we are not trying in any way to reduce farmers' incomes. What we are trying to do, and the consumers, and I think --
Mr Klopp: Is subsidize it by the government.
Mr Fleischmann: We are trying to make sure that our industry survives. When input prices for poultry and dairy are 50% or more higher than in the United States, it is very hard for companies to continue to manufacture here, when we no longer have the tariff and non-tariff barriers at the border.
Mr Klopp: So we have to put them back in place.
The Vice-Chair: You have about 30 seconds, Ms Murdock.
Ms S. Murdock: Thank you for your presentation. To summarize, you do not have any problems and you support Bill 70.
There has been no mention of the $5,000 limit in the presentation. I was wondering if you have any comments on that. I am going to ask my questions all together so you can answer them. Second, on page 2 it says, "with labour shortages just around the corner." I wanted to know, in your particular area -- I know it is very diverse -- what kind of labour shortages they were and how they would affect your indust. Thirdly, presumably the workers you have are predominantly women. Is that correct?
Mr Frakes: I will try to address each question separately. The first is the dollar limit. I think we are more interested in what is included. The compensation would be for actual wages and vacation, not severance and termination. Now the dollar amount, $5,000, if that is for wages and vacation, that is reasonable, but when we get into termination, into severance, then we get into a totally different issue. So I think it is what is included versus the amount.
On the second question regarding the labour, I think all we have to do is look at the demographics as to where we stand today and what we can anticipate by the year 2000. My functional responsibility is looking at the demographics: Where will our workforce of tomorrow be, what should we anticipate and what will we need in order to attract those people? We are competing not only in a marketplace with our own internal companies; we are competing with other manufacturers, other industries, for labour. The demographics show that there is a reduction. That reduction means there are going to be fewer people to work. We have to be as competitive as possible in attracting those people into our workforce.
As for the breakdown, I can speak for my company. We have pretty much a 50-50 split of male-female. So it depends; it is not predominantly female.
Ms S. Murdock: I was just thinking in terms of --
The Vice-Chair: Ms Murdock, I am going to have to cut you off. Mr Offer.
Mr Offer: I just want to get very clear your position as to the liability under the legislation. You clearly indicate you are in favour of guaranteeing earned wages to individuals. I take it that when you use the phrase "earned wages" you are talking about wages and vacation pay and excluding the termination and severance.
Mr Frakes: That is correct.
Mr Offer: Right now, the fund will pay for that. The way it is funded now, it is the taxpayers. Is it your position that the directors of those companies should be personally liable, potentially, for those wages and vacation pay? Right now, under the legislation, they are. There have been people coming before us and saying that they should not be.
Mr Frakes: Our position would be that the legislation currently in effect is sufficient, as far as personal liability is concerned, for the directors. I feel like I am preaching to the converted here in that you hear a lot of emotional issues brought before you, examples that just should never occur. I guess we look at it from a general standpoint; we are looking at the totality of everything that is going on. Again, as I said, the best wage protection is to ensure that people have jobs. The concern we have is that we do not want to have a defeatist attitude that companies are going to go under and therefore we have to prepare now. We would much rather see an attitude of how do we ensure that our companies are competitive, not only in Ontario and Canada, but in North America and the rest of the world.
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Mr Offer: Thank you. I would like to pick up on the global trade you are involved in, the whole question of competitiveness in industries which you have clearly outlined are very competitive. Do you see this legislation as one which will in any real and large sense impact on the competitiveness?
Mr Fleischmann: I think what you are trying to say is that each individual piece of legislation that adds to the cost of business in Ontario, that detracts from the bottom line or the competitiveness of the company, will ultimately affect its decisions on whether to stay or leave or increase its operations here or decrease them. It is the cumulative effect of all of these. Therefore -- Mrs Witmer, you were asking the previous witness about this -- we would be very interested in sitting down with the government before these legislative packages are introduced and sitting down with the labour movement, as we have with the United Food and Commercial Workers, to discuss these in the totality of the government's program overall and what are the most important things it wants to introduce first and what can be brought in over time, etc, so that we do the least possible to undermine our competitive position. That is the context in which we see this piece of legislation.
Mr Ramsay: George, I was wondering, is part of the uncertainty with this piece of legislation right now the future of the revenue-generating mechanism that could come in place, that you are worried about a payroll tax and that right now it is not so onerous as it is spread across the tax base?
Mr Fleischmann: Yes. That is exactly the concern we would have, because when we heard Mr Mackenzie discuss this initially, he was sort of assuring us that they would come under the government's consolidated revenue fund. Our concern and our pitch here and I guess the answer from the UFCW as well as ourselves would be that we would hope this would be a long-term assurance that the government would give us with respect to this particular piece of legislation and that it not come off as a payroll tax or any form of tax on the corporation itself.
Mr Offer: There is an important question that follows from Mr Ramsay's question and your response. In the legislation, there is a section that states that by regulation, as opposed to legislation, the government can prescribe other payments that are wages for the purposes of this bill and also can provide for increases in the amount of compensation which the plan can pay. I do not know if you have directed your mind to that, but the fundamental difference between regulation and legislation is, of course, legislation we are sitting here to discuss; regulation we read about it after a cabinet meeting.
I am wondering if you have not looked at that particular point. It is one that I would like to get your opinion on as to whether you are in favour of this particular section or moving this section into legislation. In other words, it cannot be done unless there is that guarantee mechanism for a discussion.
Mr Frakes: Definitely we would not want to see that in a regulatory consideration. By just the short description you gave and as far as what would be included, the amount, all of a sudden you have a brand-new, unknown factor that is thrown in any time we are trying to do business. Any time we have a cost, we have a factor there that someone else does not. It works to our detriment.
The Vice-Chair: Is it okay if I move on now, Mr Offer?
Mr Offer: Do we have more time there?
The Vice-Chair: You are running right at the limit; I think that you are actually at it.
Mr Offer: Thank you very much.
Mr Fleischmann: Could I just make one comment because I would be very concerned if you were left with the impression that in any way we wanted to undermine or reduce payments or in any way affect the farm community. The farm community is an integral supplier to our industry. It is the base of the whole Canadian agrifood chain. As Mr Ramsay knows from being the previous Minister of Food and Agriculture in the previous government, and as the current Minister of Food and Agriculture knows from our very frequent meetings with him, it is our intent to work through a consistent Canadian agrifood chain, and to the extent that any segment in that chain -- and there are four segments: the farmers, the manufacturers, the distributors and the consumers -- is undermined, the whole chain does not work. So we would be very much for finding a solution that involves as fair payments to the farmers as it does to the workers, to the corporations or anyone else.
Mrs Witmer: I appreciate your presentation, putting it within the context of what is happening globally. Getting back to the consultation process, I think part of the reason for the concern about Bill 70 is that there was not an effective consultation process. I think that as a result the business community now is very concerned and sees other legislation being introduced and again a lack of consultation. What would you encourage this government to do in order to ensure that all voices are heard and listened to and taken into consideration before the legislation is drafted?
Mr Fleischmann: If I could answer that, I would like to suggest that in terms of what is going on in Ontario there is a tremendous commonality of interests between workers, be they in organized labour or not in organized labour, and the business community. We are now integrally linked together in the struggle for survival, and I would suggest that the government should involve those two groups in consultations with its own bureaucrats, with its own political staff, with its own members of Parliament and ministers, prior to introducing legislation in a public way that we then are in a defensive position in having to respond to.
I would like to suggest to you that there are many organizations in Canada on the labour side, on the business side, groups such as the Canadian Manufacturers' Association, the Retail Council of Canada, our own group, many of the organized labour groups, that really should be in consultation with the government prior to a discussion such as the one we are having today. If that could be arranged, I think we would come together in a spirit that would allow Ontario to have a very progressive chance at developing its competitiveness to a world-class level. What we are really asking for is the kind of working relationship that has been demonstrated in Japan and in Germany. They have been very successful as world competitors.
Mrs Witmer: Thank you very much.
Mr Arnott: Mr Fleischmann, I must say that I too have grave reservations about your comments about supply management, your implied suggestion that maybe supply management should be phased out. Supply management is absolutely essential and critical to the economic survival of my riding. I assume you are following quite closely, as I am, the GATT negotiations. It is my opinion that if there is to be a successful conclusion of those negotiations, the sort of direct subsidies that you talked about for American farmers, Australian farmers, European Community farmers, those sorts of things will not be legal. How would you respond to that?
Mr Fleischmann: I do not think supply management has to be phased out, Mr Arnott. I think what has to happen is we have to look at a second generation of supply management. Perhaps what we could have is a system where, first of all, most of the product of the farm gate goes directly in a non-value-added way to the consumer. I am talking about basically, say, chickens and milk as such. A certain percentage of it has to go to the processors for value added further. There has got to be some arrangement looked at that would allow the farmers to sell product that is going to processors for further processing at some form of competitive pricing. Now, a recommendation to that effect had been made by the de Grandpré commission, if you will recollect, in a chapter where they were looking at possible supply management changes to meet the needs in the new free trade era.
What we are saying is, we believe this could be done without undermining farm incomes. We believe there are ways. One of the ways, for instance, that was recommended by the de Grandpré commission on chickens was, if you had a one-cent increase to the consumer, you could pay for all of the chicken required at open market prices to the processor. It is that kind of adjustment we are looking for. We are not looking to wipe out farm incomes or to phase out anybody. We need very much jointly to seek a common way to establish a fairer system that is going to allow the whole agrifood chain to thrive in Ontario.
Mr Arnott: I agree we need a fairer system. Something that struck me about a year ago was, I read that two cents or three cents of the total cost of a $3-dollar box of Wheaties, for example, the cereal, has gone to the farmer.
Mr Fleischmann: There is no question that in certain products that are highly processed, much of the price is in the advertising and in the packaging. That is a function of competition. If the consumer wants it and if it could come in as an alternative from the United States, our choice is not to agree with that, not to manufacture it here and lose the concomitant jobs, which is nothing that we want to do.
The Vice-Chair: The time has expired and we have actually run over. It started with the first group, which took a bit of licence. I thank you very much for your presentation. It was most interesting.
Mr Frakes: Thank you very much.
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INTERNATIONAL LADIES GARMENT WORKERS' UNION
The Vice-Chair: The next group will be the International Ladies Garment Workers' Union. Could you please come forward and identify yourselves? Is there a group or just one person? If you could come forward and introduce yourselves for the sake of the members and Hansard, so that everyone knows whom he is addressing.
Ms Dagg: Yes. I am Alexandra Dagg, manager of the Ontario district council of the International Ladies Garment Workers' Union. To my left is Nota Havaris, an old-time union member. Sorry, am I going too fast?
The Vice-Chair: If you could move closer to the microphone when you are speaking, because it is being recorded. We have the same problem.
Ms Dagg: You must get a bad neck doing this.
To my right is Mary Said, a union representative with the Ontario region, and to my far right is Tariq Kidwai, our education and research representative, also of the union.
The Ontario district council of the International Ladies Garment Workers' Union thanks the committee for the opportunity to appear before it for consultation on this very important issue. We are pleased to see that the Ontario government is making a real effort to listen to the concerns of the people of this province by holding public hearings on important issues such as wage protection for Ontario workers. Our union joins with all workers of Ontario to strongly support the Ontario government's proposed legislation to establish the employee wage protection fund.
We endorse the progressive principles underlying the establishment of this program, as stated by the Minister of Labour: "We have to take measures to increase protection for workers so that they do not become victims of circumstances they cannot control," and "Workers are entitled to receive the money they have earned, and they must be assured that this money will be given to them."
We support the establishment of the employee wage protection program because it is vitally necessary that workers of this province and all of Canada be protected against plant closures and that they get the moneys they are owed by their employers.
The magnitude of the recession, the extent of plant closures and unemployment are widely known. This has been extensively documented and reported by the media, various bodies of the labour movement and research organizations. We will not, therefore, belabour this point. Instead, we will focus on the lived experience of those affected by plant closures and the provisions of the government's proposed Bill 70 which are of concern to our members.
Our presentation to you this morning is in two parts. The first part deals with the need for the employee wage protection program; the second with the specific provisions of the proposed legislation: protection coverage, the appeals process and liability of company officers.
The need for the employee wage protection program: Two main factors have contributed significantly to the spate of plant closures in recent years, as also pointed out by the Ministry of Labour in its discussion paper: the present recession and the commencement of the free trade agreement with the United States. The future inclusion of Mexico in this arrangement, the Conservative government's present objective, will only escalate this trend.
Plant closures have preceded the present recession and their incidence have been very substantial. The present recession has drastically compounded the situation, but plants have been shutting their doors to Canadian workers well before its onslaught. This has been well documented by the Canadian Labour Congress in its publication Trade Watch and by other community organizations, such as the Action Canada Network and Common Frontiers.
It is also important to note that these plants have closed permanently, never to reopen and never to create employment in future. Thus, what is frightening is that the jobs that have already been lost will not be recreated. The net result is that there is a trend of secular decline in the levels of employment in Ontario and the rest of Canada.
The garment industry is one of the manufacturing sectors most seriously affected by plant closures due to the recession and free trade between the United States and, in the future, Mexico. If this situation persists much longer, the garment industry will be annihilated.
The garment industry is facing severe international competition, specifically from relatively cheaper imports from Third World countries. Since 1973 employment in the industry as a whole fell by approximately 13,000. In the city of Toronto, 3,500 jobs have been lost in the period 1986 to 1990. Hardly any new jobs are being created.
Since 1988, in Ontario alone, 1,030 members, one third of our union's total membership, have lost their jobs due to permanent layoffs and plant closures. This has occurred in 22 different factories. Given the current state of the economy, more plant closures and permanent layoffs are on the horizon.
In July 1988, Best Outerwear closed its doors abruptly, going into receivership and then declaring bankruptcy. No prior notice of closure was given to the employees. Twenty employees were owed wages, vacation pay and termination pay in lieu of no notice of termination. The secured creditor collected all the money that it was owed; nothing remained from which the workers could get money that they were owed. The workers were owed over $25,000 in wages alone. This amounts to approximately $1,000 per worker, which is a very substantial proportion of their monthly earnings.
Under the existing law, the federal Bankruptcy Act, the workers to this day, three years after the plant closed, have not been able to collect the money they are owed. Under the proposed new legislation by this government, these workers would have been protected and able to collect this money that is rightfully theirs.
The following are more recent examples of plant closures in the garment industry and what the workers are owed.
In a span of two months, the end of 1990 and the beginning of 1991, after the onslaught of the worst depression since the 1930s as viewed from the eyes of the unemployed, three shops in the garment industry in Toronto -- Russill Morin, Omega Apparel Ltd and J. H. Warsh -- closed permanently, declaring bankruptcy. Over 100 workers, mostly immigrant women in their 40s and 50s who have worked as garment workers all their lives in Canada, lost their jobs, to which they would never return.
The first example is J. H. Warsh Ltd. This company was opened on Spadina Avenue in 1917. On December 5 1990, the Canadian Imperial Bank of Commerce appointed a receiver. At that point the workers were told they no longer had a job with this company. They worked a few more hours to finish the work in the factory and then went home. Many workers at this plant are over the age of 55 and have been long-term employees, some with as much as 32 years of seniority with this particular company.
The workers received no notice of layoff and no severance pay because at the time of layoff the company employed less than 50 workers. The company also owed substantial money to the workers' health and welfare fund and to the pension fund. The company, a manufacturer of designer sportswear under the label of a prominent American designer, Michael Kors, was continually unable to meet the onerous interest payments on its operating line of credit.
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Nota Havaris, who is with me today, is a very senior member of our union. She has worked at this company for 33 years as a sewing machine operator. Nota came to this country from her native Greece 35 years ago. She began work as a sewer on the second day of her arrival to Canada. She had worked ever since, until she lost her job with this company. From her long service with the company, she is entitled to eight weeks' termination pay in lieu of notice of termination and 4% of her wages in vacation pay. She has not received any of this up to now, seven months after the closing of the company.
Nota's life has been totally disrupted and she is facing untold financial hardship. Nota's daughter's university education in engineering came to an abrupt halt. It could no longer be paid for and her daughter was forced to discontinue it in order to obtain a job to support the family. The employee wage protection program would enable Nota and the other workers there to collect the money they are owed.
The second example is Omega Apparel Inc. This company was initially to close down in October 1988, when the original owners were to retire. The plant manager and a partner bought the company and continued its operations but on a smaller scale. They employed 30 workers when its predecessor employer employed over 80, a job loss of 50 workers. In December 1990 the landlord of the building on College Street brought the bailiff to the plant to collect unpaid rent from the company. The company was unable to make the payments and declared voluntary bankruptcy. The workers there are owed vacation pay, payments into the health and welfare fund and the pension fund, and the union is owed outstanding union dues which were deducted from the workers' paycheques. Again, the employees would be able to collect their due under the employee wage protection program.
The third example is Russill H. Morin Inc. This company, a manufacturer of designer ski wear, closed in January 1991, also now in bankruptcy. Workers are owed termination pay. The company was unsuccessful in securing new financing arrangements. It was unable to meet its crippling debt payments due to high interest and sluggish sales to retailers.
Under the proposed legislation, Nota and all other employees would be able to collect money owed to them. Workers surely stand to benefit from this proposed legislation. These workers have suddenly lost their work, which they have been doing for decades, and their income. It is very difficult for them to adjust to the situation, which they have never experienced before. They face tremendous hardship. They can no longer maintain the same standard of living, they are unable to meet their financial commitments, they can no longer afford to purchase things as before and they are finding it difficult to provide even for the basic necessities of life for themselves and their families.
The affected workers in these plants are predominantly immigrant, visible minority women for whom garment work is, as has been aptly described, their first and only job in Canada. Most of them are sewing machine operators in their 40s and 50s who have diligently done this work for at least 15 years and as long as 30 years, for their entire life in Canada.
Many of these women are close to retirement age and most of them know little English. Because of this, it is virtually impossible for them to be re-employed either within what is left of the garment industry or elsewhere. Most of these women have still not found other employment. The unemployment insurance benefits of many have ended and for the others will end soon. They search continually for work, but none is available. They have sought admission into government training programs but have been continually denied it since there are no available vacancies in those programs for another two years.
These people are socially subordinated and are the victims of oppressive social inequalities existing in Canadian society, namely, sexism and racism.
These women have traditionally depended on the garment industry for their employment and their livelihood. Their prospects of upward social mobility, the main plank of mainstream ideology, that all immigrants to Canada can make it if they work hard and persevere, are non-existent. Unemployment throws them to the wind and there are few prospects and opportunities for their readjustment and re-employment. They have a burning spirit to overcome the disruption their lives have undergone due to unemployment, but all avenues for them to do so are closed.
The workers are angry, despondent and demoralized. They are resentful of the fact that they have devoted all their energies to improving their lives and the lives of their families and now they have nothing to show for it. They do not even get the money that is theirs from their employers.
The above examples clearly show the need for the establishment of a fund to compensate workers for the moneys which they have not been given and which are their due. This is essential to help alleviate the financial loss they have incurred from the complete loss of their income. This money would be of great help to them in surviving in these very difficult times. Such a program would also greatly affect their morale, knowing that the government is genuinely responsive and sensitive to their situation and responds to their needs.
The provisions of the employee wage protection fund: We now turn our focus to the specific provisions of the government's proposed legislation. This proposed legislation is one important and necessary step in redressing the distribution of power between workers and employers and other institutions. Furthermore, it is a step towards greater social equality and it acknowledges the rightful interests of working people.
Protection coverage: The employee wage protection program should comprehensively cover all moneys, wages, vacation pay, severance and termination pay and any other moneys owed to the workers by their employers, such as contributions to the benefit plan trust funds and the union benefit funds that are in the collective agreements. In the cases of J. H. Warsh and Omega Apparel Ltd, we will not be able to recover these costs. The coverage of the employee wage protection program should not be restricted to merely basic coverage, that is, to wages and vacation pay. Our members did not get vacation pay or severance and termination pay or the employers' contributions to the fund.
Under the existing system, workers who are owed wages, vacation pay, termination or severance pay have recourse to the employment standards branch of the Ministry of Labour. An employment standards officer has the authority to issue an order to pay against an employer for a maximum of $4,000, but despite their best efforts, it often proves impossible to collect the money owing.
The present system is so structured and the provisions of the federal Bankruptcy Act are such that the workers have no probability of getting the money that is due to them. Once the secured creditors -- usually the bank -- who have priority over all other claimants have collected their share, there is nothing left for the workers. This has unfortunately always been our experience. In practicality, this situation is inadequate in providing genuine protection to workers. The new legislation will provide workers with better protection.
The appeals process: An appeals process for the timely processing of employers' appeals to the claims of workers for money owing to them must be an integral part of the employee wage protection program. If it is not, the practical implementation of this program would be ineffectual. Unemployed workers are hard-pressed for money, and an appeals process would ensure that their claims are resolved quickly. We support the idea that hearings will be scheduled within 45 days of the employer's appeal and that a decision will be made within 90 days of the initial hearing. We also support the idea that an adjudicator or referee hearing an appeal will be able to order an interim payment for any portion of the wages which is not in dispute.
Employers' liability: We strongly argue that the employee wage protection program legislation should include that directors and officers of business corporations be held liable in the event of workers not receiving moneys owing to them. It is very important that this be the case because this will serve as a deterrent to company officials denying workers moneys that are their due. Liability will prevent such cases from arising in the first place. We favour the notion, as originally put forward by the government, of an imposition of personal liability for the equivalent of six months' wages and 12 months' vacation pay on both directors and officers of corporations whose employees make claims against the program.
In conclusion, we support the employee wage protection program because it is necessary that workers be protected in these difficult times. We agree with the Minister of Labour when he notes that the employee wage protection program is "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 employee wage protection program is an important step in this direction. We applaud the government's endeavour and look forward to the future establishment of a comprehensive labour adjustment program for the workers of this province.
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The Vice-Chair: Mr Offer, do you have any questions?
Mr Offer: It is more a comment than a question, just to thank you for coming before the committee and sharing with us some of the real experiences that have been gone through. It is important for us as we go through the legislation to recognize that we are not just looking at words on a piece of paper, but also talking about real situations that have so badly hurt a great many individuals. We are grappling with trying to make the bill as good as it can be. Certainly the comments and experiences which you have shared with us today will help us in that way, so I thank you for that.
If I might, in the last few pages of your presentation you speak to what the bill should be. As you may know, that is not any longer what the bill is, and I would like you to share with us your thoughts on what you hope the bill will in fact become.
Ms Dagg: I think I make it fairly clear what we would like to see. I think the plan needs to be introduced and made law as soon as possible, because these women are sitting here without the money and they desperately need the money now. So we are in a position where we want the bill to be passed as soon as possible so that it can be started.
Like I said, we would like to see maximum coverage of the moneys that are owed to the workers, a discussion about the retirement plans that are also being put in jeopardy because of bankruptcy situations, and a serious look at the liability question, which we think is really important as well.
Mr Offer: Just as a supplementary -- and I recognize that -- is it your position that the amendments as presented by the minister should be voted against?
Ms Dagg: I think, to repeat what I said, we want the bill to get passed. We are willing to try to look at ways to improve it once it has passed and once some of the people who have already lost their jobs receive some of the money that is owed to them.
Mrs Witmer: Thank you for your presentation. I would like to preface my comments by saying I understand where you are coming from. I say that because my parents were immigrants as well. I can certainly understand some of the menial jobs that you are subjected to as a result of not having the appropriate skills and language ability.
Although this bill is certainly going to help the women in your industry, I think you have pointed out a couple of other things; that is, the fact that there are no government programs available to help train these people for other positions.
If I take a look at my parents, the one thing they would always have wanted was to get another job. It was not to sit idle at home. But you have to provide these individuals with the skills. You have to provide them with the language training, and oft-times it is the lack of language skills that prevents them from getting another job. So it is important that the government recognize that although this bill is going to help individuals, I think what people want most is training and skills to enable them to get another job and get on with their lives.
Ms Dagg: Yes, I agree. I just want to make one comment on what you said. You called the jobs that we do in the garment industry "menial jobs"?
Mrs Witmer: No, I said that the jobs my parents were subjected to were often menial because of their lack of language skills. No, I do not refer to these as menial in any way, shape or form.
Mr Dadamo: I have several questions too. My father was an immigrant as well, stuck in a position where it was hard to grow in the job that he had, and he stayed pretty well where he was for many, many years.
Has your industry been in a nosedive for a number of years or -- I guess what I would like to ask is, has free trade been the bombshell or has it really helped the industry come crashing down?
Ms Dagg: The industry has definitely been in a nosedive for many years. The mid-1970s was probably a real turnaround time for the sector, but the free trade agreement is rapidly escalating the trend that was already there. When we are talking about adding Mexico now, that is just continuing the escalation of what is already happening and quickening the pace of its demise. I know the federal government discussed in the free trade agreement that it would be a 10-year phase-out of tariffs, and that would give the industry time to adjust, but -- I know we are not really talking about this -- it really is not true, because the employers in the industry adjust right away, as soon as they know what is going to happen. They either get out completely or they relocate their production.
Mr Waters: You hit on an operative word in both cases, both in the submission and in what you just said: Mexico. I am curious to know how much of the work from here may have drifted down to that country.
Ms Dagg: It is difficult to track exactly how much is happening now, but I think that when you are talking about a country where the wages are $4 a day, there is just no way that our larger manufacturing facilities, those that are making standardized garments in particular, are going to be able to compete with the large factories set up in the Maquiladora region in Mexico. It really bothers us when we hear the federal government talking about this. They obviously have no word on what is happening to real people in Ontario when they are discussing these kinds of policies.
Mr Dadamo: And we are well aware of that.
I wanted to ask one quick question. Nota is not here, but do you know how much she is owed by her former employer?
Ms Dagg: In total dollars?
Mr Dadamo: Roughly.
Ms Dagg: No, but eight weeks' termination pay at an average of $600 per week, plus 4% vacation pay, which would be another $1,200. So we are talking a couple of thousand dollars.
Mr Dadamo: At least. That is substantial. Okay, thank you.
The Vice-Chair: Does anyone else have any further questions?
I thank you very much for your presentation. It is always interesting to hear this aspect. I thank you for that.
GUELPH AND DISTRICT LABOUR COUNCIL
The Vice-Chair: Our next presenter will be Mr Watt from the Guelph and District Labour Council, whenever you feel ready.
Mr Watt: I would first like to thank the Chair and members of the committee for allowing the labour council to submit a brief on this very important legislation, Bill 70.
The council, in making this presentation, is extremely cognizant of the effects that sudden plant closures have on a community. We present two specific examples to demonstrate that this legislation, although beneficial to the employee, still allows employers who are devious -- and we do recognize that most are not -- to circumvent their responsibilities to the communities in which they do business.
In the spring of 1990 -- and I believe that date may be incorrect; it may be the fall of 1989 -- International Malleable Iron closed its doors for the last time, leaving many employees with nowhere to go. American-owned, this corporation left not only the employees high and dry but the community as well. Guelph has been left with an empty factory where the property is contaminated with heavy metals. Due to this complication -- and I do not believe the situation has changed since the closure -- we now have this memorial depicting the contempt certain people within the business community seem to have for the public at large. I point that out because nobody wants to touch this property, including the banks or the city, because of the cleanup complication.
The second example of a gap that exists in current legislation deals with the Dayton-Walther corporation owned by Varity. This plant went on strike, I believe, in the fall of 1988. The company, within a month or two after the strike began, mothballed the structure. All machines important for production were removed and the telephone system was gutted from the plant.
Apparently Varity had an agreement with the government regarding grants and/or loans, dependent upon the number of people employed within the province. Over a year passed before severance packages were agreed to with the unions involved, and I think it was much more than a year -- I was going by memory when I wrote this. It was obvious to everyone involved that we were witnessing a plant closure, yet due to the lack of legislation, people could only stand around and watch the pickets day after day.
I recognize that this is not within the mandate of the committee, but I am just pointing out what can happen with a plant closure, that other legislation is perhaps required. We would recommend to the committee that these gaps be reviewed and that, if not in this legislation, then in the future they should be closed.
In reviewing the legislation, the Guelph and District Labour Council would like to now comment on specific clauses in the bill. Overall, the council commends the government on this long-overdue legislation. For too long, workers in the province of Ontario have been impacted by decisions made within corporations over which they have had no control.
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Referring to section 40d in the legislation, it states that:
"The program administrator and any person employed at the ministry to whom his or her powers and duties have been delegated shall not be required to testify in a civil proceeding or in a proceeding before any other tribunal respecting information obtained in the discharge of the program administrator's duties under this act."
We recognize the protection that is required for the program administrator when civil proceedings occur. We question, however, the universality of this clause, as it could result in an employee not having the necessary evidence to win a case in which the administrator has been involved.
We respectfully ask the committee to review this paragraph so that all information required would be accessible to an employee who is proceeding with litigation.
Turning to part XII-B, liabilities of officers and directors, the council wishes to urge the committee to leave intact all liabilities under this section. For too long, decisions that affect the lives of working people have been made without any risk to the people making the decision. By enacting this legislation, the government will ensure that compensation to employees, who have usually given years of their lives to a company, will occur. Too often we hear horror stories where employees have been left penniless due to a bankruptcy or rationalization, and directors are busily negotiating what their settlement will be. It is also gratifying to note that 40z of this bill does not allow exemption due to contracting out.
The Guelph and District Labour Council urges the committee to recommend the passing of this bill through the Legislature as quickly as possible so that it will impact on as many people as possible. Thank you for your time.
Mr Arnott: Thank you, Mr Watt, for coming in to present your concerns about Bill 70. I just wanted to ask you a few questions about the case you have cited, International Malleable Iron Co. Just to refresh my memory, how many employees were working there?
Mr Watt: I believe it was about 260 employees.
Mr Arnott: Was there a gradual reduction?
Mr Watt: I think it was a fairly immediate closure, if memory serves me correctly. The owner of the plant, I think, came from Chicago from a fairly large, well-off family. I do not know all the details of that, but the plant was, I think, losing money, and it was an immediate closure with no warning to the employees.
Mr Arnott: No warning?
Mr Watt: I do not have any of the details. You can understand my problem at this time, trying to get people together, trying to find former employees. I would like to have done that for some personal testimonials, but I was unable to do so.
Mr Arnott: But it is your understanding that there were a number of people who did not receive --
Mr Watt: Yes. As far as I know, it was immediate, and certainly there were lost wages and what this legislation deals with. It is certainly my understanding that that did occur. It was a very sudden closure.
Mr Arnott: All right, thank you.
Mr Huget: Thank you for taking time to appear with us this morning. I just have a very general question. I wonder, from your perspective representing the labour council in the Guelph area, if you could give me an indication of how widespread a problem this is in the Guelph region, of how many people are affected by the same type of circumstances in your estimation and what effect it is having on workers in general.
Mr Watt: I do not have any specific figure. I highlight these two examples as extraordinary because of the circumstances surrounding them, but I know that steelworkers especially are hit by a lot of small plant closures.
Guelph is basically a small manufacturing outlet, and we tend to make a lot of different parts for the infrastructure of automobiles and what have you, so over the last couple of years there have been a lot of small plant closures. But for me to come up with specifics, you must also understand that any examples we have are within organized labour. A lot of these plants are not organized because of the size.
Mr Huget: In ballpark terms, though, would you say it was a serious problem?
Mr Watt: I would say yes, we are talking maybe 1,500 in a community the size of Guelph over the last couple of years, and I am trying to be, if you will excuse the term, conservative --
Mr Huget: Never excuse a Conservative.
Mr Watt: -- in that number, because these are fair-sized plants, and just a number of small plants that ended up by closing.
Mr Huget: In the situations that you have personal knowledge of, and given the type of economic activity in the Guelph region, is it your experience that most of the people who are affected by these closures and who cannot collect their money, are forced to go to the welfare system; or exactly what is happening there in terms of people sustaining life until they can get some money, if they ever get it?
Mr Watt: It has been a very difficult time over the last year with the recession and what have you, so we are talking about people who have basically gone in that direction in a lot of cases.
The Centre for Employable Workers has certainly been quite active, trying to come up with new jobs for these people. In that respect, I would say that the importance of training cannot be overemphasized. I think business really has to take a hold of that. They recognize that too, in the conversations I have had with members of the chamber of commerce, that they have not been doing what they should be doing and retraining employees.
These people have been doing the same jobs for several years and they are trained basically for one specific task; after that there is really nowhere to go, unless you get into some type of viable retraining program. There are lots of retraining programs out there, but I would sometimes question the viability of them in terms of what is going on at present in the economy.
Mr Huget: Just one final point: In your view, is the problem significant enough and this legislation important enough that it be implemented as quickly as possible?
Mr Watt: Oh definitely, there is no doubt whatever. Nothing I can say could in any way add to the personal testimonial from the little woman sitting at the end. That, I think, says it all. They talk about a lot of personal pain and suffering out there that has to be dealt with, and just the whole emotional impact on these people.
Mr Offer: Thank you, Mr Watt, for your presentation. It is quite interesting that one of the examples he uses is Varity. As I recall, it was last October when the Premier allowed Varity to leave the province. At the same moment --
Ms S. Murdock: Allowed?
Mr Offer: -- at the very same point in time he announced that there was going to be this particular program. I think he was also saying that there would be a reduction in the employment guarantee levels at a time when this province was experiencing the worst recession since the 1930s, so I really do appreciate the example which you brought forth. Probably without allowing Varity to leave this province --
Mr Watt: I have not had any personal discussions with Victor Rice or anything like that, if that is what you mean.
Mr Offer: I remember watching the press conference. The Minister of Labour was not in attendance, and I have a good idea why he was not. But it is quite interesting that the example is Varity: allowing it to leave the province, allowing the employment levels to be reduced, allowing it in the middle of the worst recession since the 1930s, and then throwing in this particular legislation. I thought it was pretty good.
Ms S. Murdock: They came and asked the Premier if they could leave.
Mr Offer: In any case, I could not let that go, it was a wonderful example.
Ms S. Murdock: Allowed? Use a different verb.
Mr Klopp: The previous government allowed.
Mr Offer: I just wanted to see if you guys were still out there, I had not heard you much all morning.
On the issue of the plan, you do not say whether the employees should be protected for their wages, vacation pay, termination and severance. I would like to get your opinion on that, because I think it is important for us. Also I would like to get your thoughts as to whether that protection should be paid for by the taxpayers. The plan is currently funded by the consolidated revenue fund, which is taxpayers' dollars, and I would like to get your opinion on whether you feel that is an acceptable principle to be embraced in this legislation.
Mr Watt: To answer the first part of your question, I would hope the legislation would speak to severance pay as well. Nothing is insulated, and in this legislation we are looking at federal legislation and the way it enacts the unemployment insurance program, in which severance pay is regarded as wages, so the waiting period is elongated. I think it is necessary in this type of incident -- plant closure basically, which is so severe that we are not talking about a person who is prepared in any way to go out immediately and find a job in a week or two. I think there is a necessity for including wages, vacation and severance pay, with the rationale that people are going to require more time than normal -- I do not know if there is any such thing as normal termination, other than election perhaps -- but I would say that severance pay is a requirement.
The second part of your question: I think business has to take the responsibility, and I think a communal responsibility. I know they reject that, but perhaps if they did have that responsibility with regard to payouts on a communal basis, there would be more self-policing.
I mentioned in my brief that I am in no way trying to cast aspersions at all business people, but there are certain people out there who take advantage of loopholes and what have you. Perhaps if everybody was responsible there would be more self-policing of the whole situation when those things occurred.
The Vice-Chair: Thank you for coming in and for your presentation. Since the morning has now elapsed, we will stand in recess till 2 o'clock.
The committee recessed at 1201.
AFTERNOON SITTING
The committee resumed at 1413
The Vice-Chair: I am going to call the meeting back to order.
Ms S. Murdock: If I may, I would ask for unanimous consent to have the bill printed using ink, which would include the amendments.
The Vice-Chair: For our use in the clause-by-clause.
Ms S. Murdock: For our use in the clause-by-clause, because it requires five days to get that information printed up.
The Vice-Chair: Ms Murdock moves that Bill 70 be printed in ink, including the amendments, for use in the clause-by-clause.
Mr Offer: We will certainly give our consent. I understand that when they reprint the bill -- it has nothing to do with consent -- there is always a notation as to what is amended, correct?
Clerk of the Committee: Yes.
Mr Offer: So we will see the amendments in the bill, as it is reprinted. There will be some sort of a highlight of those, correct?
Clerk of the Committee: I understand, from talking to legislative counsel about this generally before, that they will make sure these notations are made so you can see the difference, because of course they understand that you have to know where these amendments are because we still have to refer to the amendments.
Mr Offer: It is my further understanding that as a result the government, because these are government amendments, would not have to formally move them in clause-by-clause.
Clerk of the Committee: Yes, they would have to be passed just as we would pass any other clause of the bill.
Motion agreed to.
PATTI PARSONS AND CECILIA GRANGER
The Vice-Chair: We will move on to our normal business of the afternoon. We are a little bit late. I would ask that Mrs Parsons and Mrs Granger come forward to make their presentation. Just take a seat there. For the members and for Hansard, perhaps you would introduce yourselves so that we know exactly who we are addressing.
Mrs Parsons: I am Patti Parsons.
Mrs Granger: I am Cecilia Granger.
The Vice-Chair: The floor is now yours to make your presentation.
Mrs Parsons: I received a phone call about a couple of weeks ago asking me to come down here and explain to you what happened with Granny's Chicken Coop. I worked with the company for about 13 months and all of a sudden it just closed up on me. I worked Friday night. I went in Saturday morning and everything had disappeared. I am a little nervous; excuse me.
The Vice-Chair: Just take a moment and relax. Take your glass of water. We do not bite. We are here to hear all sides of this. When we have an opportunity to hear some personal things, we understand that those things are upsetting at times, but they also give us some insight into how this bill will affect people's personal lives.
Mrs Parsons: There is a letter in front of you stating that they were going to give us one week's pay because they had just shut down, unnoticed by us. I had to phone quite a few times to find out where this money was coming from. It never did show up. As you can tell, that is over a year ago now.
They owed me five weeks' pay: it was two weeks' pay, two weeks' vacation pay and one week's severance pay. I had phoned numerous times to receive my separation papers and I asked if the money was going to be with the separation papers. It never did come. It was not with them. I phoned again to find out what was going on with our money and she said: "Well, it is coming. We just have a few loose ends we have to tie up." I said okay.
I received a letter later on from the Ontario Labour Relations Board stating there were no assets for it to be taken from, and I found out that when they were deducting our taxes from our pay they were not paying the government. When they had an auction for the materials they owned, the government had taken the money from the auction and there was no money left. That is why there were no assets to give anybody any money from.
Like I said, it has been over a year now that they closed and still nothing has shown. I went on unemployment. The unemployment said there were going to be three weeks off it because I was going to be receiving vacation pay and severance pay, and I received nothing.
At the time I lost my job, my daughter was a year and a half old. We had just bought a house. We had lived there a year. By the time December rolled around we thought we were going to lose our house because I had no money coming in.
Thank God, I got a job about two months ago. We are starting to make it again, but it is still pretty damn rough.
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Mrs Parsons: With all that time not having any money coming in, I will tell you that if it was not for Cecilia right here I would have had a hell of a long time trying to find my daughter diapers or even milk or anything just so that I could feed her. Cecilia has helped us quite a bit through that hell of a time. As to the time I had claimed for unemployment, it was about two months before I even got a first cheque. As I said, even now with Granny's Chicken Coop, she just claimed bankruptcy basically and said, "The hell with you." She said "the hell" to everybody. There were about 20 or 25 employees she had promised to pay, and never paid. There were only three of us who were married. The rest were all teenagers. I was the only one with a small child. The other one who had just got married did not have any children and the other person who was married had two grown children, both in high school, capable of working to help with support.
The only income in my family was my husband who was bringing home maybe $500 or $600 every two weeks, which went right into the bank to pay the mortgage. Granny's Chicken Coop screwed a lot of people, and apparently there are still two Granny's Chicken Coops here in the Toronto area under franchise people who have bought the business. They do not have to go through Granny's to -- they do not pay them any royalties or anything, apparently, so nobody with Granny's Chicken Coop will ever receive the money owing to them whatsoever.
Apparently the Ontario Labour Relations Board had gone through and did a bit of an audit on Granny's Chicken Coop books and claimed that on the separation papers it showed they had paid me the vacation pay and severance pay, which was $1,000 before deductions. I never received it but the books say I received it. I have no proof to show them I did not receive it. I cannot even get my separation papers back from unemployment to show it to them, that it is there but it is not here. So there is nothing I can do. I am hoping somebody can do something.
The Vice-Chair: Do you feel up to a couple of questions on that subject?
Mrs Parsons: Yes.
Ms S. Murdock: If the company closed a year ago, Bill 70, if it had been in place, would have covered you for wages, vacation, termination and severance. It is not going to affect you now, you know that?
Mrs Parsons: I know that.
Ms S. Murdock: I just wondered from that comment whether or not you thought maybe that --
Mrs Parsons: Oh no, I understand that.
Ms S. Murdock: The other employees were mostly students or teenagers.
Mrs Parsons: Mostly students.
Ms S. Murdock: Were they mostly males or females? It is just that one of the comments that has been made in the past, yesterday and part of today, is that a lot of women are going to be affected by this legislation.
Mrs Parsons: Actually there were females more than males in the company, yes.
Mr Huget: Thank you for taking the time to come down and explain at first hand the experiences you have had to go through, as unpleasant as they were. Thank you for telling us the way it is. I only have one very quick question. You mentioned in your presentation that there was an auction of assets and that the proceeds of that auction were to pay for taxes that apparently were deducted from your salary and not remitted to the government. To the best of your knowledge, did the tax people get their money?
Mrs Parsons: To the best of my knowledge, yes.
Mr Offer: I have no questions except to thank you for sharing your experiences with us. Everyone here recognizes how very difficult it is to basically go back and relive that. We are grappling with the bill and it is important for us to hear from as many people as possible. I certainly do thank you for coming and sharing your thoughts and experiences with us because they certainly will be kept in mind as we deal with this bill to make it the very best bill it can possibly be.
Mr Arnott: I just want to say the same thing as Mr Offer. Thank you very much for coming in to share this.
The Vice-Chair: As Chair of the committee, I would like to thank you for coming. It takes a lot of courage to come here on your own without having a union or somebody else supporting you, just to come in as a citizen who has been affected. It is almost as bad, I think, at times for the people coming before us as the original experience. We do not mean to be intimidating and really we are not. We are just people like anyone else trying to do a job, so I thank you once again for coming before us and relating your experiences. Those things are very important to this committee.
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LABOURERS' INTERNATIONAL UNION OF NORTH AMERICA, ONTARIO PROVINCIAL DISTRICT COUNCIL
Mr Moszynski: I am not burdening you with a brief this afternoon. You will be receiving a brief later on today from the Provincial Building and Construction Trades Council of Ontario. The labourers' union is a member of that council and we subscribe to the submissions that are made in that brief. Very briefly, the labourers' district council is comprised of our 14 local unions across the province. We represent construction labourers in all aspects of the construction industry. There are upwards of some 35,000 members of our affiliated local unions.
I want to speak to you about fine-tuning this legislation to make it more responsive to the needs of the construction industry. I will begin by saying that we wholeheartedly support this initiative. The testimony you have just heard can be repeated by literally thousands of workers across the province. Thousands of our members have also suffered the same kind of devastation with the impact of the recession and otherwise. There is absolutely no doubt in my mind or in our union's position that this is a tremendous step forward, and I think certainly the government and all parties in the Legislature, in my view, can be proud of this legislation. There are some areas, however, that do require fine-tuning or adjustment to truly be useful to the construction industry.
Now you may well wonder, why should we treat construction industry workers any differently than any other workers? The answer is that the law already treats construction workers differently. We are not entitled to severance pay. We are not entitled to termination pay. We do not get the same maximum hours of work in a week. The existing structure of legislation treats the construction industry differently, and that is because past governments have recognized that the industry is truly unique.
The areas that require adjustment, in our submission, fall into two broad categories. The first has to do with dovetailing remedies with the Construction Lien Act. The second has to do with contributions to multi-employer plans, which are benefit plans.
If we can talk about the Construction Lien Act first, Bill 70 now requires that a worker will be entitled to compensation from the fund provided he has both preserved and enforced his Construction Lien Act claim.
As you are probably aware, the Construction Lien Act remedy has been there for a long time. As the law now stands, you have 45 days after you last supply labour to a project to slap a lien on title when you have not been paid. You then have another 45 days, if the lien is not settled, to preserve that by commencing an action in the civil courts against the contractor and the owner of the property.
Preservation of the lien claim is not a simple matter, but it is relatively straightforward. You find out the legal description of the property. You find out the amounts owing and you enter it in the proper registry office. Then you have your other 45 days to commence your action, a law suit in the normal civil courts with all the delays and all the legal expenses that come with that.
You will notice that is a very different process than an industrial worker has to go through. An industrial worker, as I understand the projected legislation, will walk down to the ministry office himself or herself and it will all be done there.
Bill 70 requires that the construction worker institute the lien claim and preserve that lien claim. That is a much more complicated process and it is also a process that practically speaking requires legal assistance. This is not something a person off the street without legal training can do without much difficulty. It is fairly involved to take that first step.
If you require that the construction worker enforce the claim as well, what you are saying to her or him is that you have to go through your whole law suit and get judgement until you would be entitled to subrogation from the fund, until you would be entitled to get compensation from the fund, and that will effectively frustrate the intention of the legislation, which includes to a good part the desire that workers be able to get their money quickly. If you make workers wait until that lien claim has been fully enforced, you are effectively saying to them that they will not get relief from the fund for quite a considerable period of time.
In our submission, it would be appropriate to require construction workers to preserve their lien claim because there is nothing a property owner hates more than to have a lien claim slapped on his title. It encumbers his title to his property, and that is of course a considerable burden. He will want to have his title clear as soon as possible. In many instances where workers are unpaid, the owner of the property or the prime or general contractor will move heaven and earth to satisfy the lien claims as soon as they are put on the property. However, in many circumstances, it will not be done. The funds are not available.
The question that arises is whether you require that worker to continue to enforce that claim or whether the ministry will take over that claim once it has been preserved.
We would support an amendment to Bill 70 that would require only that the construction worker's lien claim be preserved. That will keep available the existing sort of industry practice or industry pressure to settle these things.
The Vice-Chair: In answering that for the committee, it is our understanding that there is a proposed amendment coming forward or that has been brought forward to address that concern.
Mr Moszynski: I have not seen that, but that is certainly a major concern and we would regard that as a major improvement to the bill.
The question that follows from that, if I operate on the premise that amendment will be passed, and I certainly hope it will be, is that you still then have the situation where the construction worker has been put to the expense of preserving the lien claim, and that, as I stated, requires obtaining a proper legal description and slapping that down on title. That costs money and we think workers should be entitled to be reimbursed, in an amount to be prescribed by regulation perhaps, for the expenses that are involved in preserving the claim.
These are not considerable by lawyers' standards perhaps, but they can represent a real expense to individual workers. Given that this is a step the construction workers have to take that other workers do not, it seems only fair, and is only fair, in my submission, that they be compensated for those expenses.
That is what I have to say on the lien issue.
The other big point for the construction industry has to do with whether contributions for benefits will be covered by the plan or by the fund.
As I said, construction workers are not entitled to severance pay, are not entitled to termination pay, and are otherwise exempted from the standard hours-of-work provisions in the Employment Standards Act. Construction work is very seasonal work. Our members do not generally work for an entire year in the industry because you just cannot build things with some of the weather we get. Wage rates tend to be slightly higher than in other industries largely to compensate for that.
The other really important thing about construction is that you do not have the long-term attachment to a single employer. We, like all construction trade unions, operate hiring halls. In any year, it is very common for many of our members to work for 20 or 30 different employers.
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What the industry has done to ensure that construction workers do have benefits, like dental benefits, vacation pay, drug plans and the whole gamut of benefits that are covered under the health and welfare plans and pension plans, for example, is that the industry has formed plans, jointly trusteed by representatives of employers and representatives of the unions, to which all employers bound by collective agreements contribute. So if I am working for 10 different road-building companies in the course of one year, each of those companies will allocate $1 an hour, will pay $1 an hour, say, to the multi-employer plan that provides the benefits. Members accumulate hours in an hours bank. As long as they maintain sufficient hours, they will have continuing entitlement to benefits.
These payments are always made by the 15th of the month after the month in which the hours are worked. They are part of the total wage package. When construction industry collective agreements are negotiated, if the prevailing wage rate is $20 an hour and the increase sought or agreed on in collective bargaining is $2, $1 of that may go straight into the wage rate and $1 of it may go straight into benefits: 60 cents to pension, 20 cents to welfare, 20 cents to training, for example. All of these benefits are run by separate trust funds, which are, as I said, jointly employer- and union-trusteed.
In a construction industry insolvency situation, normally what happens is that the wages are paid, because the members will not run for three, four, five, six weeks without payment. What happens when there is no money coming in is that the employer stops making the benefit payments.
It is very important that these contributions, which are part of the wage package, be protected by this legislation, because otherwise the benefits to the construction industry will really not be that great. There are occasions when one week or two weeks of wages will not be paid, but by and large, the wages tend to be paid and the benefit contributions are not. It is very common when an employer finally goes insolvent to find that benefit contributions have not been made for a month, two months, three months back, depending on how diligent the union has been in ensuring that the benefit payments have been made or on how long the employer has been unable to make those payments.
In the six-week period leading up to insolvency, if the employer has first had the ironworkers in, he may have paid the ironworkers' wages but not paid their benefits. The ironworkers go off the job; the carpenters come in. The carpenters' wages may be paid, but again the benefit contributions are not. So there may well be cases where wages have been paid in an insolvency situation but the benefit contributions have not.
I understand that the legislation will not be covering benefits for industrial workers. It is very important, however, if this legislation is to be of benefit to construction workers, that those benefit contributions be paid. They are part of the wage package and really indistinguishable from wages in any significant way.
The other piece of that is that in our view the legislation should allow for the trustees of those benefit plans to bring a claim to the fund and to be reimbursed by the fund. It is the trustees who are aware whether the benefit contributions have been made or not and it is the trustees who should be in a position to recover those.
It is interesting that, at least initially, the new federal legislation appears to cover benefit contributions, and I am sure the government has no interest in being outdone by Ottawa in this regard. The benefit contributions we are talking about are the pension fund, the welfare fund, vacation and statutory holiday pay funds and training funds. Pension is very clear. Health and welfare is very clear. You may not be aware that is how vacation pay is accumulated in the construction industry. Usually 10% of wages are paid into one of these jointly trusteed funds. We think they should be covered and we think the trustees of the funds should be able to come to the wage protection fund for reimbursement.
The same thing holds true for training funds, which are another unique aspect of the industry. They were developed jointly be employers and unions because the community colleges generally could not provide the kinds of training that are required in the industry. Workers have chosen to put aside a proportion of their wages to pay for ongoing training through their unions, and that is a benefit to every worker. It is an allocation of their wages that workers have chosen to make, and we think that those training fund contributions are just like pension contributions or health and welfare contributions and they should be covered by the fund and the trustees of those funds should be able to come to the wage protection fund and get reimbursement when they have not been paid.
Subject to questions, that is what I have to say and I would be happy to assist the committee in any way I can.
1450
Mr Offer: Good to see you again.
Mr Moszynski: Good to see you, Steve.
Mr Offer: We have a certain history between us.
Interjection: Don't you want to talk about it?
Mr Offer: No, let John say that. When was it?
Mr Moszynski: I ran against Mr Offer in 1987.
Mr Offer: In 1987 John was the candidate in Mississauga North. We had an interesting election.
You have brought forward some new points we have not heard before, to be very frank. I guess my first question is, is this the type of submission we are going to hear from the Provincial Building and Construction Trades Council of Ontario later on, or is it going to deal with other areas?
Mr Moszynski: Mr Koskie will be providing a fairly comprehensive brief and it goes into the matter in some detail. I have tried to give you the high points.
Mr Offer: On the first point with the construction lien, there are proposed amendments which would take out of that section 40 the words "and enforce." So my understanding is there is no obligation to have to preserve and enforce, but rather to preserve.
But you brought forward the issue as to whether the registration costs, the legal costs in preserving the claim, should be part of this fund. I think throughout the bill there is this word "administrative" type of fee that is being used. I am wondering if the parliamentary assistant or ministry staff might be able to share with us whether it is possible that the bill as currently worded does allow for that.
Ms S. Murdock: No. The administrative fee does not cover what the presenter was discussing. The section that would apply, and that is what I was just looking for, would be the section that allows for regulatory change, and as I understand it, right now the industry and the ministry are still in negotiations.
Mr Moszynski: Yes. There is a concern here, as I understand it, on the ministry's part about, how do you quantify these costs? What kind of costs are we looking at per claim? To do a straightforward lien, you have to identify the persons and the amounts owing and make sure you get the legal description correct. They are not enormous costs, but they can be significant.
Mr Offer: If I might, just very briefly, are the benefit contributions something that could possibly be prescribed by regulation? I make no comment as to whether I am in favour or against it, but is it in fact a possibility that this also might be a prescribed piece of coverage under the legislation? I do not know if someone can help me on that.
Ms S. Murdock: Could you say it again, Mr Offer?
Mr Offer: Mr Moszynski brought forward the whole issue of benefit contributions. When I read the legislation, it does not appear that they are covered, but it does appear that they are potentially coverable under the regulation-making power. I am just wondering if we can get an answer to that.
Ms S. Murdock: Yes. Subsection 40b(d), "such additional amounts as may be prescribed by regulation," covers any potential situation like that. Benefits are not covered federally or provincially under any legislation right now.
Mr Offer: Then the third question, again without passing judgement as to whether it should or should not be coverable, is that this may be another example where this type of issue, if it is brought forward, should not be part of regulation but rather part of legislation so that we can discuss that particular type and form of coverage. I think that maybe brings forward the point that this should not be part of regulation.
Ms S. Murdock: I have a comment in relation to Mr Offer's. I guess it is a question too. If in order to provide those provisions you are asking for for the construction industry it meant the entire piece of legislation would be held back pending that, is that what you would be requesting?
Mr Moszynski: That is kind of a big one.
Ms S. Murdock: I know. But you see the thing is, if we were to do it, as Mr Offer has suggested, as legislation rather than regulation, it definitely is going to hold up the legislation from going into the House for third reading.
Mr Moszynski: Our hope, a hope contributed to by informal discussions with the parties, has been that it would be covered by regulation. Frankly, except from the lawyers' point of view, we do not care where it is as long as it is covered. If the act is proclaimed without its being covered, as I said, its practical usefulness to workers in the industry will be there, but it will not be in my view nearly as much as should be done. I would hate to see the bill delayed for any reason. Coverage by regulation would be satisfactory, I think it is fair to say.
Ms S. Murdock: I have a couple of questions, because it is an area that is handled very differently from the industrial sector. Yesterday one of the presenters made a suggestion that private trustees be included to be allowed to be applicants to the fund. That is not the intent of the legislation. It is, I guess, open to discussion, but in the construction industry trustees are very different from the private trustees. I would like you to explain to the committee what the difference is, how they differ from the private trustee. I think I know.
Mr Moszynski: A trustee in bankruptcy or a receiver?
Ms S. Murdock: Yes.
Mr Moszynski: The concern of trustees in construction industry welfare plans is really non-partisan. It is in ensuring that the industry has skilled person power available and that benefits are available at a level demanded by the skilled workforce. Their interest is not in maximizing what can be secured from an insolvency for a private party in the way a receiver or a trustee appointed by a bank is. The interest of the trustees of these benefit plans is in ensuring that the workforce has the benefits that have been paid and they have no private interest.
Ms S. Murdock: I know we have been looking seriously at the whole idea of not having third-party applications to the fund, so therefore a trustee would not be allowed to be an applicant under the legislation. In the construction industry, the trustee stands in the place of the worker. At least that is my understanding.
Mr Moszynski: Yes. If that is what you were looking for me to say, that is certainly very true. They have no interest, other than the workers' interest, I suppose.
Ms S. Murdock: There would have to be some kind of explanation, I think, because you cannot just say that no trustees are allowed to apply to this fund without giving some differentiation as to the kind of trustee a construction trustee would be.
My next question is in terms of the proportion of benefits. Right now in construction liens, what is the proportion of the benefit applications as compared to the wage applications generally?
Mr Moszynski: You will be hearing more from Mr Koskie on this point. On the liens I personally have done, which tend to be only in absolute emergency situations, I would estimate that unpaid benefits would account for up to 45% of some applications, higher in others, you see. As I said, often the wages will be paid, but you will find that the benefit contributions have not been made for the last six or eight weeks. It really could be higher. I would not want you to rely on that figure.
Ms S. Murdock: No. I just wanted your own sense of it.
The Vice-Chair: Excuse me, Ms Murdock, I am afraid I am going to have to do it to you.
Ms S. Murdock: You are looking at the clock from a different angle than I am.
The Vice-Chair: I am looking at the fact that actually we have been over the half-hour, so at this point I have no alternative. I have to cut you off. I thank you very much for your presentation and for the different point of view that this group has.
1500
BATES AND MCKEOWN
The Vice-Chair: The next group of presenters is Bates and McKeown.
Mr Yeomans: Good afternoon. My name is Steve Yeomans. I am with a company called Bates and McKeown. It is difficult for people who run small businesses in Ontario to keep informed of all the policies, regulations and legislation that affect the way we do business. Small businesses play a constant game of catch-up and respond. We wish we had more in building our businesses than in slowing them down.
I have never before made a presentation to a standing committee of the Legislature. Like most people in small business, I do not normally have the time or the resources to prepare briefs to committees. However, we at Bates and McKeown heard about the Ontario government's proposed changes to the province's labour laws and were deeply concerned. Certainly if we were looking to start up a new enterprise today under the proposed laws, we probably would not. We decided that unless we made an effort to speak out now, we might find ourselves without a business to run and with nothing but time to make presentations.
Bates and McKeown is a small residential and light commercial renovating company. We started up in 1965 and were incorporated in 1969. The company is family-owned and -operated, is non-unionized and employs currently about 25 people, down from about 50 before the recession hit us. We employ office staff as well as journeymen carpenters and we have an apprenticeship program in place. We offer what we feel is one of the better benefits programs available, certainly the best in our industry that we know of in the city, and have always promoted our workers from within. Our apprenticeship carpenters stay with us and advance to journeymen, and many have become foremen.
We work both as a contractor on our work sites and we ourselves contract outside consultants and other subcontractors; for example, one part of it, on the design and engineering end of things, as well as plumbers, electricians and these kinds of things. Our company inspires a high degree of employee pride and loyalty, which is seen on each of our job sites and which we run as if they were our own places.
I am here today to give you a quick picture of how Bill 70 and the government's proposed labour law amendments would affect Bates and McKeown.
I have three simple messages: (1) Real consultation means that you must consider the economic impact of your proposed laws. If you do not, you will drive business out of this province; (2) Even with the government's proposed amendments to Bill 70, the bill has several flaws which will further damage business confidence in Ontario if they are not corrected; (3) The government is pursuing the wrong agenda. Instead of introducing new laws that will handcuff our economy, this government should take up the real agenda of economic renewal, which would benefit all of us.
Bill 70, as it was introduced in April 1991, came as quite a shock to the people who were working in the small businesses of Ontario. The government had promised legislation to ensure that individuals are paid owed wages, and I am sure most of us agreed that this made sense when so many businesses were being forced to close down and lay off their workers. What we got, however, was the directors' and officers' liability bill and an initiative that may still, in the end, put even more people out of work.
Word of the real implications of Bill 70 spread quickly, but it was difficult to believe that any government could come forward with a proposed law which was so fundamentally antagonistic to small and independent businesses. When we heard about the new liability as proposed for directors, managers and officers of the businesses under Bill 70, we wondered how many workers would find themselves on the unemployment rolls. When we understood that the extended liabilities for directors, managers and officers were to follow them even after they had left the company and could therefore be dictated by decisions they had no control over, we wondered who would ever invest or work in a company in Ontario. In fact, we understand that the original bill would have made a number of our own workers liable for their own wages in the case of insolvency, a rather strange situation.
When the government said that it consulted widely in the preparation of this bill, we wondered who it was talking to; certainly no one trying to grow a small business in this province. As small businesses are strategically at the greatest risk of insolvency during recessions, it seems logical that a significant effort to obtain their input would have been made during the development stage. As elected officials, all of you have the added responsibility to consider the real effect of your actions. I suggest it would have been better for this government to consult before producing legislation, rather than afterwards.
Companies create directorships to provide guidance and leadership in growing businesses. A director's role is to help companies, large and small, to survive and grow in an increasingly competitive marketplace. Usually directors do not reap huge sums of moneys for their contributions. Often, as in the case of our company, they do not get paid at all. But Bill 70, even with its proposed amendments, has made existing directors, including myself, think twice about the risk of making creative contributions to the growth of Ontario's economy.
You only have to open a newspaper to see that Bill 70 has dealt yet another blow to the confidence of business, large and small, in this province. There has been little focus, however, on the additional effects of the bill with the government's proposed amendments.
In Ontario, the Ontario Business Corporations Act, OBCA, imposes personal liability on directors and officers for a maximum of six months for unpaid wages and 12 months for unpaid vacation pay owed to employees of a corporation. Proceedings against directors can take place only after a suit has been brought against the employer and where the employer has been found to have no remaining ability to pay for lost wages.
Anyone holding or considering a directorship in this province now needs to know that under the amended Bill 70 a new bureaucracy will be established to not only parallel the provisions of the OBCA but also chase down directors and issue them with orders to pay. A wage protection fund will be created to pay workers up to $5,000, but not before a number of directors have been faced with personal bankruptcy themselves.
Director's liability is increased in a number of ways. First, as we understand the bill, the program administrator will now be able to commence action against directors before it has been established that the employer has exhausted its ability to pay. Certainly the bill is not clear as to what circumstances need to be satisfied before the program administrator begins issuing orders against directors. I believe that it is fundamentally unfair for directors to be now put in a position where they may be found personally liable when it has not even been established that the company they served can satisfy the claim directly.
Second, the new program administrator will not be hindered by any of the rights and protections that are normally available to an individual director under most of our laws. Bill 70 waives the protections of the Statutory Powers Procedure Act, which means the director has no right to a hearing, no right to questions, cross-examination or to introduce evidence in his or her defence before an order to pay is issued against the director. Nor is there any provision, as in many other Ontario statutes, to suggest that if a director had practised due diligence in his or her actions this might be a reasonable consideration. I would hope this committee would at the very least consider amending the act to provide for consideration of due diligence.
Third, the time period for actions to be taken against directors is dramatically increased. The Business Corporations Act includes the requirement that actions against directors be brought forward in a reasonable time frame. Bill 70 extends the time period to two years, four times the existing period under the OBCA. Bill 70 therefore raises the risk for directors of ongoing liability for undue periods of time, even after they have severed all ties with the employer corporation.
There are other concerns that go beyond the clauses of the bill itself. One is the fear of the creation of a payroll tax to fund the wage protection fund at some time in the future. The Ontario government proposes to fund the wage protection fund from the consolidated revenues of the province of Ontario. However, the members of this committee will also be aware that on June 13, 1991, the federal government introduced changes to the Bankruptcy Act which would introduce a new tax on employers to pay workers of bankrupt companies for lost wages. We understand that the two levels of government are talking. It will come as no surprise to you that we are strongly opposed to the imposition of more taxes on small business. We simply cannot afford to stay in business when all our profits are paid in taxes.
I would hope that if possible this committee would pass an amendment to Bill 70 that would ensure that the government does not introduce a payroll tax to pay for the Ontario fund. In the aftermath of the GST, the employer health tax and the Ontario budget deficit, small business in Ontario cannot afford yet another tax. If, as some suspect, Bill 70 is a stalking horse for yet another payroll tax, let's stop it now.
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The Bill 70 experience has sent out a message to small business that the government is playing Russian roulette with our economy. The simple fact is that employers are now looking south and reconsidering investments that will create jobs here. The Ontario government cannot legislate job creation and the renewal of our economy, but it can create a climate that allows us all to prosper. This labour legislation is not the answer. We really believe that now is the time when you have the choice between an agenda that supports economic growth in Ontario, or an agenda that supports economic growth in the United States.
As the Minister of Labour has promised to introduce changes to the Labour Relations Act in the fall legislative session, I would also like to make a few, brief comments on what we have learned from the Bill 70 experience, and how these further proposed changes would affect our company and others like us.
When we discovered that Bill 70 was only the first of a long line of promised legislative changes, we became seriously concerned about our ability to continue to operate in this province. The Bill 70 experience has taught us that we cannot afford to wait for this government to bring forward its legislation. We must ourselves be heard before the bills are drafted. We fear that even at this point, this may be too late.
In March of this year, the Minister of Labour put forward a list of some 30 areas where he intends to amend the Labour Relations Act. As with the directors' liability provisions of Bill 70, these proposed changes have been thrown on the table like some kind of bargaining position in a very large set of negotiations.
The recommendations that have come from the labour representatives to the Labour Law Reform Committee, if acted upon, would devastate small business in this province. They would, we believe, both remove any remaining incentive to stay in business in this province and preclude any thinking person from opening a new small business in Ontario.
Currently, the law is that employees are free to decide whether they want a union, without interference from either management or union. It is also the law that management is free to manage. The current legal framework has served all Ontarians well. The union agenda will upset the balance.
As mentioned, Bates and McKeown is a small, privately owned, Canadian company with a loyal, non-unionized work force. We act as contractors and we contract work ourselves. Consider just how a few of these proposals would affect our company.
Upon the posting of a notice of organization, union organizers would be granted virtually unrestricted access to Bates and McKeown's private property and, we feel, our clients' homes and offices, for the purposes of unionizing our employees. We could be required to turn over all our employee information, and we would be prohibited, by law, from communicating with our own workforce during certification processes. This is not only offensive to someone who has built up a private business, but if you think about it, it is ridiculous. I suppose we would need approval to invite our employees to a barbecue or to have one of our weekly site meetings.
During a certification drive, we would be further prohibited from disciplining, removing or discharging an employee. Presumably, if an employee was caught attempting to burn down a client's home, for example, we would have to seek permission before we could discipline him.
The organizing union would also be allowed to determine exactly who it was targeting for their bargaining unit. They might, for example, choose to organize only our apprentice carpenters, or maybe our part-time workers. They might choose to organize one of each and then link them to similar individuals in other industries.
If only 20% of the employees wanted the union, the union counsel would be imposed on management and all the employees, even though 80% did not want the union. If 51% of the employees signed a union card, the union would be certified without a secret ballot vote, and employees who did not want the union or changed their mind would have no say.
Bates and McKeown could also become unionized simply through our existence as a contractor. It has been proposed that where a non-unionized company does work for another company which is unionized, collective bargaining rights and obligations would be extended to the first company, presumably without asking the consent of the company or its workers. These successor rights proposals, if ever enacted, would certainly put Bates and McKeown, and I believe a long line of others, out of business. We were most disturbed to learn that a bill to effect these changes may have already been drafted and approved by the Ontario government.
I have only to mention some of the changes which involve processes for organization and successor rights. Other proposals would force unionized companies to shut down during a strike, provide unions with confidential financial information and subject all management decisions to a third-party arbitrator's view of reasonableness. They would also preclude employers from communicating with employees during a strike.
While the Ontario union movement may believe these proposed changes are desirable to increase their dues-paying members, it is clear the real effect will be to put even a larger number of people out of work.
One of the key aspects of any real consultation is to evaluate the results of an action before it is taken. In our industry the Ontario government's proposed labour laws would force private employers, such as Bates and McKeown, to do one of three things: to close down and lay off workers, possibly move to the United States, or join a growing number of underground companies that currently cannot survive Ontario's taxes and legislation, such as Bill 70 and the proposed changes to the Labour Relations Act. In each scenario, we all lose.
We believe the Ontario government has another choice. The constructive choice for the Ontario government is to abandon its current labour agenda, and focus its considerable resources on activities that will support economic renewal in this province. We believe that the Ontario public shares this view.
The Vice-Chair: Seeing that you have actually eaten up all of your time, I will allow one very quick question from each.
Mr Arnott: Thank you, Mr Yeomans, very kindly for coming in today to present your case. How optimistic are you about the future of the Ontario economy over the next few years?
Mr Yeomans: We have mixed feelings. I guess it is sort of a roller coaster. Some things say it is going to look good, and then other things come along and we do not feel so great about it. Our general feeling, and the feeling of other people, for example on the renovators' council, the Toronto Home Builders' Association, which we are very much involved in, and other similar kinds of organizations, is somewhat pessimistic. There is a lot of talk, not only in companies like ours but in other companies: What to do? Close up and go someplace else? Open up a new business someplace else?
The job of running a business now is not what it used to be. It used to be that we could focus on what we were doing; in our case, renovating houses and building houses and things like that. Now we are finding more and more time spent like today in preparing for this, doing other things that have nothing to do with our business directly. Quite frankly there is not the money in our business to support that kind of looking around and trying to do other things. We need to focus on what we are doing.
Already, as I mentioned at the beginning of my comments, our workforce is down nearly 50% from what it was a couple of years ago, so there are a number of people who are unemployed, and certainly within the construction trades in this city, unionized and non-unionized, there are a lot of workers who are looking for work.
Ms S. Murdock: With the journeyman carpenter apprenticeship program for carpentry -- so it is building, I presume you are into building now.
Mr Yeomans: Yes, we renovate houses. We sort of update.
Ms S. Murdock: The previous presenter was explaining how the payroll system worked. Is that similar to what you do?
Mr Yeomans: Sorry, I did not hear all of his comments, just the tail end of things. We are not a unionized company, so some of the things that would apply to him as far as trustees and those kinds of things are concerned are not applicable. We are not obligated to offer benefit programs like medical and dental and those kinds of things. We have for a number of years. We just do that as part of building goodwill and a good workforce. We are not obligated at this point to do those kinds of things. Certainly, our apprenticeship program is something for which we wish there was more money and more support from the government. It is not quite the same thing as a unionized situation. We deal basically through the community colleges.
Mr Offer: As a representative of or a part of small business in this province, the creator of so many new jobs in the province, would your concern with the bill be lessened if there were some provision that the liability for directors in a small business, if that could be defined, were eliminated?
Mr Yeomans: As I understand the bill as it is proposed, one of the off-shoots, if you will, of the way it is, is that we would be looking for some kind of liability insurance or something along that line. Two things come to mind on that. First of all, if that were the case, marginal companies would probably not be able to afford the premiums, or be able to get it at all, in which case, what happens then is that for the directors the prudent thing to do would be to close up rather than risk their own personal situation.
Second, even if a company such as ours were in a position to do that, it is yet another cost of doing business that has nothing to do with the core of our business. What we are finding is that in looking at the cost to stay in business these days, the costs are getting greater and greater. Certainly, from our aspect, there is not an endless source of income. We cannot keep charging more and more. It is a very competitive business.
The other thing that is very key is that we are constantly competing with an underground economy. In our city it is very simple for a carpenter to leave a company such as ours, set up his own business and compete against us directly, paying no taxes, not being licensed and all of these other things. What we are finding is there is a bigger and bigger spread, especially through this last recession, between fighting an underground economy that has no controls and companies such as ours that are forthright, paying taxes and doing everything aboveboard.
We are losing our shirts. On so many jobs, guys are coming in at cost and below. How can we compete with that? How can we pay taxes? That is why our workforce has dropped by 50%, because we cannot compete. This would be yet another hidden cost of doing business.
1520
TIMMINS NICKEL INC
The Vice-Chair: The next people we have are from Timmins Nickel.
Mr McIntyre: Timmins Nickel was started in December 1988 by two former Noranda employees. Since then we have developed two mines and currently have over 120 employees. Our Langmuir mine is the only new mine in northern Ontario in 1990 or 1991, and as far as I can tell in the foreseeable future.
We believe ourselves to be significant contributors to our community. Our contributions have been recognized in Timmins, and I have copied for your information an editorial about us in the Timmins Daily Press in January of this year. I would like to quote from part of it:
"Sometimes, it seems, people don't say enough about the businesses and individuals in Timmins who stick it out no matter how tough times get....Businesses across the country are failing. But there are companies that step back, tighten their belts and keep operating, keeping on what staff they can afford, but at least providing a sense of continuity for residents of Timmins.
"Other companies pick up the gauntlet, look recession squarely in the eye and march boldly forward, not just surviving, but expanding. Such a company is Timmins Nickel...the Timmins Nickel people have faith in what the future holds for our city, and, for them, and for people like them, we're eternally grateful."
Our business growth has been accomplished through high productivity from our miners and our staff. Our stope miners are the key to our operation and make $80,000 to $90,000 per year, which is more than our chief financial officer. This is about 40% more than in union mines. What we get in exchange is multitasking from the stope miners. To do his job effectively, each stope miner must do his own plumbing, electrical work, sheet metal and mechanical work, as well as his mining responsibilities. If he had to wait for a staff plumber or sheet metal worker, as is in the case in many union operations, the productivities in our particular mine would be so low that we would be out of business within weeks.
Following our editorial in the Timmins Daily Press in early February, we wrote nice letters to the Minister of Northern Development and Minister of Mines, the then parliamentary assistant to the Minister of the Environment, who was my MPP in Toronto, and to our MPP from Timmins, requesting a meeting to discuss our views on the mining business in Ontario. To date we have been unable to obtain a meeting with any of them. We are therefore grateful for the opportunity to discuss Bill 70 with this committee, although our concerns about the mining business in Ontario are much broader.
Let me make one other comment. As a small business, we have no government relations officer. To research and prepare material to make a presentation to you means that I am not doing pertinent parts of my job in dealing with customers, suppliers, financing, operations and the myriad details of running a small business.
My concerns about Bill 70 are quite simple. It has crystallized the entire issue of personal liabilities of directors and officers over and above the additional liabilities actually imposed by the bill. In the case of our company, this has particular importance.
As a publicly traded company on the Toronto Stock Exchange, we are required to have two outside directors. One of our outside directors resigned in January and we are now trying to replace him. Any candidates now inquire about liabilities.
Without being absolutely certain of completeness, personal liability for directors arises under the following legislation:
Under the Canada Business Corporations Act, failure to discharge duties as a member of an audit committee can lead to a fine of up to $5,000 or six months' imprisonment. Under the Income Tax Act, directors are personally liable for withholding payments, CPP and UIC not remitted. Under the CBCA, directors are personally liable for up to six months' back wages.
There are both quasi-criminal and personal civil liability under the Mining Act. Under 1991 amendments to the Occupational Health and Safety Act, directors and officers can be personally liable for fines up to $25,000 or imprisonment up to one year or both. The Canadian Environmental Protection Act imposes quasi-criminal liability on managers of the corporation which does not comply with national environmental standards. Non-compliance with the Transportation of Dangerous Goods Act can create personal liability for fines up to $50,000 for a first offence and $100,000 for subsequent offences, as well as imprisonment up to two years;
The Ontario Environmental Protection Act imposes quasi-criminal liability on directors and officers, as does the Ontario Water Resources Act;
There is probably something under the GST and there are various liabilities under the Securities Act;
Under the Employment Standards Act managers may be liable for fines up to $50,000 or imprisonment up to six months. Under the original Bill 70 they were personally responsible for severance, termination, vacation pay and so on.
Despite being a small company, we have been able to obtain directors' liability insurance for wrongful acts. However, environmental liability and chronic health liability are excluded, leaving a major uninsured liability on directors. In addition, if the liability arises through bankruptcy, say, a decline in nickel prices or bankruptcy of one of our customers, eliminating our receivables, events beyond the control of the individual directors, it is not clear that the directors would be covered for civil liabilities for owed wages and vacation pay, etc. However, it should be understood that even this level of coverage requires a strong balance sheet and is not generally available to small companies.
The issue of directors' liability has an impact even on large companies when they run into trouble. For instance, someone acting as a director of Algoma Steel or a new company buying out Spruce Falls is incurring significant personal responsibility even if he or she is acting on behalf of a union. The contrast with the virtual total immunity for personal liability enjoyed by directors and officers of ministries and municipalities is really quite startling when you think about it.
With the wide variety of personal liabilities under different legislation, each change in the underlying legislation or regulations affects our personal liabilities. During the past year, these have changed at a bewildering pace so that it is virtually impossible to keep up with them. To give you a sample, there are amendments to OHSA in January; amendments to the Mining Act in June; a new land claim package with Indians affecting all land in the Hudson Bay watershed, including Timmins; the original Bill 70 in April; in February there is a mooted environmental bill of rights; in February, a federal green plan.
There were changes in the Environmental Assessment Act, assertions by the feds that they would use their environmental assessment review process if a permit is required under the Navigable Waters Protection Act or the Fisheries Act; the introduction of the GST; a new payroll health tax, increased workers' compensation; changes in the federal Bankruptcy Act covering ground somewhat similar to the Ontario Employment Standards Act; proposed changes to the Labour Relations Act; amendments to the Ontario Securities Act; amendments to the Environmental Protection Act, extending liability and now a possible new payroll tax.
Speaking personally, it is virtually impossible to operate a business effectively and at the same time remain up to date with the changes in legislation. The entire problem is exacerbated when each change in legislation affects your personal liability.
In reading this bill, I also note that the proposed program administrator is exempted from the Statutory Powers Procedure Act. This means the director has no right to a hearing, no right to question, cross-examine or even introduce evidence in his or her own defence.
On a personal basis, this Statutory Powers Procedure Act was passed as a result of recommendations by my grandfather, Chief Justice McRuer, in the early 1970s pursuant to a commission on civil rights in Ontario. I find it startling that an NDP government would curtail individual civil rights in favour of administrative expediency.
In order for our business to grow we need to attract outside directors of the best possible calibre. In the past, executives in the mining business have acted as directors of junior companies, partly because they enjoy the entrepreneurialism and partly out of a sense of community involvement. The motives are not entirely different from being director of an arts organization.
In our company, the financial compensation for outside directors is nominal; no quarterly fees are paid. Outside directors have been awarded options on 40,000 shares of stock at then prevailing market prices. By way of comparison, our mine foreman has an equivalent option package.
With the myriad risks an outside director is now exposed to, it is extremely difficult to create incentives to act as an outside director. It should also be noted that some outside directors function as specialists in finance or exploration. They are required to assume liabilities in areas such as the environment or mining practices on which they may have little or no specialist knowledge.
One assertion of supporters of Bill 70 and various other measures to increase personal liability for directors is that small companies will not be affected. In fact, the effect of these bills is exactly the opposite. Large companies can provide indemnifications to their directors; small companies are often poorly capitalized and may have less net worth than an outside director of substance. Further, if our company with a successful track record can obtain only limited directors' liability insurance, there must be thousands of companies in Ontario with no directors' liability insurance at all. The net result is to produce yet another chill in small business activity throughout the province.
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In passing, I would like to make one related comment on bank liability. Under various well-intentioned legislation, liability has been extended to banks if there are environmental claims against a property. In the case of our company, we operate so that we have virtually no environmental impact. However, it is hard for a bank to make, or believe, that assessment. As a result, it has become virtually impossible for banks to lend against mining assets in Ontario except to companies with other collateral.
At the start of my talk I recited an endorsement of our business by the Timmins Daily Press in order to establish our credentials. I wish to reiterate our view that our company has been a notable contributor to our society in difficult times.
Most directors of small private companies and public companies are not Conrad Blacks. We essentially live on my wife's salary as a public school teacher. I have invested more money in Timmins Nickel than I have earned since it was founded. I have put a third mortgage on our house. I drive a 1978 Aspen. I have no pension. If Timmins Nickel succeeds, then I succeed; if it fails, then I am out of luck. I resent that, above the other risks which I have taken, my house should be held hostage to so many pieces of government legislation.
Two of my neighbours derive incomes from the public sector. My neighbour across the street works for the Ontario Ministry of Agriculture and Food. He is returning in August from a year's sabbatical in the south of France. He is contemplating early retirement at 55 on an indexed pension. My next-door neighbour is a professor at York University. He is about to begin a second sabbatical in seven years. His previous sabbatical was spent in England. My wife is absolutely bewildered about why I persist with our business. Fundamentally, it is that I do not want to be a bureaucrat.
I have obviously addressed slightly broader issues than directors' liability under Bill 70. In my view, there has been a significant buildup of problems under previous governments and under the federal government which have been crystallized by Bill 70. It appears to me that civil servants, comfortable with their own indexed pensions and total personal immunity from liability, have been very quick to assign broad personal liability to directors. In the process, we have created a liability chill that is a significant problem for us as a small business.
As a society, I think it is important that we determine exactly what is an appropriate level of liability to require of directors and I am very far from convinced that any thought whatever has been put into this.
On a broader scale, it is important to foster entrepreneurial business in this province. Virtually every operator of a relocatable small business that I know of is studying a move out of Ontario. If you are NDP, you blame it on free trade, the GST or the high dollar. If you are Conservative, you blame it on the Ontario budget, Sunday shopping or the NDP government.
Most small businessmen are not particularly interested in politics and do not have the time to engage in it. Rather than lobby like activist groups, they will simply move. As a citizen who is not interested in moving, I think it is an important economic issue for our province and somehow politicians have to come to grips with it.
Ms S. Murdock: You certainly stated your position really clearly. I just wanted to clarify a point under the Statutory Powers Procedure Act because, while it is true that prior to an order the SPPA is waived, once the order is made, the director not have to submit money, as the employer does, say, pending the decision of the tribunal or the court. Under section 50 of the proposed amendments, what you are saying on page 3 is not correct. Actually, I think the previous speaker had referred to that point and I lost out on time and could not tell him that, so I am glad you raised that issue as well.
A number of the small business people who have come in have noted their concerns regarding added costs. It is difficult to say. I guess the added costs I see are potentially 18 months from now, but I do not see any right now. So I have some difficulty in the additional costs at the present time to any of the business levels, given that the taxpayer is going to foot the bill for the next 18 months. But I will leave it to my loyal opposition there to make their comments.
Mr Ramsay: I would like to thank Stephen, also, for making the presentation. This is the type of presentation that all of us as politicians are going to have to start to listen to. I think it is interesting how you listed all the liabilities you suffer from, potentially, and listing also all the acts, all the regulations that regulate your business activity. One could almost feel that governments are waging war on entrepreneurial activity in this country. That is the effect I get when I see how you have listed all this together.
I must say I was part of a government that did a lot of good things, and as a person looking at these things, I did not look at the cumulative impact of what I was considering. I think it is telling for a lot of us in political life to wake up to what we are doing.
It is interesting to note, too, what you said about unions. Again, you have been able to find some efficiencies there that you are not able to do in a unionized operation. Of course, it is not politically correct to say anything bad about any group in society, but I think all of us, whether government, unions, people in the business community, have got to start to look at ways to be innovative and find ways to be competitive.
You laid it all out here and all of us have to take the blame for our lack of competitiveness. You are making a plea here to us as parliamentarians to wake up and smell the coffee, as the common expression is, and help you do your job.
Mr McIntyre: Actually, in terms of listing the liabilities, I will tell you something interesting. When I was preparing this I decided to make the quixotic task of phoning up the Ontario government and asking them what liabilities one would get as a director. So I phoned the Attorney General's office and they said, "Well, this is nothing to do with us." They gave me a consumer information number. I phoned the Ministry of Consumer and Commercial Relations and they thought I was trying to buy insurance.
Then I phoned the minister's office and they sent me to the companies branch. Then somebody at the companies branch said, "Oh, you're trying to find out about the wage protection act," and I said, "No, I am trying to get sort of a more comprehensive listing." They said, "Well, we can tell you about what your liabilities are under the Ontario Business Corporations Act, but you are on your own for anything else." I said: "Do you have any information even under that act? Do you have a brochure or anything?" They said no. Then I said, "Well, where would I find that information about other liabilities?" They just said, "Call your lawyer." To be honest, that is the answer I expected, but at some point you would think somebody should at least have a vague idea within the Ontario government, and what the net result was.
Mr Ramsay: It seems to me there needs to be a lot more advocacy by government on behalf of business people who are trying to generate the economy, and maybe that side we have not paid enough attention to.
Mr McIntyre: I do not know what the answer is. That is not my job; that is your job.
Mrs Witmer: I would like to thank you very much for your presentation. I am really impressed with the thoroughness of the research and I am disappointed at the difficulties you have had in obtaining this information, that even the government did not have this all in one place. Would it be fair to say, Mr McIntyre, as an employer at the present time and someone who has taken the risk and operates this particular company, that if it were not for the fact that your wife were supporting you, you would not be able to continue?
Mr McIntyre: I would have reinvested less money in the business, something that would have affected something somewhere.
Mrs Witmer: What would you suggest the government do with Bill 70?
Mr McIntyre: Where do you start?
Mrs Witmer: I hear you say you are concerned about the directors' liability.
Mr McIntyre: The minister said there is no additional directors' liability under this bill as compared to any other legislation. If that is the case, why even add one more set of clauses so that people have to figure out what it means? If it does not add any liability to any previous legislation, then why have it? it is just one more thing that people have to figure out.
If it does have additional liabilities beyond the existing legislation, then the minister has not exactly stated it right; it does have some additional. I cannot figure it out. I have other things to do.
The Vice-Chair: I am sorry, I am going to have to cut it off at this point. I do not mind sitting here, but we keep overrunning our time allotments. Thank you again for your submission.
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COMMUNICATIONS AND ELECTRICAL WORKERS OF CANADA
The Vice-Chair: The next group would be the Communications and Electrical Workers of Canada. You can just sit down and the clerk will distribute your brief. Could you please introduce yourselves.
Mr Martin: My name is D'Arcy Martin. I am a national representative with the communications workers. My colleague Leo Dowhaluk is with me. The two of us are here to talk about our experience as a union with closures and with the effects of closures on workers.
It is interesting: Steve McIntyre is a former classmate of mine. Were he here, I would like to emphasize one of the points we make, which is the distinction between what we talk of as productive investment, which is I think what he does, and speculation, which is what I think this act helps to stamp out. It seems important that we have, as unions, some responsibility for participating in the process of wealth creation and economic development in the province and that we engage in this conversation in that spirit.
What you have before you is a very short brief that comes out of years of experience. We will just leaf through it quickly so we have the time to deal with questions.
The first page lays out some perspective. We are a union that represents just under 20,000 Ontario workers. During the current recession, close to 20% of them have lost their jobs. Our members are in the telecommunications sector and in electrical and electronics manufacturing, places like General Electric, Mitsubishi up in Midland, places like that, and at Bell Telephone, both in the operators and the craft.
We have dealt with a lot of closures and a lot of layoffs. What we are arguing is that the distribution of risk needs to match the distribution of power, that those who have authority over a workplace need to carry some particular responsibility in terms of the social costs of mistakes that happen. And those who do not want to insure workers and make sure they actually get adequate compensation in situations where mistakes are made would, it seems to us, have to offer workers a share of power in those decisions, which we do not find employers forthcoming with.
The bottom of that first page makes some specifically political comments. Those are around what we see as a pre-emptive strike by the militant wing of Ontario business launched before this government can effectively address the legitimate needs of its constituency.
We argue that Ontario needs a distinctive economic and social identity in the North American trading bloc that is now emerging and that this bill is a part of it. I think Leo will speak directly to some of our experience with closures.
Mr Dowhaluk: We have three examples in our brief about the experience of closures. I will only highlight one of them, which strikes us bluntly in the eye. It is the closure of Admiral Canada in 1981, where workers were told on November 4 at 1:55 pm that the company is going bankrupt and they have to be out the door by 2 o'clock, in five minutes.
The employees were led out of the plant. Subsequently they were paid the wages owed to them, but all the other things like severance pay, vacation pay and benefits are still outstanding after almost 10 years in court. There is no way to collect.
In 1982, Inglis Canada bought this plant from Admiral Canada, and they re-employed some workers with some ups and downs in the production. Ironically, this plant is closing in October, again. This time it is for another reason. We believe it is free trade. This time around we were successful with negotiating a settlement of severance pay, benefits and wages, but the outstanding issue of vacation pay and severance pay from Admiral is still outstanding and still before the court.
That is why we strongly support this Bill 70, so cases like that will not happen.
If you look at the last page, we enclosed from our experience some job loss numbers. As of January 1991, in total, in the industrial sector we lost 960 jobs, at Bell Canada 1,200 jobs, for a total of 2,160. That is as of January 1991. The figures are much worse right now in July 1991.
We believe this legislation should be implemented as soon as possible. This initiative will mop up situations like those from our old Admiral plant, which tend to embitter labour-management relations. Further, it will provide a floor of security for non-unionized workers, a counterweight to the anxiety that now pervades workplaces across the province.
Most important, it will serve notice to the least responsible employers that a new level of community standards is now in place in Ontario and that callous disregard of their obligations to employees will no longer be tolerated.
Mr Martin: We are speaking in support of the legislation, urging that it be implemented quickly. The fact that it was retroactive in its provisions is a help in that regard, particularly given what has gone on since last October in our workplaces.
In both the previous presentations, there was talk of other, connected, forthcoming legislation. The next to last presentation was remarkable in terms of the portrayal of labour law reform provisions. In fact, what is being suggested by that person is much more extreme than even the labour people have been proposing to government, which in turn is obviously much stronger than what the government is ever going to be able to put forward politically.
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I think there is hysteria around a lot of this, and what we are trying to do is to introduce into the conversation some straight talk about how we can deal with an increasingly volatile labour market without deadlocking politically and economically in ways that are going to drag us all down. What that is going to require is providing a floor of security so that workers and their organizations can afford to take part in a public policy debate. You cannot have dialogue with a gun at your head, and the situation now, where we tie up our resources for a decade to try to retrieve money that is clearly owed, where we are now going through a second round of closure with those same people, is intolerable.
We suggest that this government should be enhancing the security of employees particularly by developing training and other legislation that will give people portable and developmental skills training as a universal right, so they will have some educational capital, some skills they can use to protect themselves in a shifting labour market, and that this government aggressively promote a distinct identity for Ontario in the North American trading bloc. As happens, for example, in the European common market with several of the countries involved, there is no reason why a distinct identity, socially and economically, cannot be developed in this province which is attractive to certain kinds of investment -- productive investment, not speculation.
We did not read you every line. We thought you could do that if you wanted to. We wanted to introduce a conversation.
Mr Offer: Thank you for your presentation. I want to try to get your position as clearly as I can. Obviously, you support the bill. But it is also -- and I do not want to put words in your mouth; I would rather receive your position -- in my opinion obvious that you do not believe this bill goes nearly far enough, that in your opinion what is required is not just the wage and vacation pay protection but also termination and also severance and that, in large measure, probably is not covered in this bill. I am wondering, is that your position?
Mr Martin: As you say, there are lots of things we would like in life. Some of them are not covered by this bill and we are not addressing them here. Is there a union agenda developed with our members around enhanced job security and greater compensation? Absolutely yes. We believe there should be disincentives to employers to shut down. But the social costs of shutdowns should be carried more proportionately by employers than is now the case. That is true in much of western Europe, for example. It does not introduce rigidities. What it introduces is a situation where employers think twice before they toss people on the street and then have them recalled two months later, as happened for example in the Admiral case, where people as employers feel some long-term stake in the development of the community and the welfare of the workforce.
Now, for that to happen, it is has to be made expensive for employers to shut down. We are not talking here about punitive activity. We are talking about an economic strategy that rewards the productive investors in the business community and discourages those who are in for a quick hit and who are going to dump people immediately afterwards. That is a broader discussion, then, around what an industrial and employment strategy for the province would be. I would be happy to get into that, but we did come on the specific measures of this bill.
Mr Offer: My question, however, dealt with the specific measures of the bill, because we have the bill right in front of us, and the fact of the matter is that when the bill was originally introduced, it imposed on directors, and in fact officers, personal liability for wages, termination, severance and vacation pay. That has now been changed by amendment, but it was there. It was introduced in the Legislature. My question to you is on the bill. What is your position on the bill, as originally introduced, and on the amendments that were introduced by the minister?
Mr Martin: The amendments, as introduced, are ones which we find acceptable. Our concern is how a guarantee is going to be provided. Where the guarantees come from is a little bit like Steve McIntyre. For example, I am a director, in fact the treasurer of a non-profit community organization. If I were wearing that hat I would be introducing that. But in this mode what we are saying is, under the system of management rights, management also has responsibilities. Those responsibilities need to be exercised in ways that insulate workers from the effects of mistakes. How you do that is, as Steve would say, your problem.
Mr Offer: If I might, just on that point. The bill, as now before us, foists a larger potential obligation financially on the part of the taxpayers of this province generally and not, as amended, the directors. Do you feel, in principle, that the bill is correct in putting the financial obligation on the taxpayers as opposed to the directors?
Mr Martin: I would rather see it on the directors. Is that a straight answer?
Mr Offer: If it is your answer. I am the one who is asking the questions. I appreciate receiving your response to these questions. I think it is important that we deal with it.
Mr Martin: We are trying to deal with this in a spirit of openness. That is our preference. If it is not saleable, if it is imposing unjust burdens on individual employers, if it is creating a climate that is intolerable, compromises are possible. We are involved in processes of collective bargaining and social bargaining all the time. We do feel that those who have management rights should have responsibilities to go with them. So that is our preference. If it is not viable right now, that's life.
Mr Ramsay: I was just wondering whether the presenters feel we can insulate ourselves from the vagaries of economic downturns, or any other conditions and daily challenges that the world presents us. What you are saying basically is that people should be guaranteed employment. You can have a situation where there is a tremendous downturn in the economy, as we have just experienced and still are experiencing, where a company finds itself without demand for its product any more.
Sometimes the prudent course for that company for its long-term survival is maybe to cease production for a couple of months in order to be viable in the long term. Companies should not be forced to produce a product when it is not in demand. We cannot as governments dictate business decisions for entrepreneurs in society. At the same time, we want to find a balance so there is social justice in the system, but I think we are getting to a point now where we can be crossing that line. We are feeling that somehow we can insulate everybody from everything, and I think we have to get back a little more self-reliance.
Mr Martin: The balances we strike depend on our experience and who we report to. I worked for 13 years as a trade unionist. I am exposed constantly to the pain and frustration of the relative powerlessness of those members in the broad economic decision-making process, and I would say that the quid pro quo for the kind of self-reliance you are talking about would be an inclusion of workers and their organizations in economic planning. Now, if we can talk about that, then we can talk about sharing risk. Until we do that, I think it is incumbent on employers to offer a degree of insulation, and a greater degree of insulation than they do now because, under the present circumstance, it is self-defeating for workers to commit themselves to enhancing productivity, enhancing the viability of the operation and enhancing the competitiveness of the society.
I see the proposal of Bill 70 as a way of enhancing the competitiveness of Ontario industries. That may sound weird in the context of the two previous presenters, but it seems me that in a high-wage, high-skill, high-flexibility workforce model it is logically required; but it will require a level of power sharing that Ontario management has not been willing to provide until now. I think that is a great historical opportunity.
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The Vice-Chair: I am going to have to jump in here.
Mr Ramsay: Ten seconds, just 10 seconds. Can I issue you a challenge? I think you are talking turkey, and I think that is right. I would challenge you to start entering those partnerships because I agree thoroughly with you. We have to start working together and get rid of that adversarial relationship for sure.
The Vice-Chair: We have to --
Mr Martin: The 10 seconds is only fair. You let him. We are involved in that kind of thing. We talk turkey, for example, in the electrical and electronic manufacturing sector directly between senior management and the union about the future of the sector. It makes them very uneasy; they are completely unaccustomed to it and they have not had great support for it from outside. That does not mean the end of the adversarial system and its replacement by some abstract consensus -- I mean social bargaining, where everybody keeps their identities and we make a deal that is in the interests of the whole society. I thank you for your tolerance.
The Vice-Chair: We have been somewhat flexible.
Mrs Witmer: Thank you very much. I am a little concerned about the presentation and also some of the responses you have made to the members from the opposition. Nowhere in here do I see a reference to consultation. I see this presentation as actually rather confrontational. I see you encouraging the government to forge ahead with the legislation without ensuring that all the people in this province are comfortable.
I am really concerned about that, because I think the reason the government got into trouble with Bill 70 is that there was not any consultation and there were a great many people in this province who had absolutely no input. As a result the first draft of the bill was changed because of the outcry and because it created a real air of uncertainty in this province.
I take exception, I would have to tell you, to the fact that you refer to business that leaves this province and business that is speaking out as speculators rather than investors. You talk about them walking away from their obligations. I want to tell you, I have many people in my community who are leaving or are considering moving and they are fine individuals who are looking after their employees; but they are very frightened by the economic climate, they are very frightened by some of the legislation that this government is proposing. I would say to you, unless there is consultation, unless there is compromise, unless committees are struck in this province, business is going to continue to go, and it is not because they are speculators. They are good, hardworking people, but they are frightened for themselves and their families and the fact that they could lose all of their money too.
I guess I would like to ask you, what type of consultation do you personally see taking place in order to ensure that we can have what you believe is necessary for this province so that everybody feels comfortable?
Mr Martin: I am not sure that the kind of transitions we are going through are going to leave everybody comfortable. I think there is a degree of dislocation involved for everyone and we do require, as was said in response to the previous presentation, some innovation on all sides and certainly among all economic partners, of which my union is one. I guess the reaction and the tone of the paper have to be located in the context of the virulent kind of response from a wing of the business community to these kinds of initiatives, and the real overreaction -- to go back two speakers -- to things that are now being talked about loosely as though they were already established legislation.
In fact, I think the climate of provocation -- once it is set up, people can always find that it is someone else's responsibility to have initiated it. I think we are participating here in a constructive way. What we are saying is that a system which punishes the most responsible employers and which rewards those who walk away from obligations, like the situation at Admiral -- I mean, that is not simply rhetoric, that is a fact -- that a new floor of community standards is required if there is going to be genuine consultation between people who have some reason to believe in the good faith of the others.
In situations where people are not delivering on severance pay, are not delivering on vacation pay, are shutting down and reopening a little while later 25 miles away, these kinds of situations are not conducive to long-term economic planning, nor to real, authentic consultation. They are scams. I would say there are people doing scams in government, in labour and in business. I am not talking about monopolies on virtue. But we need to have relations among business, labour and government that encourage responsible and ethical behaviour. I see Bill 70 as doing that.
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Mrs Witmer: But it is not going to eliminate what you have just alluded to. It is still going to allow someone to start up somewhere else.
Mr Martin: As in response to the previous person, I am just dealing with this little corner. That is what this hearing is about. If you want to talk about economic social bargaining and the future of partnerships in the province, I would love to come to that consultation. We were invited to this one.
Ms S. Murdock: Yesterday Leo Gerard was here for the steelworkers and made a representation. To be fair, the majority of employers in the province look after their employees. The ones we are concerned about are those employers who have opted to walk away or who, through no fault of their own, have had to close, and of course the ones that, through contrivance, as Mr Gerard said, have closed their doors and moved south. But his comment was that the provincial government should make it difficult for those companies that opt to move south, for instance, and operate at a marginally greater profit, that we should make it difficult for them to sell their products in the province of Ontario. Am I hearing you say somewhat the same thing?
Mr Martin: The question of what we do with them once they are gone -- I am not going to worry so much about that. I would like to deal with those who are in the province still and those who are wondering about whether to leave, because I agree with you: there is a significant current in the Ontario business community, most importantly of younger entrepreneurs, who are considering leaving, and that is a serious problem.
I would just cite to you EEMAC, the Electrical and Electronic Manufacturers Association of Canada, which is doing a major study right now on competitiveness, in which the union is participating. It is finding in the course of it that a major structural problem is not wage levels and rigidities and lack of multiskilling; it is foreign ownership. No matter what the hell we do, if the head offices are going to shut down the plants in Ontario -- and it has nothing to do with the NDP, although it will be a nice, cheap political shot for them to be able to use that. It has to do with repatriating close to the home market and keeping the jobs close to home in the midst of a recession.
To deal with that kind of thing requires a range of policy options, many of which are in the hands of a provincial government; for example, creating alternative capital pools, mandating use of pension funds, promoting worker ownership. There is a whole series of possibilities which are positive. Punishing somebody when he is already in Raleigh, North Carolina, is not a top priority for me, but if it would help to create the community standards, then I am not against it.
My prime interest here is, as I said, rewarding responsible employers. To give a parallel or analogy, the current system is that employers who invest in training their employees have as a reward that the neighbouring employer raids their trained employees. That is their reward. That is the kind of system which leads you to say it is up to the labour people to save management from itself. That is the way I see it. I do not think it is good for the business community to have these people walking away from obligations, and embittering and terrorizing people in the workforce.
When I talk about anxiety in the workforce, it is there. Sure, it is there for structural reasons. It is also there because of the record of employers in just abandoning people and taking off, currently to the south. I think that is part of the distinctive nature of Ontario that we should not tolerate any more.
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Ms S. Murdock: Just one quick question, because I know the Chair is going to be on my case here, but in terms of industrial democracy, and I am looking particularly at Europe, another comment that was made was that people tend to forget that we in Canada have a southern giant as compared to the smaller countries like, for instance, West Germany, Italy and France, which have a very differing view in terms of their employee relations or labour-management relations. I was wondering if you could comment on that briefly.
Mr Martin: It seems to me that the combined East and West Germany is no pygmy economically and that the emerging European common market is big-scale in terms of the trading blocs of the next couple of decades. So I believe that within an emerging North American trading bloc, and even with the initiative of the Americas trading bloc, there is room for some diversity and that there is no need for us to hew to the lowest common denominator. It is possible for us to look to very much more progressive and innovative approaches, and that is a much better bet for a high-wage, high value added economy in which all of us and our kids would like to live than competing with, shall we say, South Korea or something of that sort.
What they found in western Europe is that they are capable of homogenizing things like exchange rates, and even free trade, unpleasant though it is, and maintaining control over telecommunications policy, control over cultural policy, control over labour relations policy. Those kinds of things do not have to be harmonized. There is no reason they have to be harmonized. If we are going to harmonize, let's at least harmonize up.
The Vice-Chair: I am going to intervene now.
Ms S. Murdock: I will just talk to him some other time.
The Vice-Chair: I thank you for your presentation, and I guess you will be involved somewhere down the road with some of these other things that keep coming up.
Mr Martin: I hope so.
The Vice-Chair: We will probably see you back here again.
Mr Dowhaluk: Thanks.
Mr Martin: This is the first time.
OWEN SOUND AND DISTRICT LABOUR COUNCIL
The Vice-Chair: The next presenter is the Owen Sound and District Labour Council, Mr Cooper. Welcome to the committee and, at your leisure, feel free to start.
Mr Cooper: My name is Greg Cooper and I am president of the Owen Sound and District Labour Council, and I thank you for this opportunity to speak to you on this very important bill.
The worker protection fund is something that is long overdue for many thousands of workers who, through no fault of their own, have seen the lives of their families devastated. Without warning and without cause, these workers are then further assaulted by not being paid money they have already earned. This is no reflection on the dedicated, hardworking people who show up for work day after day. It is, however, directly caused by the backroom, secret policies and deals of a federal government and the first ever made-in-Canada recession, and I thank this provincial government for trying to solve a problem it did not create.
I am also here to congratulate the Minister of Labour and his staff for the foresight and leadership in drafting this bill that will put the teeth in the Employment Standards Act. This bill will let the Employment Standards Act do what it was meant to do, protect the workers of this province, putting people before profits.
My plant closed in January 1991, without proper notice and without cause. It happened in that nice little gap just after Christmas and just before the Christmas bills start to come in. But our problems started long before January 1991. They started in November 1987. We were told by our then employer that it was no longer profitable to operate a machine shop, fabrication shop and foundry. They did, however, make arrangements to lease the business. We made many concessions to protect our jobs, as well as showing our good faith, commitment and dedication to our jobs. These concessions ranged to everything under the sun, from a wage freeze to a cutback in pension contributions to lost holidays to seniority.
But what of the many profitable years our former employer enjoyed? I give them credit for finding someone to take the business over, not because they did it out of any concern for our benefit, but because they were smart enough to unload their obligation for severance on to someone else.
The majority of the workers in this plant had between 20 to 40 years of service. Some of the rest were second- and third-generation employees. We had a lot more invested in the plant than just jobs; we had a heritage. Yet we were taken to the curb like someone's garbage, after years of working in the dark, sunless, noisy, hot and dirty foundry. So you see our story is special, because we did not just get the shaft once; we got it twice.
The actual closing took place in January 1991 and it was the most underhanded sneak attack since Pearl Harbour. A notice was posted that the employees were laid off indefinitely. Realizing they had made a mistake and left themselves open to a Ministry of Labour investigation, this notice was replaced. The new notice stated that over 50 employees would be put on temporary layoff and a small number would be kept on to clean up some $60,000 worth of castings that were left. This was while the company "restructured."
This layoff came directly on the heels of a period of work-sharing. This period of work-sharing came about at the request of the union, again showing our attempts to help the employer in every way. The employer was very aware that the layoff had bought him 13 weeks and left the union with its hands tied. At the end of the 13 weeks, when the Ministry of Labour investigation was started, the restructuring was complete. The investigation showed the cupboard was bare -- no surprise, by the way. After all, the employer had 13 weeks to do a Harry Houdini with any assets that he may have had.
I will go as far as to say that in my opinion the closing was premeditated and that the employer kept his true intentions secret. The current Employment Standards Act was used against us, the very people it was put in place to protect. It has become obvious to all of us who were employees at this plant that the employer planned to close long before January of this year. While basking in the Florida sunshine, our employer commented to the local press, "Of course they were told of the closing." This statement is now, as it was then, a lie. While he enjoyed Florida with in excess of $720,000 of our money, some 70 workers in Owen Sound had the winter of their discontent.
To truly put this in perspective, let's look at the community we come from, Owen Sound, just 120 miles down Highway 10 from here, a city with a population of 20,000 people, supported by a surrounding rural community. When our plant closed, nobody but the 70 employees and their families noticed. After all, there are only 70 of us, so no meetings took place to save our jobs. There are only four major employers in the area, and with scaledowns to meet the hard times we are in affecting even the strong workforces, the likelihood of finding other full-time employment was grim at best.
I am sure you can see the enormous effect this sneak attack on our pride and our financial resources has. I use the term "has" instead of the past tense "had," because many of us, in fact almost all of us, will feel the effects of this uncalled for and selfish act for a long time to come, as will our community and our families, from the bankers who hold the loans and mortgages to the local merchants to the already overloaded welfare system.
I mentioned at the start of this brief that this problem is widespread. There are many stories out there even worse than ours, but ours is the kind of story that does not draw a lot of attention, which is why I have focused on it so heavily. You will hear from small to medium employers who will say this bill will break them. May I remind you that our employer is doing very well indeed. Critics will say that some briefs are trying to generate fear. I did not have to do that. Our story is not scary; it is real. I would be willing to say that there are at least twice as many stories out there like ours as there are ones that end happily.
There will be critics who will say that legislation like this will drive industry from Ontario. They will say that it will ruin investment confidence in Ontario. I have news for you. Look around since the introduction of free trade. The exodus of companies to the promised land to the south began long before this legislation was ever thought of. I would respond to these critics by saying that legislation like this will bring the kind of employers we need and want. They will be as committed as their workforce. For the first time ever, employers and employees will know where they stand under the law.
You will hear briefs from all branches of organized labour. Critics will say we only speak for 35% of the workforce. Let me remind you that if this can happen to us, with all our training, the benefit of a collective agreement and the United Steelworkers legal people, then imagine what is happening and will continue to happen to any unorganized worker who does not even have the benefit of a collective agreement and must depend solely on legislation. Further, I will say to you that the needs of the unorganized worker do not differ from those of the organized worker.
I wish you well with the passage of this bill, but be warned that watered down attempts to please both sides will not satisfy us. This legislation is a step in the right direction, but try to remember how far short of the actual money owed to a long-term employee the $5,000 base rate is. The key is that this is money already earned, and any attempt to let the boards of directors of profitable companies off the hook for the balance will be met with stiff opposition. In your consultation and in your final debate, remember that this bill is to protect the workers of this province.
I also have some concerns about this bill, however. The thing that concerns me most is the very real threat that upon receiving money from the fund, it will be clawed back by the UIC or welfare system. This will defeat the purpose of the fund, since this money should be able to be used to help the workers and their families in the transition period. This money will help to lighten the debt load so that families will be able to survive on UIC or welfare. This money is not a windfall, but is what is needed to help these families over the rough spots.
Truly this topic will be the centre of much debate in your committee, but try again to remember how far short of the money owed the $5,000 limit is. These workers have gone through enough. Do not make a bad situation worse by letting this money be taken back. To allow such a thing to happen would only be seen as yet another tax.
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No delay in benefits or paybacks should take place. This would be easily done by creating a formula to average the severance and termination pay over the period of employment and including it in the separation paperwork, because this is money already earned.
Further, do not let critics of this legislation sway you from the real teeth of the bill. I speak of the boards of directors of profitable companies. These people must be held morally and fiscally responsible for the workers, their families and the community. Workers must no longer be treated as doormats. We must put people before profits.
All this and we have only touched on the economic loss of the worker. Even greater than the economic loss they will endure are the many other challenges they will face; first of all, the extreme good fortune of being able to find other full-time employment. The workers now must start all over. Nothing they have done in the last 5 to 30 years amounts to anything. They will be put in a probationary time. They have no rights. They may be subjected to shift work, which could be very hard on older employees. They have now lost their pride, their security and their confidence. Starting over, for a worker who is 45 years of age and up, will be a large challenge.
Some people will say that this brief is slanted and one-sided to show our argument in the best light. Darn straight it was. We have people young and old waiting for in excess of $720,000. This may not seem like a lot of people or a lot of money when you have finally heard all the briefs, but to the 70-some workers in Owen Sound, it is the difference between bankruptcy and survival.
Some of you will have sensed the hostility and bitterness in this brief. You're darn right we are bitter and fed up, and we have waited long enough for this help. Remember, these are people just like you, only they have to survive on $15,000 a year or less. When employers talk about the bottom line, it is money. Our bottom line is survival.
There are eight million stories in the naked city; ours is just one of them. But it is the story of hard work, dedication and commitment on our part, repaid by an underhanded, premeditated robbery of over $720,000. There is no use in trying to clean it up. That is what took place.
Each time you hear a story like this, I want you to reflect for a moment. I do not want you to just hear numbers. Connect each number with a face and then see that face directly affecting 3.5 other faces, a wife working part-time and two fully dependent children. See the faces and see them as lives, and see all the lives with a future. Then multiply all the faces by 3.5 times. When you have done all that, see yourself as one of those lives. It will be hard for some of you, but remember that is the only way to relate to the true bottom line. Also remember that the needs of the many always outweigh the needs of the few or the one.
I have come to you today because the hope we see in this bill is the only hope we have of getting what belongs to us. I have delivered this brief in the hope that you have not just heard me but have listened to me and the thousands like me and like you. We wish you God speed in the passage of this bill. I thank you and I invite your questions.
Mr Klopp: The previous speaker talked about how in his light he sees this bill as actually helping good employers from other people who may get in the business or are already in the business who will subvert the thing and take the money and run. Do you see that as the same idea?
Mr Cooper: I think it will promote better employers. It has to. Legislation like this has to stop speculation, as you said, the people who are just plain speculating for a quick buck, as our employer did. In my opinion and in the opinion of a lot of people who worked there, it was actually a done deal between our previous employer and this employer to shut down completely, leaving us all in the hole and nobody liable for any obligations whatsoever.
Mr Offer: Maybe by way of comment, on pages 5 and 6 of your brief you spoke about the fact that attempts to please both sides will not satisfy you, and I take it you are the labour council. Also, and I am reading from your presentation, "Any attempt to let the board of directors of profitable companies off the hook...will be met with the stiffest opposition."
You will know that the bill as originally introduced made directors fully liable for wages, vacation pay, termination and severance, and amendments were introduced by the minister afterwards which limited that particular liability. I make no comment on that except to say that it in fact happened, and I am wondering if you might share with us whether it is the position of your council that you are going to be opposing those particular amendments.
Mr Cooper: It would depend on how far off the hook they are being let. Unfortunately, in the political game mistakes happen. Letting the board of directors of profitable companies off the hook is a mistake, especially in our case. We were left high and dry. There is no question about that. He has over $700,000 of our money that we earned and that he has to be responsible for. A lot of our people had a lot of seniority. If we talk about a certain fellow I know who has 47 years in there, he is entitled to 26 weeks, plus his eight weeks' termination, plus his holiday pay. If you are going to give him $5,000 and say, "Now you can only get 15% of what is left," after 47 years a man has to see that as a slap in the face.
Mr Offer: I do not have any other questions, save just to say that I would recommend -- only as a result of the very strong presentation you made, the position which was so clearly stated in here -- and ask you to read the amendment to the legislation. It may be one which you might not agree with in light of this presentation.
Mr Cooper: I am quite certain, as I said, that any shortfall in the money that is owing to a dedicated employee like that is not satisfactory as far as we are concerned.
Mr Arnott: Mr Cooper, you talk about the speculators, and we do not particularly need the speculators. They can go south, whatever. What happens if, as it turns out, the speculators comprise 10% to 20% or even 5% of the businesses in Ontario and our unemployment rate goes up to 15%? Where is the job creation going to come from? What are we going to do then?
Mr Cooper: Job creation will come, and it will be better job creation as the socioeconomic structure, as was explained by the last brief, improves, and it will improve under legislation like this as the speculators do go south. Ontario still has a great many things to offer, and as long as we can focus on that and focus on getting employers that are as committed to their workforce as their workforce has been to them for years and years, then those are the kinds of employers we need in this province to build our economic structure.
Mr Arnott: New investment requires someone putting forward his after-tax dollars to create jobs. I am just not sure in your answer where that is coming from, the new investment, the money.
Mr Cooper: I think you do have a number of committed employers in this country now, and we are not talking about the multinationals and we are not talking about the small employers like ours was. We are talking about truly committed people, the Canadian-owned, grass-roots kind of business that is going to spread throughout this province -- there is no question in my mind -- in the next five to 10 years. That is where we need to focus and that is the kind of economic structure we can spread.
Mr Klopp: Just to help my colleague with regard to the government amendments, directors will still be liable for up to six months' wages and 12 months' accrued vacation pay as it stands so far. I just wanted to clear that up for you.
Mr Offer: If that is the current legislation under the Ontario Business Corporations Act, the fact of the matter is that when the bill was originally introduced, directors were going to be ostensibly personally liable for wages, vacation pay, termination and severance. The minister, after a great deal of concern raised by opposition members -- you may not agree with this -- and by opposition members in the third party, introduced amendments that just said that directors would not be liable for the termination and severance. That took the directors off the enforceability hook under the legislation.
Mr Cooper: As I said, under the political game, unfortunately mistakes happen and that amendment was a mistake.
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PROVINCIAL BUILDING AND CONSTRUCTION TRADES COUNCIL OF ONTARIO
The Vice-Chair: The next group coming before us is the Provincial Building and Construction Trades Council of Ontario. Perhaps you could introduce yourselves for the benefit of Hansard and the members prior to your brief.
Mr Koskie: My name is Raymond Koskie. I am legal counsel for the Provincial Building and Construction Trades Council of Ontario. To my right is Joseph Duffy, the business manager and secretary-treasurer of the council, and to my left is Fiona Campbell, a member of our law firm. We appreciate the opportunity of appearing before you today.
The council represents over 100,000 construction workers in the province, and as you know the construction industry is perhaps the largest industry in this province. We want to compliment the government on the introduction of this long overdue legislation. It will help many employees, particularly those who have been unemployed because of the current economic situation.
While we applaud the government for this progressive legislation, we do have certain concerns that we wish to refer to, and they are four in number. We have summarized them in the executive summary of our brief, and I think I can deal with them quickly and let you ask any questions you may have.
First, we are speaking here today on behalf of the construction industry. The construction lien has been a tool of the worker in that industry to recover unpaid wages and contributions to the employee benefit plan trust funds. However, in order for a construction worker to file a claim under the employee wage protection program, the act as it is presently worded requires that the worker must not only preserve a lien claim, but he must also enforce that claim. In discussions we have had with the representatives from the ministry, who have been very co-operative in consulting with us and speaking with us, we understand that this is no longer an issue and that any reference to enforcing the lien claim will be deleted. Therefore, our understanding is that all that is necessary for a worker to be able to file a claim is to register a timely lien.
With that understanding, I will proceed to the next and perhaps more important concern we have, and that is in respect of the definition of "wages." As you know, the bill in the definition section of "wages" makes no reference whatsoever to contributions payable by an employer to the many employee benefit plan trust funds. As you perhaps will appreciate, the contributions to these trust funds, such as pension plans, health and welfare plans, training trust funds, etc, represent a very substantial part of the overall wage package and can sometimes represent up to one third of the overall wage package.
You should understand that in the construction industry the actual take-home wage is really the smaller part of the concern, because workers in the construction industry rarely, if ever, work more than one week or perhaps two weeks before they realize that their paycheques have bounced. They simply will refuse to work thereafter. What has concerned us over the years are the contributions to these trust funds. I will not go into a lot of detail with you on this, but at page 6 of the brief we talk about the makeup of the wage package and we take the position that contributions to these plans are simply wages in another form.
In tab 2 we have appended pages from various construction industry collective agreements which show you the breakdown of the wage package. If you look, for example, at the first agreement, which is the Labourers' International Union of North America, Ontario Provincial District Council agreement, and if you look at the part we have taken from that, you will see article 5, the rate of wages of waterproofers. You will see that the wage rate is $22.83. That is the take-home pay, and then there is vacation pay and then welfare. That is 92 cents an hour. I apologize for the small print, but the employer will contribute to these health and welfare funds 92 cents per hour worked by each employee. Then there is the pension, which is $1.30 per hour. Again, these are all employer contributions to the jointly administered trust funds.
Then there are worker dues and there is the training fund, which is another employee benefit, and you see the contribution there is 10 cents per hour, and then there are dues, and then employer industry funds. Those are all the amounts that make up the total wage package of the construction worker. It is in the area of the trust funds, and when we talk about those at page 7 of the brief, subparagraph (a), we go into a little bit more detail as to what these funds are.
The pension fund, I think, is an obvious one, that is, a contribution is made to a pension trust fund, again by all the employers who are bound by this collective agreement. You have to understand that in the construction industry, unlike other industries, each particular trade, the labourers, the asbestos workers, the plumbers, will basically have one collective agreement, a province-wide collective agreement, which will cover hundreds of employers. All those employers covered by each agreement will contribute to separate, jointly administered trust funds, and those are the trust funds we are talking about, the ones that provide the benefits for the workers.
Then (b) there is another fund which is the welfare fund. That basically provides extended health care, dental care, vision care, etc.
On page 8 (c) talks about vacation pay funds. Again, these funds were set up many years ago because of the problem in the construction industry where employers would not pay the vacation pay when it became due. Even though, under the Employment Standards Act, they were required to set it aside and make it available for the worker, many did not and therefore the worker was out of pocket the amount of the vacation pay.
There were stamps as well, but these were set up as another means by which to make sure the worker got the vacation pay when he or she wanted it. So the employers will be required to contribute into a separate trust fund -- that is, vacation pay, statutory holiday fund -- so many cents per hour to cover the amount of that benefit and that benefit will be paid out when it is due.
Subparagraph (d) is a training fund, and that is a relatively new benefit that we speak of here, but nevertheless a benefit the same as pension and health and welfare. What happens in the construction industry is that the employers are too small to train their own workers and cannot afford to do so, and there is also mobility of the workforce. They are here two weeks and they are gone, so it does not pay for an individual employer to spend money to train.
In order to get around that problem, what happened was that about 20 years ago we designed another employee benefit known as the training trust fund, operated on the same basis as a pension fund or a health and welfare fund. The employers would pay so many cents per hour worked into a training trust fund. The trustees of that training trust fund would provide the training necessary for the workers. Today workers are unemployed, unfortunately, in the construction industry. They will come into the training centres of these trust funds and receive upgrading training which will make them more employable, so as to avoid the necessity of layoff. So that is another benefit.
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We have supplementary unemployment benefit funds, the name of which, I think, is self-explanatory, and then there are union dues. Now, more recently, we are introducing prepaid legal services funds, which will be operated on a similar basis. These are the funds, the contributions for which we are asking protection under the wage protection fund. They are not protected the way the act is presently defined. We feel they are as much a part of the wages as the take-home pay.
Just to give you an example, we should look -- I talk about this on page 9 of the brief -- at the recent federal initiative under the Bankruptcy Act, Bill C-22, with which I am sure you are familiar. They are introducing a similar worker protection fund. At the bottom of page 9 is their definition of "wages," which includes salaries, commissions and, more important, "compensation for services rendered by an employee."
Over the page we refer to a case in Ontario, the Canadian Display in Exhibit Company Ltd case, where the phrase "compensation for services rendered" was held by the registrar of the bankruptcy court to include the very contributions to the trust funds that we speak of. So the federal government appears to want to protect that kind of a contribution, yet Bill 70 does not.
We therefore think that after you consider all this, you will see that the contributions are really part of the overall wage package and deserve to be protected as much as, if not more than, the actual take-home pay. That is why we urge that be included in the definition of "wages."
The next issue deals with the question of trustees of these trust funds being able to make a claim against the worker protection fund. The problem is that at the moment only the workers themselves can make those claims. The reality of the situation in the construction industry is that the contributions I just spoke of go directly to the trustees of these funds. The workers do not know until months after they are due whether or not those contributions are paid. The wages will go to the worker, and the worker will know whether the cheques are good or not. The worker will not know until about two months later whether the employer actually sent those contributions to the trustees.
Therefore, the trustees of these funds, if the contributions are paid, will want to file a construction lien. In fact the Construction Lien Act was amended some 10 years ago, as we point out at the bottom of page 11 of our brief, to give the trustees of these worker funds the right to file liens on behalf of the workers. We feel it is a far more expeditious, more pragmatic and realistic approach to let the trustees, who really represent the workers -- they are trustees for the workers and therefore they are the logical persons to file the claim against the fund on behalf of the workers for those contributions. It is consistent with the Construction Lien Act, and we therefore respectfully urge that you amend this act consistent with the Construction Lien Act.
There has been some talk through our friends from the ministry of the difference between trustees of these trust funds and a trustee in bankruptcy. I think it is really an apples and oranges comparison. The reason I say that is that trustees of the employee benefit plan trust funds are trustees for the workers; the law mandates that they are trustees for the workers. This goes back to the common law. However, a trustee in bankruptcy is there as trustee for the creditors, not for the workers. That is the main difference.
When a trustee in bankruptcy pays a worker, the trustee is making a pragmatic decision because he or she wants to keep the business enterprise going, to try to make it viable or pay back some of the debts. That person will go to the key employees and say, "We need you to continue to run this business." The worker will say, "You want me, you've got to pay my arrears." The trustee will pay the arrears, take an assignment and keep the business going. But you can see that he or she is there in an entirely different capacity than the trustee of the trust funds. We think there is a clear distinction, and really one that ought not to be of concern to the government. What they can do if they are concerned about that, in amending the act, is simply to provide that trustees of employee benefit plan trust funds can file these claims. That would clear it up very nicely.
The final point we make on the executive summary is that under this bill, construction workers, unlike any other workers, are required to file a lien before they can make a claim. That in most cases requires retaining a lawyer and requires an expense, yet the worker has to go to that expense in order to be able to file a lien. You will find that many workers simply will not have the money to go to that expense. If they are out of pocket for wages and other benefits, they simply will not have the money to file a lien. So that is a deterrent. It will not work in the construction industry; therefore they should be given some incentive to protect themselves and should be entitled to reimbursement for filing of the lien.
Similarly, where workers go to unions to file the liens, the unions should be equally entitled to some form of reimbursement for the expense they have to go to. We are not talking about big money here, but you have to understand that the construction worker, unlike his or her industrial counterpart, is at a disadvantage by having to take that extra step. We do not mind taking the extra step, but we think we should be paid some reasonable amount of money because they have to retain lawyers in most cases to do that work. Unfortunately, like any other profession these days, that costs money; hopefully not too much.
Those are the four points we have to make. We urge that you give serious consideration to them. In all other respects we compliment the government, as we say, for this legislation and hope that you will meet the needs of the construction worker by adopting these changes.
Ms S. Murdock: I actually have a number of questions. In terms of the preservation of the construction lien, right now I do not know how that works because I am not familiar with the construction lien provisions. But the trustees of the trust funds, since they stand in the stead of the workers, would not be starting the action?
Mr Koskie: The trustees of the trust funds? Yes, the trustees or the union would do so. In the case of the contributions that are payable to the trust funds, in many cases the trustees of those trust funds will file construction liens.
Ms S. Murdock: Okay. Then say it is decided and it is found that the worker is owed the money. Are the court costs covered at all in that?
Mr Koskie: A certain amount of court costs are awarded, yes, if it goes to trial. Most of these, I should point out to you, are settled before a trial. It takes a long time sometimes to settle them, but if they are settled we do not necessarily get costs. It depends on the particular settlement. If one has to go to court and argue the case and if one is successful, one is entitled to costs, but is not necessarily reimbursed for all the legal costs incurred. It is only usually a fraction of the costs incurred.
Mr Duffy: Some of the trust plans themselves have an agreement in the trust document between management and labour that if an employer is delinquent and you have to start that action, there will be a penalty automatically assessed against the employer.
Ms S. Murdock: Okay. In terms of the number of liens that are put through, how many proportionately -- speculation, I know -- would be for benefits only and not wages?
Mr Koskie: Almost all of them, will be for benefits. Some of them will also be for wages. If they are for both, the majority of the claim is for the contributions to the benefit funds. The wages are, relatively speaking, a very small portion of the overall claim. As I said, the most the wage claim part will be is for two weeks' wages, because the worker simply will not work beyond the second week if he or she knows that cheques are bouncing. The contributions are payable monthly in arrears. They are payable 15 days after the month in which they were earned.
Ms S. Murdock: Darn, now the thought has just passed, has run through me, but watch, I will remember it afterwards and will kick myself for this.
In terms of the legislation, we had a presenter earlier today who asked for the same kinds of changes. My question to him, and I will ask you the same one, was, if it meant making the changes about the construction industry before this legislation was put in place, is that what you are asking for, or would you be willing for the present legislation to go through with the regulatory changes to the construction industry being made after?
Mr Koskie: The difficulty with that is that as you know, with some legislation the regulations are introduced about the same time the bill is given royal assent, but that is not always true with legislation. Quite often we find the regulations lag behind, and if they lag behind, the construction worker will benefit less from the act. So we would prefer to have that enshrined in the act now, as opposed to waiting for it to go in the regulation, unless there is some assurance that the regulation will be brought out and effective contemporaneously with the legislation itself.
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Mr Offer: Thank you for your presentation. I want to continue on the same line of questioning. Mr Moszynski was here earlier and introduced us to this matter. It was quite helpful that he had gone forward, so that when you came in later and expanded with some particularity, we were somewhat ready for the issue, so to speak.
On the construction lien -- I just cannot remember -- when there is the registration of the lien, I seem to recall that there is a place where you put how much is owed, and you can put down costs and things of this nature. This would include, for instance, the costs to the lien claimant for doing that. So that would all be added into the lien claim; it becomes the lien claim. It becomes $2,000 for work, $15 or $36 for registration, $120 for lawyers. I am just wondering if that is correct. It has been a while.
Mr Koskie: Yes, I think that is correct. But those amounts, the amounts we put in there for costs, are just sort of nominal amounts really.
Mr Offer: But it is not legal fees that are put in there?
Mr Koskie: They are intended to be legal fees and registration costs and title searches and such.
Mr Offer: I just want to get that clear. The way I read it, the major issue is over this whole question of the benefits issue, and I ask ministry staff, what are "wages" under this legislation? Are they gross? Is it something else? I think that is important, because we have been talking about claiming wages against the fund, and we may be assuming something as to what wages are whereas it may be something different. For some it may be the gross amount, for others it may be the wages less income tax, and for others it may be net wages. I hope we may be able to get some clarification from ministry staff as to what the wage claim will be.
My question is, on the example you bring forward -- I think you looked at the journeyman example -- it had wages and vacation pay and went through all that list in appendix 2, and this was quite helpful. Would your concern be met -- I do not know but I am asking -- if all those other categories were added into wages?
Mr Koskie: That is what we are proposing, that the definition of "wages" include a reference to the contributions to the various employee benefit plan trust funds.
Mr Offer: I understand that, but I am saying, in the event that there was not a change to the legislation, either by legislation or by regulation, could your agreement be amended so that -- maybe I am just way off.
Mr Koskie: I know what you are saying.
Mr Offer: Maybe the wages, instead of saying $22.83 would be $32.83, and off that would come all these things, so that the net take-home would be $22.83, but it would in fact be $32.83 and as such in that way the claim could be made. I do not know.
Mr Koskie: Unfortunately it cannot be, because for income tax purposes we have designed these trust funds in such a way that the employer can get a proper deduction of the contributions, but more importantly, so the worker will not be taxed on the amount of those contributions. We have to set it up as a separate contribution.
Mr Offer: So because of the income tax implications, which are obvious --
Mr Koskie: That is the reason you will see in these collective agreements. We have given you two other examples, the bricklayers and the engineers. They are all set up in the same way. They have to be structured like that for income tax purposes. Otherwise the worker is going to be taxed on those contributions.
Mr Arnott: Thank you for your very thoughtful, well-presented presentation. I would like to go back to your last recommendation in the executive summary: "The council recommends that construction workers should be compensated for any legal expenses incurred in pursuing any lien claims." I do not have the slightest idea what a simple, typical lien costs an individual.
Mr Koskie: I knew you would ask that question. Fortunately, or unfortunately -- I am not sure how you want to put it -- we act for a lot of unions, as you no doubt appreciate, and we file many liens, and up to the point of actually filing the lien an average cost would be around $750, plus disbursements. Again, that would vary, depending on the number of workers involved, because there are a lot of calculations that we have to figure, and it depends on whether we have to do title searches and things like that. But it is based on time, so a rough amount would be, we will say, no less than $350 up to around $750 to do all the work involved in registering the lien in the first instance.
Mr Arnott: Generally speaking, if a lien is successful, the court orders that the costs be returned?
Mr Koskie: No, but those costs are not intended to compensate the worker for all the actual legal expenses he or she has incurred. That is just the rule of the courts, so even though the worker would be entitled to some costs, it would not be 100% compensation for the costs actually incurred.
Mr Arnott: If liens were unsuccessful, and some may be frivolous, would you suggest that the individual who filed them still be compensated for legal expenses?
Mr Koskie: Yes. I think the important point is that the worker has preserved the lien, ie, registered the lien, and it is at that point that the worker should be entitled to make a claim against the fund. That would be before any determination is made of that particular claim by the court.
Mr Arnott: Many other businesses and individuals besides workers who are owed wages register liens against property. How would you respond to their claim that perhaps it is unfair that someone else gets his real costs covered for filing it?
Mr Koskie: It is the construction worker, unlike all other workers, who has to incur this additional cost to register a lien. Persons who work in a plant would be entitled to make a claim against the fund without incurring any expense. All they have to do is fill out a form, make a claim and they would be compensated up to the maximum of $5,000. That should not cost them any money. The construction worker has to take the extra step to file a lien so that the government can in effect be subrogated to the rights of the worker in respect of that lien, and therefore the government can pursue, in the name of the worker, that lien action and in effect recover the money it paid out.
The Vice-Chair: We have about a minute and a half, Mrs Witmer, if you have anything you want to add.
Mrs Witmer: No. Actually Mr Arnott has asked the question I was concerned about.
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MINICOM DATA CORP
The Vice-Chair: The next presenter is Minicom Data Corp. At your leisure, whenever you are ready.
Mr Diamond: Let me tell you first why I am here. I should say, first of all, that I am not representing my company as much as I am representing myself and a whole group of people who are like me in the province who I speak to everyday.
I am here because with Bill 70 having been introduced some time ago, it became a favourite topic, or shall we say an infamous topic at a lot of gatherings, cocktail parties, tennis games, workplaces, whatever. Anyplace you went where there were people doing business in Ontario, the topic of Bill 70 came up, and the implications of what Bill 70 meant to all of us doing business in Ontario.
Since we spent so much time complaining and muttering and various other things behind the scenes, when I saw the ad in the paper I decided if I could get an appointment I should probably come down and reiterate to you some of the things that are said and thought and felt behind the scenes. I am not suggesting that none of you are aware of this, because you all have constituents who talk to you, but there was a forum and I was also aware that most of the people coming to the forum were organizations and were probably, in most cases, representing unions, which have one focus, and in other cases representing large business groups which in some cases do not have the same focus I might have as a smaller businessman. So that is why I am here.
What I am not is an expert in the legislation. All of you, having spent the time on it, are much more expert than I am. I cannot deal with the kind of detail I have just heard for the last 10 or 15 minutes, so do not ask me any hard questions, but I can tell you about feelings, reactions and the position of the small- to medium-sized businessmen who employ in this province most or a good percentage of the people who have jobs.
What I have given out to you is a single page which provides an overview of the company and myself. I will just go through that very quickly. What we do is develop software for the real estate industry. If I had a client list, it would be one that you would recognize. I have a few names on there, under the overview -- Trizec, Royal LePage, companies like that. We are into the United States as well.
We are a successful company, an Ontario company, 100% Canadian owned. I said 90% Ontario owned because we do have a venture capital firm, but most of their money is out of Ontario, so I was just trying to be safe.
We have 125 employees in total; 118 of those are in Ontario. We try to be centralized in the way we operate. We have our own building that we own in Markham and about $14 million in revenues. The source of those revenues is about half in Ontario, 40% in the rest of Canada and 10% in the US, and the US portion is becoming the fastest growing. We also have some far eastern opportunities that we will be getting into at a later date.
We spend about $2 million annually on research and development on about 340 clients. Historically, if you go back -- this is interesting because this is the kind of picture a lot of people like to see with respect to small business. In 1977 -- this was before I became part of the company -- two fellows got together, borrowed some money and started a company. It says there 12 employees. That is a typo. There were two employees to begin with, no revenues and no clients, and five years later there were 22 clients -- still a small company -- and $600,000 in revenues. That is when I joined the company and we started to expand. By 1991 -- that is today -- we have 340 clients, $14 million and 125 employees, so there is a nice growth taking place there.
What I want to point out, and it comes up later, is that our annual payroll is about $6 million. Of that money, over 90% is being paid to people who live in Ontario and work in Ontario.
By 1995, and this is kind of the interesting one -- obviously I am speculating, because maybe we will not be as successful as that or maybe we will be more successful -- we will likely have many more clients than we have today, more revenues and some greater number of employees. I put a question mark in there for the number in Ontario, because frankly the kinds of things that happen over the next several years in the province are going to dictate what I can afford to do in Ontario as opposed to other places where we have clients. I will get into that in a minute.
Personally I am president and CEO. I have a 30% equity stake. I do not own the whole company but a chunk of it. I have a lot of my own money in the company and a lot of my own sweat. I used to teach high school back in the early 1980s and I also have a law degree. I joined Minicom in 1982.
What is said behind the scenes and what I am about to say to you here is that it is very hard to run a business, period. I can tell you that personally. It is not an easy thing to do. I do not say it is easy to be a politician either. I think it is probably harder to be a politician because you never please everybody, but being a businessman is also very hard and there are a lot of risks associated with it, a lot of downsides. There is impact on family life. There is all sorts of bad stuff associated with being in business that is similar in many respects to the kinds of bad things that happen when you are an employee.
If I can leave you with one thing, it is to try to remember that employers are people too, especially some of the smaller employers who live and work under the same kinds of pressures that the employees of those people do.
What we have to do in Ontario, though, is that we have to run a business where we are competing with companies in other jurisdictions, and I mention some of them there. I listed four jurisdictions where we have primary competitors: Denver, Winnipeg, Seattle and Atlanta.
We have higher labour costs. I will just give you one quick example of that. I needed to hire a specialty senior person. The type of person I needed was not available in Ontario. I had to go to the US. The salary range I thought I was looking at was about $100,000; they were making $100,000 in the US. I found the person. We had a study done to determine how much I would have to pay that person to have an equivalent standard of living here. The answer came back between C$150,000 to C$160,000. If you factor in the exchange rate, there is a 35% to 40% premium that has to be paid here to give somebody the same standard of living.
The major impact on the negative side is the taxes, which are significantly greater, the changes in deductions; for example, lack of deductibility of interest on a home. The only factor in our favour is the health care, and that does not begin to deal with the other costs. When I extrapolated it back in the other direction and did some more research, I figured out that my payroll of $6 million, if I was operating across the border in Buffalo, would be somewhere between $4 million and $4.5 million to get the same kind of people and allow them to enjoy the same standard of living. The difference of $1.5 million to $2 million goes right to the bottom line.
The next thing I realized was that if is the case, then I have a hell of a problem because my competitors in Denver, Winnipeg, Seattle and Atlanta have a lower cost base to work with than I do, yet I have to produce the same services and I cannot charge any more than they can. I have to either be a lot better at what I do or I probably have to stick to the Ontario market only and not do a lot of expanding.
That is the kind of predicament I found myself in in 1990 and early 1991. Then what happened? The NDP got elected. The rest of the world outside of Ontario said, "Oh my," and that was something I heard from lots of people I spoke to outside. Then Premier Rae stepped up and said, "We're going to take care of business and we're going to work with people," and so on. That was greeted very favourably. Business felt a lot better. There were a lot of things in the paper about it and so on.
Then Bill 70 comes out and we get wind of some other proposed changes to the employment law, which frankly I do not have every detail on but I read some summaries on, and they are particularly scary to a small businessman like myself. Now we really get worried. When I say "we," I am talking about the people I run into, whether it be walking along Yonge or Bloor or Eglinton, or the people I associate with. I have a lot of friends and associates and friends of friends who are in business and might have anywhere from two or three employees up to a couple of hundred. Everybody is starting to think the same thing and is looking very carefully at what the government is doing, not just with Bill 70 but with everything that affects business.
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It is almost as if, because the NDP is now elected, you have to err on the side of being pro-business, because the assumption is that you are anti-business because you were elected, effectively, by union people. That is the perception out there. I am not saying all this is fact. I am only saying that is what is being said and thought.
The "we" I am talking about are typically entrepreneurs, people who start businesses, people who grow them, people who take risks in order to grow them, and people who hire other people and create jobs. By myself and a couple of partners getting going in 1982 and taking some major risks and borrowing money and putting in 18 hours a day, we were able to take a company that had eight or 10 employees, including ourselves, and build it up to over 120. That had a major positive impact for Ontario, and certainly for the people we hire.
What we are feeling now is that we are afraid of what is going to happen next. We are tired. We have just been through a serious recession. Real estate in particular has been very hard hit. That is my marketplace. It is hard to be in business during a recession. We are coming out of a recession and we are looking at all sorts of changes to employment law which are not very comfortable to think about.
We are feeling somewhat ignored. I guess I should not say that, considering that I am using a whole bunch of your time today. The process leading up to this consultative session effectively seemed to ignore -- that is the perception -- that business community. The fact that it came out with so many flaws and problems indicates that maybe there was not enough consultation before the fact. That the bill was effectively changed and a lot of things that were bad, from my perspective, were taken out is a good thing, but I am not convinced at this point that it is not going to show itself up in another fashion a year or two down the road. I am also not convinced that other things are not going to happen in the next couple of years that are going to be equally problematic.
These are all little facts you have to understand. I was about to lose my board of directors because all of those people were now concerned that they were going to be liable. I was also about to lose a number of officers under the proposed Bill 70. So because of that possibility, I went out and I got liability insurance. The liability insurance cost me about $15,000. That is half an employee. That is money I would otherwise have used to hire somebody; or it may lead me to have to lay somebody off earlier than I would want to or not replace somebody leaving.
That liability insurance money is basically wasted. It took place because I had to protect the basic infrastructure at the top of my company because of the potential danger. You need to think about those things when you are making the decisions you need to make.
The result of the the whole process right now is that you have an NDP government, people are uncomfortable, some bad things happen and more bad things are talked about happening. So what happens? People like me do not want to start a business. If this is 1982, I am not going to start a business. It is too hard. The upsides are not there. The risks are too great. I am going to wait it out for a while and see what happens. So there are no new jobs happening as a result of starting businesses.
We do not want to risk capital to grow larger. Wherever we can we want to look at reducing costs because we are not sure quite what the future holds. We ignore a lot of opportunities as a result, and frankly, we look at non-Ontario opportunities. If I have 50 clients in Washington DC, maybe I am going to open up an office there and hire 25 people there instead of hiring the people in Ontario to support those clients in Washington. That is actually what happens.
There are other obvious examples of people closing plants here and moving to the US. We are not as obvious as that because we need the people we have. But in terms of expansion, why do I want to expand here when my costs are 50% higher and I have what appears to be an adversarial relationship with government, when I have other jurisdictions which are happy to have me and would love to see me hire people at lower rates?
The result of that, paradoxically, is that the people you are trying to protect end up getting hurt because they are not getting hired or they are not able to be kept around in the company or they are not getting the raises they would like to have. The overall economy of the province suffers. The real estate industry -- as it happens they are my clients -- suffers because there are fewer people around working, and therefore there are less people renting, and therefore they do not have the revenue coming in.
There are all these cumulative effects that go around in a circle. It is a kind of thing that does not last just a couple of years. What you do over the next couple of years with respect to your employment law and how you affect business is going to have ripple effects for well over 10 years. It is going to be very problematic.
I wrote a letter to the Premier a long while ago. Basically what I said was: I love the province; I would like to be in business here; my friends are here; I am not moving away so fast. But if you look at the impact on younger people, people who are more mobile -- just got married, are not married yet -- what are they going to do in this kind of environment? It is already tough enough to operate here with the higher costs. Do not make it more difficult.
You should be going in the other direction. You should be looking at ways of making it easier to run a business here. All that is going to happen down the road is that we are going to end up with fewer jobs and a weaker economy. Government has to set the tone. Because it is an NDP government, you have to be even more positive to business than a Conservative or a Liberal government would. Some of you are Conservative or Liberal. I do not know who, so I am talking broadly and generally.
Okay, let me kind of close off, because I have been rambling a bit. The first thing you can do to help us and, therefore, I believe, help the province is to work with us and appear to work with us, not against us. I do not feel that right now, and I would like to feel more positive about government and how government is helping. I would love to see Ontario be a place where it is easier to make a buck, not harder, so that I am encouraged and my associates and other people I know in business are encouraged to make things happen here and hire more people and grow.
Put yourself in my position. If you had $100,000 in your hand, and you had a great idea for a business, which was not dependent on a particular jurisdiction, and you were 22 or 23 or 30 years old, would you start a business here today, or would you go to some place where your costs were lower, where your risks were a lot less? You probably heard the relative cost of severance in Ontario is two or three times higher than other provinces and many times higher than many of the States. I do not think I would start a business here, and that really worries me, because it means the province that I live in and that I want to stay in has to get weaker because fewer people are going to want to operate here.
It was suggested that I talk for 15 minutes and leave 15 minutes for any questions, so that is my talk. Any questions?
Mr Cleary: First of all, I would like to thank you for your presentation. I guess that we as politicians face some of the questions you have presented to us, that it is a bad place to do business and there are better opportunities other places and different legislation that may be coming out. I would hope that we can learn something from these hearings. I think you would feel more comfortable if there were more consultation prior to legislation being introduced. Am I correct on that?
Mr Diamond: Definitely. I would also be more comfortable if we were spending more time on doing things to help business be successful as opposed to doing things that in effect are going to make business less able to be successful. That was the focus, I think. It is not totally wrong, because you need to focus on any problems that exist out there, but it seems to be very one-sided right now.
Mr Cleary: We have heard from other groups that come in here, too. They had suggested that if we would lean more to consultation prior to the legislation, some of the horror stories might not even happen.
Mr Diamond: It would have been a lot better to have Bill 70 end up the way it is now -- there are still a few problems with it, but it is not as damaging -- than go through the enormous dislocation that took place when you released something that was inherently flawed.
Mr Cleary: I would hope that companies like yours, with the success you have had in the few short years, if you were thinking of doing things other places, in the States or somewhere, would reconsider it.
Mr Diamond: I am not here threatening that I am going to leave, because you cannot. The software company is people-related. You cannot leave. Without our people, we are nothing. All I am suggesting is that the things that make this province successful, and indirectly make my company successful -- because we have in Ontario a client base -- for the most part are affected by what you do. I am not here for my company as much as I am personally and for the other people whom I talk to who are in businesses that are more directly impacted.
Mr Offer: I thank you for the submission. My question is really on the last response you gave to Mr Cleary. You said the bill is now better than when it was initially introduced. Then you go on to talk about the impact this type of bill might have on companies, and you use directors as an example. Could you share with us what your reaction would be if the bill exempted the liability of directors of small businesses? You spoke about the insurance premium, that you were paying $15,000. That is the cost of doing business. There are businesses that are much, much smaller than yours that will still have to pay, ostensibly, that same type of premium.
Mr Diamond: Three quarters of them cannot get it at all. You have to be in reasonable financial shape to be able to do that.
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Mr Offer: And that of course raises a whole series of other problems for business. But what would your reaction be if we said the principle of the bill is the protection of wages, vacation pay for employees when the business has gone bankrupt, but directors of small business should be exempt from any personal liability.
Mr Diamond: I would jump up and down with joy, for two reason. One is that it would solve a problem for my company personally and would allow me to have directors who are more willing to serve. Second, it would send a very strong signal that the government is aware and concerned about small business and understands what the issues are in running a small business. Probably the second is more important than the first, because for my company personally, we solved the problem: We have insurance. But the second is much more important. There is an attitude here that I am really looking for. That would send a very strong, positive message.
Mr Offer: Thank you very much. No other questions.
Mrs Witmer: Thank you very much. I very much appreciate your comments. I would certainly concur with you that the type of information you have presented is the type of information, unfortunately, that I hear at home from people in my own community who actually are encouraging their young people, their sons and daughters, to look south of the border for opportunities if they are going to be successful. It is very frightening that some of our young people will indeed take that step. Did you have any trouble getting insurance? Did you look around? Was there much difference?
Mr Diamond: Yes, we had trouble. I think we were kind of on a borderline. You have to be a very strong company financially, especially when you are small. We are actually sort of medium-sized now: $14 million. But if we were back in the $5-million to $10-million days and we were, especially during a recession, going through a period of difficulty, we would not have been able to get insurance. In fact, we applied a year earlier. We could not get insurance a year earlier. We had to have a successful year before we could get it. Most of the people I know of who are in any kind of difficulty and were worried because they might get hit with this enormous amount of liability could not get it by virtue of the fact that they were not in good shape.
Mrs Witmer: So what are they going to be doing?
Mr Diamond: They cannot do anything other than think about whether they want to stay in business. A lot of people are thinking about that now. It is a lot easier. The costs of being in business are so great in terms of risk and your time commitment and your family and all those types of things that you really wonder sometimes whether you are better off just selling out of whatever level you are at or just stop the whole thing, sell your real estate, which has a high value in Ontario, and go move somewhere else where you can buy a house for half the value, bank the rest and live on it; and I will go back to teaching. Do not think I have not thought about that. Everybody I know in business thinks about that during a recession. It is no fun being in business in a recession. Then government gets involved and makes it harder. I think they should be helping me, because they are my government. They are making it harder instead. Then you really wonder, if everybody is against me -- if the economy is against me and my government is against me -- then I guess maybe I am barking up the wrong tree. You know, I should not be paddling upstream against the river for ever. Take it easy. Go downstream for a while.
Mrs Witmer: I guess what I hear you saying is that if this legislation is passed as it exists and directors are made liable, there are going to be companies that are unable to buy insurance.
Mr Diamond: No, 100%.
Mrs Witmer: Obviously the only option will be to go out of business.
Mr Diamond: What will happen is that there will be some insurance. First of all, you have unwittingly improved the shareholdings of the liability insurance industry, so if any of you have any friends in that business, they are doing very well now. For those who cannot get insurance, they are going to have to look very carefully. There are all sorts of assets being switched now from husbands to wives and wives to husbands and various protections taking place. The retroactivity of the original legislation -- in fact, it is still there now -- was grotesque, from my perspective. It is the second time. The Family Law Reform Act was the first. I guess that was under the Liberal government, although I think it was begun by the Conservatives. So I cannot blame the NDP for introducing retroactivity into the process, but that is another problem, too.
Businessmen do not understand the validity of retroactivity because we are never retroactive. We make a deal on a going-forward basis, and we stick to it. We never go back and change the rules in arrears. That is wrong. It is improper. You just do not do that kind of thing, yet it is being done to us. It does not make you feel very good. And yet, we are under your control. Government controls us; we do not control government. In theory, we can elect the government; but in practice, I have a vote, and so what?
Mr Huget: Thank you very much for the presentation and I wish you and your company well in the future. I have some questions of principle, if you will. What do you think about the principle of the payment of workers' wages in terms of the situations we have been discussing on this bill, and bankruptcies? Should we pay those wages?
Mr Diamond: I was wondering when somebody was going to ask me that. It is very hard to argue with the principle of paying wages that are due and payable. Of course I have to say yes to that. I could also say yes to a hundred other things that are wrong with our society. People on welfare do not get enough money. Unemployment insurance is not enough for people to live on in Toronto. People go to the food banks and there is no food. I can make a list a mile long.
The question is: How do you correct that? You correct it with a Band-Aid, which is forcing people to pay up their obligations, in theory, because that is what you may believe they are, and then cause business to weaken as a result. Then the problem gets worse, the province gets worse off. Or do you try to create a situation where there is enough money around that this type of thing is not going to happen? That is one answer.
The other answer is that if it is deemed by government that this is effectively a social requirement, a social program, which is really what you are asking me, then, good, call it a social program and fund it out of the general social program revenues. But for God's sake do not add more taxes. Take it from something else. You are going to have to tighten your belts a little bit if this is more important than something else, because we are already non-competitive as it is.
You, unfortunately, have to make the decision whether this social program is more important than 15 others. I am not going to tell you it is that important. I was not elected, so I am not going to decide which one is the one you should fund. I am going to say that if you are going to fund it, do not add more taxes to fund it, because we are already taxed to death and it is hard to deal with that.
Mr Huget: The purpose of this bill is to make sure that workers who are owed money actually receive that money. It is not anti-business. In fact, it is pro-worker in the sense that people owed money should receive those moneys as you, as a business, who are owed money likely demand payment from people who owe you money. I do not see it as a non-business bill. It is a protection of working people.
Mr Diamond: The corporation owes the money. If I have decided to go into business as a partnership or a sole proprietor, then I owe the money. In this case I do not owe the money, my company owes the money and I only own 30% of the company. I do not own 100%, as it happens. If my assets happen to be more easily attached, I am going to be the one who is going to be out the money even though I only own 30%. I am not even sure the idea of piercing the corporate veil and going after either shareholders or directors is a very good idea if you want to compete with the rest of the world, because it does not happen in most other jurisdictions.
Right or wrong, you have to deal with reality here. Reality says the rest of the world is operating a certain way. If Ontario is going to deviate from that in a significant way, and we do not have some other assets to offer that are a lot better, which we do not any more, then we are going to lose out. You have to deal with that reality, right or wrong. Either call it a social program and fund it that way, or do not do it. If you are going to call it a social program then something else is going to suffer.
I have learned one thing in business over the last eight years, that you can cut and still survive, and I do not see any cutting going on in the Ontario government whatsoever. That is perturbing because we cannot afford to live at the level we are living.
Mr Huget: In general principle, though, if I understand you right, you would support the principle that workers should be paid the moneys they are owed?
Mr Diamond: I cannot dispute that.
Mr Huget: My final point: You mentioned you were considering looking at the environment to the south, and many businesses are considering looking to the US or somewhere else to locate their business. You cite as the reason Bill 70, which means workers need to be paid what they are owed.
Mr Diamond: I did not say that.
Mr Huget: If, in fact, someone were to go to the US as a more friendly climate, would that be so they could avoid that obligation, or am I following you? Why would the US be more attractive?
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Mr Diamond: What I said was that when you run a business, the issue of starting a business, investing in a business, is a function of where you can generate the greatest return. That is a fact of life, right or wrong. If you want money to flow into Ontario, you want to have an environment as positive for business as is possible relative to other environments. If in the United States they had Bill 70, then we could have Bill 70 too. Forget about the United States -- the other provinces of Canada. If everybody had the same thing, we could have it, but they do not. We were going further. Therefore, all I am saying is that the people who make decisions to put money into the province will be less likely to do so, and Bill 70 itself in its current form is not going to be a significant factor one way or the other. The attitude behind the former Bill 70 and the attitude behind a number of other things proposed for the future, related to employment legislation, is extremely damaging in terms of the way the people view the province. That is what I am saying.
I also said I am not going to move my company because I cannot, and I am speaking more broadly for lots of other people who you know and I know are thinking about it, and some are in the process of doing it now.
Mr Huget: Would I be safe in assuming you are probably not pleased with the federal initiative, then, that covers part of the same territory and involves a payroll tax?
Mr Diamond: I am not in favour of any additional taxes, I would agree with that. But the federal government is at least pretending to cut costs. They are in fact cutting costs. They are taking some steps to try and do that. I am not a Conservative, I am not anything, but that is the one big difference I see between the two governments.
Mr Klopp: You mentioned attitude, and I totally agree. I had friends in university saying they were going to move to the States because we have all these taxes. That was four years ago. I think I said, "We in the NDP government can start working on these things," and that was four years ago.
The federal government, this week again, is over budget by about $8 billion in its projections, yet the attitude we have is that the feds are cutting. In the paper, they have not cut. In fact, they are over budget again this last quarter. We are only dealing with one Bill 70 here, sir, and there are all the other issues of getting jobs in Ontario. This government is working at that and I appreciate your time to come here to hear some points.
Mr Diamond: That was not a question, right?
Ms S. Murdock: No, he is renowned for this.
Mr Klopp: I want to get the last word, right?
Interjection: No, you are here to learn.
The Vice-Chair: Thank you very much for your presentation.
Mr Diamond: Thank you for your time.
RETAIL COUNCIL OF CANADA
The Vice-Chair: The next presenter is the Retail Council of Canada, Mr Woolford.
Mr Woolford: With your indulgence I have a couple of prepared remarks. My submission is just being circulated now. I am sorry it did not get here sooner so that many members would have had a chance to go through it in advance.
First of all I would like to express my thanks to the committee for the chance to present the views of retailers on Bill 70. We recognize that your committee is working on a very tight schedule and we are particularly grateful we were able to shoehorn ourselves in. I know we gave your committee staff only very short notice. They were particularly kind in making a number of adjustments to accommodate my availability. Ms Manikel has been very helpful. You should be aware that your staff are doing a good job and I am very appreciative.
I would like to open with a few remarks to introduce our organization and the retail trade generally, give you a sense of who we are and the interests we represent. The retail council is the national voice of the trade in Canada. Our members are representative of every sector of retailing and together account for about 65% of Canada's retail store volume. We count within our membership large, medium and small retailers, corporate, franchise and independent stores. While the large corporate organizations account for the major share of the total sales made by council members it is the small, medium and independent stores that constitute the great bulk of our 6,000 members. Our sister association, the Canadian Council of Grocery Distributors, counts within its membership all the major wholesale and retail food distributors. CCGD supports the views in this submission.
I would like to provide you with a bit of information about the retail trade, because it will help to highlight the relevance of Bill 70 for my members. Retailing is a very competitive business. There is easy entry into the trade and as a result the trade is marked by a large number of small firms and small chains. Unfortunately, exit from the trade is also relatively easy, with the result that we see a high turnover of firms. Companies compete very vigorously on product selection, location, service and, above all, on price.
Many of my members today face a new competitor: US retailers in the form of the cross-border shopping phenomenon. Retailing has always been a tough business to be in and succeed in, and all the signs are that this situation will continue or become even more challenging.
I would like to turn now to the substance of the legislation and then conclude with some general remarks. The council and its members support the concept that firms which owe money to their employees have a legal and moral obligation to pay that money. This was one of the strongest observations that came out when I was discussing the implications and the issues in Bill 70 with my members. I was struck by the strong sense around the table that this was a bottom line they adhered to very strongly: companies should be responsible for their debts.
Council believes the changes proposed by the Minister of Labour to the bill originally submitted represent a substantial improvement in the legislation. We are relieved that after the expression of widespread concern, the government did change a badly designed piece of legislation that would have had damaging consequences for many organizations. The proposals to exclude officers from personal liability and to limit the liability of directors remove some of the most punitive aspects of the first version of the legislation. We believe these changes reflect more closely the reality of the way business is administered today as well.
The retail council also welcomes the intention to harmonize the Ontario initiative with the proposed federal measures. I would simply note in passing that the confidence of Canadians in their governments is enhanced if those governments can arrive at those co-operative arrangements before they introduce their legislation rather than after.
Having made those opening remarks, I note there are still some facets of the legislation that are of concern to my members. The closure or bankruptcy of an enterprise often gives rise to claims on the remaining assets in the firm from a wide range of people and companies: employees, customers, lenders, suppliers, the landlord and others. We believe it would be preferable to address the interests of the parties in an integrated way rather than in a piecemeal fashion. This would help to ensure the appearance and the reality of equitable treatment of creditors and would help to reduce the possibility that unintended side effects could affect some aspects of a firm's operations.
We are very concerned that the wage protection fund will become the justification for another payroll tax. Council would be strongly opposed to such a move. We believe payroll-based levies are a seriously flawed way to raise revenues. Because such a tax would be levied without regard to the ability to pay, this tax in fact could end up increasing the number of claimants on the fund as the burden of taxation drives more firms bankrupt. The additional drain on the funds firms have for compensation would also mean that over time the tax would reduce the wages of employees.
We believe the program proposed by the government to include compensation for termination and severance pay is overly generous. Our preference would have been to limit payments to individuals' wages and vacation owing, in that these are funds taken directly from the employees' pocket. We wonder whether it is appropriate public policy to compensate individuals for the second set of items, that is, termination and severance pay. Often there are other creditors of a firm who do not have access to this kind of government subsidy. As well, we are concerned, as much of business is, about the overall level of government spending.
We note that in this connection, too, the government is contemplating additional changes to the Employment Standards Act which might have the effect of increasing the value of payments for severance pay, thereby increasing further the cost of the program to the public purse.
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I would like to finish off by making some general observations about how this legislation fits into the broader agenda of issues we see facing Ontario and Canada. Perhaps I could start with the words of Valerie Sims, who is acting executive director of the Canadian Council on Social Development. She was commenting recently on a Statscan publication reporting on the high portion of Canadians who collect unemployment insurance benefits.
She said: "The problem is that the government has had to contribute more and more just to offset the poor performance of the economy. Employment has not kept up with the formation of new households in the last 10 years."
I think her words touch a key point. The Canadian, and I would suggest the Ontario, economies have been experiencing a loss of competitiveness and as a result, Canadians and Ontarians have lost job opportunities.
Governments, yours and the federal government and other provincial governments, have been under pressure to increase their contributions to individuals. This policy approach is understandable, but I would suggest misguided.
In the case of Ontario, our members are concerned that the provincial government appears to be focused more on palliating the effects of an underperforming economy than on improving performance. If Ontarians are to continue to earn a First World standard of living, the government must ensure, as a matter of priority, that the policy environment supports a healthy and competitive private sector. We are concerned that this is not the agenda of the Ontario government.
The only sure protection Ontario workers will have is productive, needed jobs in firms that are vigorously competitive and highly market-responsive. In an area of cross-border shopping, this is as true for retailing as it is for any export-oriented sector.
A policy approach that focuses on public measures to compensate for the impacts of an uncompetitive economy also faces the natural restriction that governments have only a limited capacity to compensate for broad economic weakness.
Retail Council suggests that Ontario is at, if not beyond, the point where governments can add to general welfare by focusing on the needs of those affected by poor economic performance. This is especially the case if the reasons for that underperformance are structural in nature rather than cyclical.
As a final point, I would like to register our concern that it has been difficult to have meaningful consultations with the government on this issue. We were involved early on in discussions with officials and were grateful for that chance. But when we tried to bring forward and have a dialogue around some creative suggestions we thought might work, we were advised the issue was already too far advanced for the government to consider other approaches.
The amount of public pressure that was required to bring about changes that were so obviously needed is also a worrisome signal about the willingness to listen. We hope this administration will show itself more open to other points of view in the future.
Those are my opening remarks. I would be happy to answer questions or discuss issues at your pleasure.
Mrs Witmer: Thank you very much for your presentation. It was very well presented. Most of the information is here.
Getting back to Bill 70, you talked about the lack of consultation. Obviously it is your wish that the government involve itself in a more complete dialogue in the future and that you have a chance to make a response. What is your feeling about the maximum amount of $5,000, and also the ability to change that simply by regulation?
Mr Woolford: I did not get a lot of clarity from my members on the maximum threshold. From the conversations I have had with officials, I think it will meet most of the needs of individuals, certainly for covering pay and vacation pay that is owing. If the government chooses to compensate employees for that, then I think the threshold should be set at a level that would be appropriate to ensure that those obligations can be met fairly.
What was the second part of the question?
Mrs Witmer: That change.
Mr Woolford: Oh, the ability to change. Frankly, I think the business of the Legislature is sufficiently full at most times that bringing something back to the Legislature is pretty demanding. I think governments need a certain measure of freedom to govern, in all honesty.
Mrs Witmer: So you would support the cabinet making that decision.
Mr Woolford: I would hope they carry out some consultations to make sure they have the amount right, that it is a burden that is supportable by the public purse and that it matches up with businesses' and employees' views of what would be fair and appropriate.
Ms S. Murdock: Just a couple of points on your comments, and actually the two of them sort of go together. I will paraphrase. You were talking about no additional tax and definitely not a payroll tax. That has been made quite clear and I thank you for the clarity of your presentation.
The next sentence was on no government spending, or that you would like governments to watch their expenditures. You cannot have it both ways.
Then your next sentence, if I recall, was --
Interjection.
Ms S. Murdock: Yes, it is on page 5.
"We are concerned about the overall level of government expenditures and would have preferred to see outlays under this program constrained by limiting the base on which payments could be made to wages and vacation pay."
I presume that is to eliminate termination and severance.
Mr Woolford: Yes.
Ms S. Murdock: Okay. I guess we are coming from two philosophically different ends, but I will try once more.
When an employee works for any employer, part of the deal they make -- my base is that both the employer and the worker have a vested interest in seeing that this business works and becomes successful. It helps out at both ends so that neither is out to get the other or to damage, whichever end you are coming from. When they are working for the employer, the Employment Standards Act legislates statutory rights in terms of termination, severance and so on. This is not something new we have dredged up and thrown in and said, "Okay, now we're going to give you some additional benefits that you haven't had before." They have agreed to work for a period of time on the understanding that at the end of a certain period, should the company ever close down or whatever may happen, they are going to have the guarantee of two weeks, four weeks, six weeks, whatever. I see it as wages. I do see it as something that has been earned by the employees and is owed to them whenever the company is no longer.
I would like your views on that because I really am having great difficulty in understanding all the presentations that have been made by the employers' side that are not seeing that perspective.
Mr Woolford: Okay, I will try to answer it. I think the first and simplest point, if not necessarily the most important, is the concern about the level of expenditure the government thereby makes, the hit on the fisc, if you will.
Second, we would not advocate a rolling back of the Employment Standards Act to remove from the employer the obligation to pay severance and termination pay. We are not here to argue that aspect of the legislation should be changed. In the event of the bankruptcy of the firm, what we are suggesting is that those aspects of the capital that an employee has invested in the job not be compensated by the government. I think it is based on a feeling that government is already being relatively generous to employees, in this situation, in a way that it is not being towards any other creditor of the firm. The individual who has made a down payment on a product loses that money, and that money is as important to the customer as it is to the employee.
Ms S. Murdock: Would that customer not be able to file in the bankruptcy claim as listed? I do not know.
Mr Woolford: Cannot that employee file in the bankruptcy?
Ms S. Murdock: Where are they put?
Mr Woolford: Where is the customer put?
Ms S. Murdock: Is it at the same level?
Mr Woolford: The problem is that you always have a crocodile of people who are lined up for the assets of a firm. Naturally there is a struggle to be higher in the line. Everybody cannot be first.
Let's face it, when a firm goes down there are losses and people are going to take losses. We think that, with the way the legislation has been changed now, you have covered off the worst hit the employees take by paying back their vacation and pay owing to them. That is money out of pocket, if you will.
We suggest that trying to compensate for the capital the employee has lost probably is taking it a little too far.
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Ms S. Murdock: Yes, I know, but I do not think we are ever going to agree on this. Thank you very much. I appreciate it.
Mr Offer: Mr Woolford, thank you for your presentation. Just to carry on with that same line of questioning, as we have proceeded, I think we recognize there are certain entitlements employees have under ESA: obviously wages, vacation pay, termination and in some cases severance, and I hope we do not get bogged down into whether those moneys are in fact due and owing. I think we will all agree those moneys are payable to the person.
This is the question I have. What we have to ask in principle is, who should pay? On the issue of severance and termination, in a case where a company has gone bankrupt, where severance and termination are payable, where there is no employer to pay, where there is probably no director to pay, where there is no preference on that security scale that will receive money, is it then in principle, or should it be, a debt paid by society to the worker? Are we talking about a social program or are we talking about a labour adjustment program?
We cannot change the bankruptcy legislation. We may want to, but we cannot. In the end I think we have to ask, should the taxpayers of the province owe the debt, as legitimate as it is, to the employee of a firm? If it comes out of the consolidated revenue fund, that is who it is.
Mr Woolford: As I indicated earlier, certainly with respect to severance pay and termination pay, we feel the public purse should not cover off those debts of a firm. Those are debts of the firm, no question, but we suggest that it not extend that far.
I guess we reluctantly acknowledge the validity of society picking up the debt owed for wages and vacation pay. We sincerely hope it will not happen and that firms will meet their obligations, but there are going to be circumstances where they do not. Whether or not they are within the control of the owner is beside the point, in a sense. Those are debts that probably should be paid.
There are a couple of other things, I guess. There is an extensive safety net in Canada for employees who lose their employment and are in need. As a result, I think you can argue that after we have met the immediate obligation of wages and vacation pay owing, if there is need on the part of the employee, there are other public policy instruments there to ensure that he or she is given the income needed to keep body and soul together, find another job and move back into the labour force.
We believe that going that extra step to recompense employees for the capital they have invested in the job is probably going further than is necessary, given the range of measures we have today and given the ability of governments to finance that kind of program.
Mr Offer: If I might just ask one further question. It is an area I have been exploring today. In fairness, a number of people have spoken to us on the validity of the principle. I think it is fair to say that in so far as wages and vacation pay are concerned, I cannot really recall anybody who speaks against that principle and that obligation.
They also talk about maintaining a competitiveness in the province and the concern they have that the directors' liability will impose, if not directly, certainly indirectly, a tax, be it through insurance, if available, or potentially through the loss of an expertise in a very real sense. So I ask you, in the area of small business, however we define that, what would your reaction be if the directors of small businesses were exempt from the personal liability aspects of this legislation?
Mr Woolford: As a former civil servant, I shudder at the thought of the boundary problems. When you start talking about real money, it becomes extremely difficult to define boundaries. Trying to carve out a chunk of the business community and say, "Directors of this type of company should not pay those obligations, and others should," I am not sure would be workable or terribly helpful. As well, either it is a principle or it is not. If directors are responsible, as they are under the corporations legislation in this province, then they are responsible. If they are not responsible, then take it out of corporations legislation and make it clear.
I think that trying to make exemptions for small businesses would create a lot of problems in administration, and I am not sure it is worth that amount of effort to address that problem. The unfortunate reality, of course too, is that it tends to be small businesses, at least in the retail trade, which have the greater trouble staying in business. So you find the failures, particularly the failures where the owner has struggled against odds with that awful feeling in the pit of his or her stomach, to the point where he or she knows that the company is going down -- that happens more often in the retail trade and more often in smaller firms than it does in the larger firms, so that in a sense exempting small businesses then exempts that sector of the economy which is most affected by default and bankruptcy.
Mr Offer: I was probably not making myself clear. It was not that we are exempting small business. The workers' entitlement would still remain. The only thing that would be exempt would be directors of small business from the enforceability aspect by the branch, but the workers would not be impacted.
Mr Woolford: Let me go back to the discussion that my members had on this, all of whom were employees, none of whom was a director of a company. They felt very strongly that this was a fair obligation on the directors. They were of the opinion that this was a fair obligation on the directors of the company. I was surprised by that. I thought that business managers would be of the view that if we could avoid an obligation we would do so, but they were not. They were quite firm on that, that this was an obligation of the company and if you were a director of that company, you understood when you signed on that you had that obligation, that there should be some commitment to the organization you are advising, to the organization you are providing leadership to. That is direct from my members, as well as the view of the Retail Council of Canada.
The Vice-Chair: Our time has basically expired here. Ms Murdock has one more question. We have two minutes on the clock. Is everyone in agreement? It is all yours.
Ms S. Murdock: This is just sort of a continuation of Mr Offer's first question. For instance, in my constituency I have a couple of small business people who have come to me who, due to the recession and the hard times right now, are having difficulty paying back small business loans they got from the government. I do not know the exact names of the programs, but there have been a number of programs funded by the provincial government over the years. The Liberals and Conservatives started it a long time ago.
I am just wondering, because Mr Offer has asked this question a number of times and every time I hear it I keep thinking, "I've got to remember to ask it" -- moneys that the provincial government funds came out of the consolidated revenue fund and went to a particular ministry to support small businesses. In both instances I am thinking of, the small businesses, although their period of time for non-payment of interest and principal has now run out, are asking for extensions. Of course, given the times, I imagine we are probably going to go that route. But to me it is the same thing. It is using this money out of the consolidated revenue fund for a social or labour adjustment program, using it to hold up small businesses in hard times. I was just wondering if I could hear your comments on that.
Mr Woolford: Where the government is a creditor under a financing program, where it has acted as a lender, it should make those decisions as a prudent lender would. As a taxpayer, I hope governments would do that. That is, they would assess the company, they would try and determine if this company was going to make it, and if there was a chance of getting that money back in the future, then it is sensible to agree to an interest holiday or a suspension of payment of principle and interest over a period of time that the government and the company feel is appropriate to help the company through its troubles.
Equally, if they think the company is going down, if their judgement as a lender is that the company is in financial trouble, then fiscal prudence demands that they act to secure their assets. I do not think government should be soft-headed about things. I do not think those decisions should be made on a social basis. You are not helping the employees by propping up a company for another six months facing the almost certain likelihood that it is going to go down in the future. In a sense, that is a deception to employees. You are giving them hope --
Ms S. Murdock: I was not thinking so much of the employees as of the owners.
Mr Woolford: You are giving a deception to the owners as well.
Ms S. Murdock: Yes, true.
The Vice-Chair: Thank you for your presentation. Time has expired. Thank you again for coming before the committee. The committee now stands adjourned until 10 o'clock tomorrow morning, at which time we will resume.
The committee adjourned at 1803.