Union eyes employer insolvency
Media union leaders will be discussing how to deal with potentially insolvent employers at the annual media council conference on April 14-17 in Montreal.
Of primary concern is the fragile state of Postmedia Network, publisher of dozens of newspapers across Canada, including the National Post, Toronto Sun, London Free Press, Ottawa Citizen, Windsor Star and many others.
Postmedia is not insolvent but it owes about $670 million in debt that comes due in two installments in 2017 and 2018. The company, however, is already struggling with debt payments of about $69 million per year.
The decline in the Canadian dollar compared to the U.S. dollar has made a bad situation worse since a portion of the debt has to be re-paid in U.S. currency.
Golden Tree, a U.S. hedge fund, recently began looking for someone to buy its 52% restricted voting shares in the company and analysts have predicted the shares will soon be worth “zero.”
Most companies that become insolvent in Canada seek protection under the Companies’ Creditors Arrangement Act (CCAA).
The CCAA allows companies to avoid bankruptcy by restructuring their financial affairs through a “Plan of Arrangement.”
There are no restrictions on what the restructuring plan can entail but unions generally cannot be forced to reduce members’ rights and benefits in a collective agreement. The reality, however, is that unions may come under a great deal of pressure to make compromises in order to save a company.
There is some protection available under both the CCAA and the Bankruptcy and Insolvency Act (BIA) for employees who aren’t paid their wages. And the federal Wage Earner Protection Payment Act can usually cover up to about $4,000 in lost wages.
Existing pension assets are protected from creditors but money that is owed to the pension plan, but not yet deposited, is less protected.
The Ontario Pension Benefit Guarantee Fund guarantees the first $1,000 per month of a plan member’s monthly defined benefit pension income but not beyond that.
Grievances, arbitrations and labour board applications are mostly frozen during both BIA and CCAA proceedings.
If insolvency leads to the sale of the business, labour law gives the union successor rights to remain in the new company.
However, that doesn’t stop employers from attempting to skirt these rules.
Unifor has lodged complaints, for example, to the Ontario Labour Relations Board concerning the termination of employees, and the failure to recognize the union, at Hamilton’s CHCH television station.
The federal government is also investigating CHCH TV over its failure to pay workers fired just before Christmas in a sudden bankruptcy.
Employment and Skills Development Canada said the probe will examine failure to pay wages and other amounts when the holding company that operated CHCH TV news filed for bankruptcy, the Hamilton Spectator reports. The report says the government is unable to take direct action to recover money owed the employees but company directors may be held individually responsible.