December 10, 2010 – The hopes of 400 Disabled Nortel workers’ hopes were finally dashed this week when Bill S-216 An Act to amend the Bankruptcy and Insolvency Act and the Companies’ Creditors Arrangement Act was voted down 47-44 in the Senate. Two weeks ago, the Senate Banking Committee voted against bill S-216 by 6 votes to 5.

At the time, Senator Art Eggleton, the sponsor of the bill, said he’d try to “revive” Bill S-216 in the next reporting stage. The likelihood of that happening was always slim, and this week the bill has finally been defeated. The disabled Nortel workers must now await anxiously the insolvency court rulings.

However, without any legislative requirement to protect long term disability benefits promised to the disabled Nortel workers, they will fall into the lowest ranks of creditors, along with pensioners, and well behind lenders and other secured creditors, both Canadian and international. This means that the disabled Nortel workers won’t be left with much, if anything.

Bill S-216 was meant to confer a preferred status on the “liabilities of a fund established for the purpose of a long term disability benefits plan”. The established fund, in turn, would continue paying benefits to disabled employees if or when the employer could no longer do so. As with many companies, Nortel had made a promise to its employees that was not backed up by anything more than Nortel’s good will and success.

The essential problem is that the company’s disability plan was self-insured, leaving expectant recipients with little recourse in the wake of Nortel’s demise. Add to that insolvency legislation that ranks large creditors, banks, and insurers, ahead of employee benefits, and the result is disabled employees left holding the [empty] bag.

While it is still possible for the House of Commons to supersede the Senate decision by enacting its own retroactive legislation to apply to the Nortel workers, there is little precedent and no sign that the political will exists to make that happen. Come December 31st, barring a spurt of seasonal generosity, 400 disabled Nortel workers will be left out in the cold.

Bill S-216 would not have helped only the disabled Nortel employees, but would also have applied to over 1.1 million Canadians who are relying on self-insured long-term disability benefits in the workplace. According to the group, Rights for the Nortel Disabled, up to 23,000 disabled employees in Canada are still exposed to the risk of corporate insolvency. Nortel workers may have received the most attention, due to the size and notoriety of the company, but a large number of Canadians may still face loss of benefits and pensions due to broken corporate promises, and insolvency court rulings that protect large creditors but not employees.

That this played out in the Senate is particularly problematic since there is no straight-line political accountability for their decisions. Some political parties railed about this very thing on their way to Ottawa but then forgot about it.

Keywords: pension, disability