BRIEF TO THE ONTARIO GOVERNMENT ON SEVERANCE PAY

Transcription

1 BRIEF TO THE ONTARIO GOVERNMENT ON SEVERANCE PAY March 17, 2009 National Automobile, Aerospace, Transportation & General Workers Union of Canada (CAW-Canada)

2 INTRODUCTION These are difficult economic times. For some workers they are desperate times. Unemployment continues to climb. In the months ahead more workers will lose their jobs than has been the case in many years. Those who are losing their jobs will be unemployed for longer periods of time. And the prospects for new jobs grow dimmer with every downward revision of economic forecasts. The safety nets we had in place in the past are now in tatters. In this recession only 4 out of 10 workers qualify for EI. The hours required to qualify has doubled since the last recession. The duration of benefits --- even with the federal government s addition of 5 weeks is considerably less than it used to be. The level of income support is also much less than it used to be. Those who are fortunate enough to qualify for EI now will find it more difficult in the future. The new labour market, characterized by an increase in part time jobs, contract work and the proliferation of temporary help agencies, makes it harder to accumulate enough hours to re-qualify for EI. Admittedly, much of that is a federal responsibility. We urge you to pressure the federal government to make the necessary changes to EI that will help laid off workers land on their feet. But there is a situation which is clearly a provincial responsibility. And that is severance pay. Amongst those workers who are losing their jobs are thousands who are doubly victimized. They have been thrown out of work and they are denied the earned wages and separation pay that is owed to them. In economic terms we are in uncharted territory. For the most part we don t know what is going to happen. But as the recession deepens we will probably face more bankruptcies, more insolvencies, and more employers refusing to honour their financial obligations to their workforce. CAW Brief on Severance Pay Page 1

3 INSOLVENCIES INCREASING Already the evidence points to an increase in business insolvencies, especially in manufacturing. The last 3 months of 2008 saw the numbers increase across the country. For the last quarter manufacturing insolvencies were up 21% over the same period the year before. In October the numbers climbed by 41%. In 2008 there were 793 manufacturing insolvencies and proposals in Canada. In Ontario, business insolvencies were over 2,800 for There are no records of the number of workers involved. The accompanying table shows the spiking of business insolvencies in the last two recessions. Business Insolvencies, Canada Source: An Overview of Canadian Insolvency Statistics up to 2006 OBS, Ottawa, Ontario, June 2007 Slide #2-2 CAW Brief on Severance Pay Page 2

4 CASE STUDY REPORTS Over the last year and a half CAW members have faced a significant number of situations where employers have refused to pay severance as well as other separation monies. Bauer Industries, Waterloo, Ontario # of Members: 35 Fleming Door Products, Ajax, Ontario # of Members: 135 Simmons Canada, Brampton, Ontario # of Members: 151 Ledco Limited, Kitchener, Ontario # of Members: 65 Plastech Eng. Products, Kingsville, Ontario # of Members: 385 Lofthouse Brass, Whitby, Ontario # of Members: 14 at closure SKD Automotive, Brampton, Ontario # of Members: 140 Collins & Aikman, Scarborough, Ontario # of Members: 400 Alumetco, Brantford, Ontario # of Members: 85 Polywheels Mfg., Oakville, Ontario # of Members: 250 Concord Coatings Inc., Concord, Ontario # of Members: 92 St. Clair Forms, Blenheim, Ontario # of Members: 43 ELS Plastics, Oldcastle, Ontario # of Members: 83 Contran Mfg. Ltd., St. Thomas, Ontario # of Members: 80 Aradco & Aramco Mgmt. Ltd., Windsor, Ontario # of Members: 90 O.I. Corporation, Toronto, Ontario # of Members: 375 In every one of these cases there are families facing unnecessary hardships. In many cases there are shattered lives. While each situation is unique in the devastation it causes to families and communities, there is a general pattern of employer actions. In some cases our union has been successful in winning severance pay. In others; workers are left with nothing. CAW Brief on Severance Pay Page 3

5 CASE STUDY A Nasra had worked at the plant for 22 years. She knew the plant was going through tough times. Over the last few months there was less finished orders and some layoffs in a few departments. Then on a Friday in October, Nasra and her coworkers were called into the lunch room for a meeting. Management reviewed the current financial situation and informed everyone that they didn t need to come to work on Monday. They also announced that a new owner would be taking over in a couple of weeks. Nasra and her co-workers were handed out their last week s paycheck and were told to take their personal items from their locker or work area. After the shift end on Friday, the workplace was closed. Over the next few days, trucks arrived to remove the machinery and finished products and the company declared bankruptcy. The new owner didn t materialize. Workers were left without severance or termination pay and they had no way to force the company to pay the monies owed to them. There are minor variations on the story. In the case of Polywheels workers arrived at work to find the doors locked. In the case of Ledco workers weren t called into the cafeteria. Instead a notice was put on the bulletin board so workers would see it at the end of shift. CASE STUDY B Mohammed, on the local bargaining committee for the first time was surprised at how hard it was to negotiate a renewal agreement. The employer had tabled major concessions including large cuts to wages and benefits. When the members rejected the latest company offer they ended up on the picket line. A short time later, the company announced that they were in receivership. The bargaining committee had to shift its focus to negotiating a closure agreement. The company agreed to pay owed wages and vacation but refused to budge on severance and termination pay. When the workplace was closed there wasn t much left in the plant. CAW Brief on Severance Pay Page 4

6 The company owed much more money to secured creditors than the value of the assets remaining in the plant. As unsecured creditors Mohammed and his coworkers didn t get any severance pay. CASE STUDY C Sonja was one of the workers who occupied her plant. She never dreamed she would be in such a situation. But it seemed that it was the only way to put some pressure on the employer. Sonja, inside the plant, and the group of workers on the outside hoped that by stopping the company s customers from removing tooling from the plant they could have some leverage to get some of the money they were owed. It was a tense number of days, punctuated by the employer s efforts to get court injunctions against the workers. In this case Sonja and her coworkers were successful. The union managed to negotiate the monies from the Big Three to cover severance pay. The CAW has tried to negotiate third party severance payments in the case of Collins & Aikman, Ledco and Plastech. WORKERS SHOULDN T HAVE TO FIGHT FOR SEVERANCE PAY Whatever the outcome of a particular fight around severance pay the basic question remains: why should we have to fight? Why are workers forced to occupy their plant and blockade their workplaces in the hopes of getting what they are legally entitled to? Why does the union have to try to bargain with third parties to win severance pay for workers abandoned by their employers? Why does the union have to spend time and major resources trying to win severance pay claims through the bankruptcy courts? And why do workers, who are owed thousands of dollars, end up with a few cents on the dollar of severance pay? Or worse, nothing. ONTARIO GOVERNMENTS PROTECTING WORKERS IN PAST RECESSIONS Ontario governments, regardless of their political affiliations, have introduced legislation and developed programs to protect workers in past recessions. In the recession of the early 80 s Bill Davis s PC government introduced Ontario s severance pay legislation. The government was responding to the growing CAW Brief on Severance Pay Page 5

7 number of plant closings, insolvent workplaces and pressure from high profile plant occupations such as the one at Houdaille Industries in Oshawa, Ontario. In the recession of the early 90 s the Ontario NDP government introduced the Employee Wage Protection Program which provided compensation to employees for separation monies owing to a maximum of $5,000. This legislation was later repealed by the Harris government. In the current recession the federal Conservative government has taken some minor steps in its 2009 budget. The budget announced modifications to the Wage Earner Protection Program to include severance pay to the list of possible claims. THE LIMITS OF THE FEDERAL PROGRAM After years of lobbying by the labour movement the federal government introduced the Wage Earner Protection Program in July The program applies when employers become bankrupt or are subject to receivership. In the 2009 budget, severance pay was added to the list of permissible claims. There are a number of problems with the federal program. Although severance was added to the list of permissible claims, the total amount of monies a worker could recover was not increased. It remains at $3,254 (a formula based on 4 weeks EI maximum earnings). Under the federal program a worker with 26 years of service with an employer and earning the average industrial wage would get less than 18 cents on the dollar of severance pay. And that is provided there are no other unpaid wages. At the best of times this is inadequate. But now as workers face longer periods of unemployment it is especially inadequate. The federal program excludes workers who have been abandoned by their employers or where employers refuse to pay. It only applies to bankruptcies and receiverships. However limited the federal program is it remains the only protection Ontario workers have. OUR PROPOSAL Ontario has a special responsibility for severance pay. Legislation in our province provides workers with an important legal entitlement to a critical income safety net. But it is a hollow entitlement in the face of bankruptcy, abandonment or an employer s failure to pay. CAW Brief on Severance Pay Page 6

8 We acknowledge the Premier s statement in the Ontario Legislature on Dec. 6, 2007, when he said: I know I speak for every member in this legislature when we say that there is more that can and should be done when it comes to protecting workers in those cases where a business fails.so the step we are taking at this point in time is to look at the federal legislation and see what we can do working in concert with the federal government Working in concert with the federal government, Ontario could provide additional protections to workers in this recession. The upcoming provincial budget provides an opportunity to announce the government s commitment. Ontario needs to develop a wage earner protection program that: is integrated with the federal initiative, with the federal program as first payer, applies to all separation monies including earned wages, vacation, termination pay in lieu of notice and severance pay, applies to insolvencies and bankruptcies and to situations of abandonment and employers refusal to pay, provides protection to an additional $10,000 limit per claim, and is retroactive in line with other adjustment related programs. For example, MTCU s Second Career program eligibility was amended to include all workers who had lost their jobs going back to January 1, 2005 OTHER REFORMS Measures to protect severance pay can be done in the short term and their impact can be both immediate and retroactive. These initiatives would be an important element in a broader suite of reforms that help improve the conditions for some of Ontario s most vulnerable workers. Additional efforts, some within Ontario s jurisdiction and others where the province s influence could help change the rules set elsewhere, would include the following: Ontario s severance pay provisions, while relatively unique in Canada and incredibly important to laid off workers, haven t kept up with the changing times. Outside of the amendment in 1987 which extended severance pay entitlement to a single employer with a payroll of $2.5 million, severance pay provisions haven t changed in over 25 years. It is time to review the restrictions and the limits set in CAW Brief on Severance Pay Page 7

9 the legislation. In particular the restriction of severance pay to layoffs of 50 or more workers within 6 months, the minimum qualifying period of 5 years employment and the maximum payout at 26 weeks. Severance pay needs to be carved out of the calculation of EI benefits. Ontario needs to pressure the federal government to introduce reforms to bankruptcy laws to ensure that workers are either afforded secured creditor status or that all monies owing to them is protected on a preferred creditor basis. Ontario needs to provide a mechanism that allows severance trusts to be set up by mutual agreement between employers and bargaining units outside of the current 35 week rule. The Employment Standards Trust Fund is not currently able to hold severance payments until 35 weeks of layoff have transpired or full closure occurs. By such a time the funds would already be in the hands of the CCAA or bankruptcy trustee. Legislation which requires plant closings to be reviewed, that holds employers publically accountable, requires justification and supports interventions to keep workplaces open. DR\sd cope343 CAW Brief on Severance Pay Page 8