Proceedings of the Standing Senate Committee on
National Finance
Issue 3 - Evidence - Meeting of March 11, 2009
OTTAWA, Wednesday, March 11, 2009
The Standing Senate Committee on National Finance, to which was referred Bill C-10, An Act to implement certain provisions of the budget tabled in Parliament on January 27, 2009, and related fiscal measures, met this day at 2:33 p.m. to give consideration to the bill.
Senator Joseph A. Day (Chair) in the chair.
[English]
The Chair: Honourable senators, this afternoon we continue our consideration of Bill C-10, An Act to implement certain provisions of the budget tabled in Parliament on January 27, 2009 and related fiscal measures, which were referred to the committee last Thursday. Today is Wednesday. The bill has been in the Senate for less than a week, and already we are being accused of delay and obstructionism. We will proceed as expeditiously as possible. We would like to thank the witnesses who are here with us today.
[Translation]
Yesterday morning, we heard the statements of the Minister of Finance and his parliamentary secretary on the elements of the Bill involving the Department of Finance.
[English]
This afternoon, we will have the opportunity to question officials from Industry Canada, Transport Canada, and the Treasury Board on other aspects of the bill, specifically Part 7 and Parts 10 through 15 inclusive.
As always, I know we will have a number of questions to ask. I would appreciate, honourable senators, your continued cooperation in keeping your questions as brief as possible so that all senators will have an opportunity to put their questions. The Senate is in session, and some senators will be arriving as we proceed.
As to the manner of following the proceedings, if you have Bill C-10 in front of you and look to the Table of Contents, you will see that the first several parts relate to evidence that we can best receive from the Department of Finance.
Yesterday, we received introductory words from the minister and the parliamentary secretary. I have heard from a number of honourable senators that they would like to get more into the meat and the substance of the bill itself. We are starting at Part 7.
We are trying to understand what is in this bill, what amendments are being proposed and what the government is hoping to achieve by these amendments. Then we can, over the next week and the week following, bring in members of associations, members of the public, and individuals who are impacted by this legislation to let us know whether they are impacted adversely or positively. We need to understand what the government is hoping to achieve before we start that second round of hearings.
A number of honourable senators have indicated to me that we should have the Finance people back again to help us with the process we will follow today with respect to Transport Canada and Industry Canada. Finance will help us with the first four parts. There may be some questions that arise out of the first four parts today, but we will try to stick to subject matter as best we can. If you are able to answer the questions that are posed, then that would be wonderful. If not, then just indicate that that would be better posed to someone from Finance, and we will follow up on that.
Honourable senators, we have already agreed to meet March 23, 24, 25 and 26 for all-day meetings and into the evening. However, because we did not get as much done yesterday as we hoped in terms of actually understanding the amendments, it has been proposed, and steering committee is putting to you now, that we should meet on Monday next to call back the Finance personnel to help us with the first four parts of the bill before we go into the other sessions. Is there any discussion on that point or could I have a motion that we do so?
Hon. Senators: Agreed.
The Chair: I will not need a motion if it is unanimously agreed. I will ask the clerk to try to have the officials here at ten o'clock. We will go as long into the day as needed to understand what the government is trying to achieve with respect to Parts 1 to Part 4. There are 15 parts to this bill and many divisions within the parts. There may be other aspects of the bill that are the responsibility of Finance.
Senator Di Nino: In conducting the meetings on the basis of the segments where the witnesses have expertise and knowledge, is this why we are starting at Part 7?
The Chair: Yes.
Senator Di Nino: Also, it is generally expected that the witnesses will provide a written document for us to study and follow with some information. That is not the case today. Is there any particular reason for that?
The Chair: It was because it is a budget. We have three documents in front of us. First is the binder that was provided. This gives the information you would have in a speech if we were dealing with other subject matter. Second, you have the table of contents of the bill itself. Third, you have the research done by the Library of Parliament for us.
Senator Di Nino: I have all those. You are telling me that the witnesses did not prepare a presentation for us at the beginning. Will we simply go right into questions?
The Chair: We will introduce our witnesses and go to asking questions. We did not ask our witnesses to prepare any documentation, nor did we expect them to. Perhaps, after I have introduced you, you could let us know if, notwithstanding that, you have something in writing.
First, I would like to introduce from Transport Canada, Mr. David Osbaldeston. He is the Manager, Navigable Waters Protection Program. We appreciate you being here. Brigita Gravitis-Beck, Director General, Air Policy, Transport Canada, who should be here in due course. We also have Hélène Laurendeau, Assistant Secretary, Treasury Board of Canada and Collette Downie, Director General, Marketplace Framework Policy Branch, Industry Canada.
With respect to Senator Di Nino's point, do any of you have a written submission or statement that would you like to present?
David Osbaldeston, Manager, Navigable Waters Protection Program, Transport Canada: No, I do not.
Colette Downie, Director General, Marketplace Framework Policy Branch, Industry Canada: I do not either.
Hélène Laurendeau, Assistant Secretary, Labour Relations and Compensation Operations, Treasury Board of Canada: I do not either.
The Chair: Who would like to start and in which section? I would like you to follow the table of contents and then help us through the various amendments pertaining to legislation with which you are familiar. We would like to go to the amendment and understand what it is intended to achieve.
The Chair: Mr. Osbaldeston, would you like to begin?
Mr. Osbaldeston: Yes. I am not quite sure of the direction. I am here to respond to any queries you may have with respect to the amendments before you.
The Chair: We would like to hear from each of the witnesses and then we will ask questions individually.
Senator Eggleton: They just came here to answer questions.
The Chair: They came here, first of all, to tell us about the amendments the government is seeking in relation to the legislation they are familiar with. Therefore, would you tell us about the legislation and tell us what it is you hope to achieve with that. Then we will ask questions of you. Who would like to begin?
Ms. Laurendeau: I can inform the committee that I am here to talk about Part 10, Expenditure Restraint Act and Part 11, Public Sector Equitable Compensation Act.
The Chair: Shall we try the process with you first?
Ms. Laurendeau: As you wish.
The Chair: Parts 10 and 11.
Ms. Laurendeau: That is correct.
Senator Nancy Ruth: What page is it on?
Ms. Laurendeau: Part 10 starts at page 335 of the bill and Part 11 starts at page 362.
The first is the expenditure restraint act and the second is the public service equitable compensation act.
The Chair: Part 10 deals with the expenditure restraint act, which is a new piece of legislation?
Ms. Laurendeau: Yes, it is a piece of legislation that basically provides for wage restraint on Government of Canada expenditures for a five-year period. That is Part 10.
Part 11 is the public service equitable compensation act, which is a stand alone piece of legislation that will amend the Human Rights Act.
The Chair: Take us to Part 10.
Ms. Laurendeau: Part 10, the expenditure restraint act, applies to employees, both unionized and non-unionized, of the broad federal public administration. This includes the core public administration, separate agencies, some appropriation-dependent crown corporations, the Senate, the House of Commons, GICs, RCMP and the military. It basically provides for a cap on wage increases for a period covering five years — two years into the future, three years including the current one going backwards — but only for a limited number of people.
The level of restraint for 2006-07 is 2.5 per cent. For 2007-08, it is 2.3 per cent. The three other years are 1.5 per cent. The purpose was to provide predictability in the growth of the wage bill for the federal government at large.
Imposing those caps provides for the maintenance of collective bargaining for the unionized groups during the period of restraint.
The Chair: Other than wages presumably.
Ms. Laurendeau: Of course, other than wages. The right to strike remains accessible, which was a little unclear at the outset. However, the legislation is clear; the right to strike remains accessible for the parts of the collective agreements that may be bargained.
Arbitrators and public interest commissions under the Public Service Staff Relations Act are bound by the legislation. They have to ensure they stay within the expenditure parameters. Other union-management activities such as the National Joint Council are also maintained. Not all activities of union-management discussions are affected by this. The National Joint Council remains active and unaffected by the legislation.
The restraint touches all aspects of compensation. In other words, there are specific prohibitions in the act about doing indirectly what is not allowed to be done directly. Any alternatives that could translate into increases beyond and above the 1.5 per cent, such as introducing allowances or restructuring pay rates, are prohibited.
In a nutshell, those are the key futures of Part 10. I am ready to answer questions.
The Chair: As a result of this legislation being passed, would Part 10 create a new piece of legislation entitled Expenditure Restraint Act?
Ms. Laurendeau: That is correct. It covers the years I mentioned, and runs until fiscal year 2010-11. Unlike Part 11, which I will get to later, which is stand-alone legislation that will survive this period of time.
The Chair: We will get to Part 11 in a moment. However, a number of senators may wish to ask questions on the subject matter of Part 10.
Ms. Laurendeau: That would be great.
The Chair: If a senator has indicated an intention to ask questions, but not on Part 10, they will be passed.
Senator Ringuette: I have a few questions in regards to this. I know that for quite a few years, there was a situation of trying to amalgamate certain job descriptions to certain scales. I know it is an ongoing process, unfortunately. However, at the end of this process, does this legislation mean that the new amalgamated job descriptions for the public service employees will be affected?
Ms. Laurendeau: Are you referring to classification reform? As a direct effect of this legislation, the broad exercise of classification reform is not affected, except for some of the exceptions provided for that "operationalize" classification reforms that were already on the way. I will be a little more specific.
If you look at the exceptions, we had to introduce new pay rates for a new group. Unfortunately, I cannot point you to the exact article but I will in a minute. That was the border guards at the border agencies. You will see that, for that specific group, you have an element of "operationalization" of a classification reform. The ones that were ready or needed to be provided for are provided for in this legislation. However, there will be more in the future which are not covered by this legislation. In other words, the legislation does not bring work on classification reform to a halt but it "operationalizes" the ones ready at this point in time.
Senator Ringuette: Does it restrain the wage increase that could occur by the process?
Ms. Laurendeau: For the period up to 2010-11 but it does not prevent any classification work from being done during the restraint period.
Senator Ringuette: We are talking about unionized employees having to submit via legislation to wage restraint. What are the other, non-unionized groups, of public servants who are not subject to the wage restraint legislation before us?
Ms. Laurendeau: I would say that it is the other way around. The act applies to both unionized and non-unionized workforces that are operating in the core public administration, in separate agencies and in the Crown corporations listed in the annex. It also covers the RCMP, the military, governor in council (GIC) appointees who are non-unionized, the Senate and the House of Commons. You have both populations. A total of about 380,000 people are captured by this legislation, both on the unionized and non-unionized fronts.
Senator Ringuette: Would that include directors, assistant deputy ministers and so forth?
Ms. Laurendeau: Yes, it does.
Senator Ringuette: Would that also include the bonus package program for those groups? Is the bonus program under the restraint or has it been totally removed?
Ms. Laurendeau: It has not been removed. The legislation specifically provides that any existing program, rates of pay or allowances remain as is. Rates of pay can be increased only by the percentage that I described earlier.
To answer your question, the merit pay system for the senior cadre remains as is but is not being improved by this legislation. In fact, it is kept at status quo, except for the rates of pay, which can be increased by whatever the percentage set under the restraint.
Senator Ringuette: If the government really wants to impose wage restraint, why is the bonus system for the assistant deputy minister still kept in there?
It is part of the income of these individuals. I find it very hard that, at one end of spectrum of the hierarchy of the public service, the not-too-bad bonus system is kept, while your employees at the lower end of the income scale within the public service are subject to wage restraint.
Ms. Laurendeau: Perhaps I should clarify. I do not want to get overly technical but one thing needs to be understood. Let us put aside performance pay for senior cadre for a minute. I will come back to it. The bulk of the people who are covered by this legislation are still governed by the progression in their rates of pay on an annual basis. The bulk of the unionized employees have increments every year. In other words, you enter the public service at a certain level, usually corresponding to the minimum, and, on a yearly basis, receive an incremental raise until you get to the maximum. For the bulk of the workforce, that is the way you progress through your pay rates. That is unaffected by the legislation.
The amount by which that pay grid can be increased by is affected. The pay grid could be negotiated at pretty much anything from zero to something higher. That increase in the pay grid is capped at the amounts I referred to but the progression within the pay grid remains.
In parallel, if you look at the senior cadre, the way to progress through your pay grid is through performance pay and performance management. So the senior cadre are treated the same way as the unionized people on increment,. The progression system is not affected by the legislation just as it is not for the people who are on increments. However, the increase in their pay grid is limited by the percentage figure, depending on the years.
Senator Ringuette: As far as I know, there is also a pay grid for assistant deputy ministers, depending what department they are at, what their level of seniority is and so forth. Are you confirming to me that there is, indeed, a different treatment between the people at the higher end of the public service hierarchy and people at the lower end?
Ms. Laurendeau: I do not think I am confirming that. I am saying the two have different systems of progression and the two types of employees keep their systems of progression. The only thing that is limited is the economic increase that may be applied on those pay systems.
Senator Eggleton: I would like to follow that through. Those who are on the progression scale who are entitled to increments will still be entitled to them, plus they could get the 1.5 per cent as the inflationary increase.
Ms. Laurendeau: Exactly.
Senator Eggleton: Those who are in the lower wage categories are only receiving the 1.5 per cent.
Ms. Laurendeau: No, this is not the case. The people who are on an increment system primarily tend to be the bulk. There is performance pay for a very limited number of people within the public service, which is primarily the senior cadre or the highest level in some professional groups and in some excluded groups.
If I was to follow your logic, the bulk of the people who are low, middle and a certain element of the higher paid that are on an increment system remain untouched for the progression.
Senator Eggleton: They still get more money in the progression.
Ms. Laurendeau: Yes.
Senator Eggleton: They do so by going up the steps.
Ms. Laurendeau: Yes.
Senator Eggleton: That is compared to the others who are held at the 1.5 per cent.
Ms. Laurendeau: No, everyone can get their progression, from the CR-1s up.
Senator Eggleton: However, if they are at the top of the range, that is it.
Ms. Laurendeau: Yes, that applies to everyone in any group, lower or higher paid.
Senator Eggleton: With regards to reclassifications, are there any rules that will be applied there to prevent abuse of reclassifications to get around the 1.5 per cent?
Ms. Laurendeau: You have a very long memory, senator, if I may say.
Senator Eggleton: I used to be the President of the Treasury Board.
Ms. Laurendeau: There are various mechanisms by which we can contain the wage envelope of the federal government. Many mechanisms can be used, such as a freeze of classification, staffing or hiring — all kinds of freezes. The one chosen in the legislation is limited to economic increases to the global pay envelope, which is the mechanism that is described there.
Any other measures that may have been considered possible are not captured by this particular legislation. The normal rules apply; that is what I am trying to say.
Senator Eggleton: Keep a good eye on it.
I want to understand how Part 11 relates to Part 10.
The Chair: We will get to Part 11 shortly.
Senator Eggleton: There is a relationship between the two of them. Do you not want me to ask it now?
The Chair: No; there are a number of people interested in Part 10. Then we will get to Part 11. We will have the introduction and then questions, one of which could be how does that relate to Part 10 that we just looked at.
Senator Mitchell: I am particularly interested in Part 11, but I have a couple of questions on Part 10. In the briefing that we received from the department, it says that Part 10 sets out rules governing economic increases, the rates of pay of unionized employees, et cetera. It goes on to say that "it also continues certain other terms and conditions at their current levels," which would mean those could not be improved or changed under the collective bargaining process, it would seem to me. What would those be?
Ms. Laurendeau: Those would be the ones that have monetary implications, such as increasing an existing allowance or introducing a new allowance, et cetera. Any other working conditions that do not have monetary implications would remain subject to collective bargaining.
Senator Mitchell: You could not change pensions, for example?
Ms. Laurendeau: Definitely not. Pensions are governed by legislation, and this legislation does not touch upon that particular legislation. The entire pension regime remains untouched.
Senator Mitchell: When you say allowances, could you give me an example — for instance, per diem for travel?
Ms. Laurendeau: That would not be considered an allowance; it would be considered a reimbursement for the cost of doing business. Allowances would be things like market allowance or maybe diving allowance for divers. We have 265 allowances of all kinds in the public service that are job related. You do a particular duty and you get an allowance for it. Those would remain as is.
Senator Mitchell: A market allowance might be extra money you get because you live somewhere where it is more expensive to live, is that right?
Ms. Laurendeau: No. Those would be reimbursement policies for the cost of living. The market allowance would be if we have a particular recruitment retention problem for pharmacists, for example. In the armed forces we had a particularly acute problem with the retention of pharmacists. So beyond the normal pay of a military rank for a pharmacist, we have market-driven allowances. Those remain, but they are not increased in any way.
Senator Mitchell: If we had more trouble getting doctors for Afghanistan and we thought we might need to augment the market allowance, this bill would say no, you cannot do it?
Ms. Laurendeau: For the next two years, that is correct.
Senator Mitchell: We only have two years left in Afghanistan. I wonder if anyone thought of that.
Ms. Laurendeau: We certainly look at all aspects of compensation when we devise the mechanism by which we could contain the problem, and we assess the risk associated with all elements of compensation. It was determined that this provides the best combination of a fair, least intrusive and most efficient way to achieve the cost containment that was the objective.
Senator Mitchell: It would not be fair to soldiers who were in Afghanistan if we could not get more doctors. We should get the minister back, because the point was made by military senior staff we had at the Standing Senate Committee on National Security and Defence that they were trying to attract pilots who are now being let go by airlines, and that is subject to some premiums of pay and market adjustments. The market is adjusting very quickly and perhaps we should be adjusting those, but that will not be possible.
Ms. Laurendeau: I hear what you are saying, senator, but at the same time, the existing pay schemes, particularly for the military, are regularly updated. We are not talking about old market adjustment premiums. They are fairly significant and they are adjusted with the economic increase on the base pay. This is a bit of a ripple effect on them.
Senator Mitchell: We have just had a minister say no one can predict the future; no one can know what will happen. No one knew, although many were telling him, that there would be a recession. Does anyone know for certain we may not have to augment market adjustments in order to get doctors to go to Afghanistan? It is probably a question I need to ask the minister. Hopefully, we will have him back so I can.
The right to strike is not affected by this bill, but it is not protected in this bill either. It does not say the government will not change the right to strike for two years under the restraint act, for example.
Ms. Laurendeau: It does say the normal processes under the existing legislation of the Public Service Staff Relations Act or the Canada Labour Code, depending on the population, remain untouched. It prescribes the level of increases and caps them at the levels that are there; but all the existing processes under the Public Service Staff Relations Act remain untouched. The right to strike, the right to choose between arbitration and strike remain untouched.
Senator Mitchell: However, they were prepared to change the right to strike in their fall fiscal update.
Ms. Laurendeau: I can only speak about the bill before you. I will not speculate on what could have been done or not done.
[Translation]
The Chair: I now give the floor to the senator from the Laurentians, Senator Rivard.
Senator Rivard: Thank you, Mr. Chair. Senator Mitchell just asked precisely the question I had wanted to put to Ms. Laurendeau. You began your statement by talking about four increases. You said that the right to strike would be maintained. It is a good idea to want to impose restraint, but if public servants refuse, they are free to strike, and arbitration is also a possibility.
Ms. Laurendeau: Absolutely.
Senator Rivard: Forgive me for asking the question.
Ms. Laurendeau: I am very happy to hear it in French.
The Chair: We have interpretation.
[English]
Senator Di Nino: I want to go back to the questions that have been asked so far, because I think they are important in a number of ways. In your opening comments, you said that the sums of the allowances are also frozen. Is that correct? That means that whatever the allowances may be will not increase by 2.5 per cent or 1.5 per cent or whatever?
Ms. Laurendeau: That is correct.
Senator Di Nino: They have been capped, frozen, at the maximum that exists today.
Ms. Laurendeau: Yes, at the level they were when the legislation was introduced.
Senator Di Nino: I think that is a good clarification.
On the question that Senator Eggleton asked, obviously, all of this is subject to some sort of an audit or control. Can you describe how that would happen to ensure that abuses do not occur? Is there an audit procedure?
Ms. Laurendeau: I do not want to leave the committee with the impression that there is no control over what we call "classification creep" or inappropriate use of staffing actions. I guess that is where you are going with your questions.
These things are dealt with through delegation to deputy ministers in every department. I am referring specifically to the promotion and classification systems. There are policies that govern how these things are supposed to be done, and there is an audit framework that exists in every department. Each department is responsible to do its own audit to ensure those policies are properly applied.
If I left any impression that there is no control over those activities, there is, both through the policy system and through various audit and verification functions.
Senator Di Nino: Would the Auditor General play a role at some time in the future to ensure that those audits had been conducted and in an appropriate manner?
Ms. Laurendeau: I cannot speak on behalf of the agenda of the Auditor General but in theory, yes, any of these activities can be verified by the Auditor General. I do not know specifically whether it is in the hopper that these will be reviewed in the short term.
Senator Di Nino: I believe she has the authority to do that.
Ms. Laurendeau: She does, definitely.
Senator Di Nino: The other question raised was that the future, as it has been said, cannot be predicted. In effect, if the government needed to change some of these rules, they would have to go back to Parliament for authority. Would this not be the way it would have to happen if we needed 15 pilots to go to Afghanistan and if we send more soldiers to Afghanistan, because I believe when you go to Afghanistan, you get an allowance.
Ms. Laurendeau: Yes, the allowance remains.
Senator Di Nino: The allowance remains but we are talking about bringing in additional people, which may require additional compensation. If the government needed to do that, would they not have the ability to do that by going to Parliament to ask for permission?
Ms. Laurendeau: You are quite correct. Anything done by legislation in this country, as I understand it, can be undone, changed, modified or adjusted by way of legislation. The fact that you have time-limited application for this act, this could be changed by another act of Parliament or any future budget, if there were need and if Parliament so decided.
Senator Di Nino: I have one clarification. We are talking about the expenditure of money for payment of compensation, which, if I understand you correctly, could be a combination of salary, allowances, one or the other, or mainly both or just one; is that correct?
Ms. Laurendeau: That is correct.
Senator Murray: Forgive me if you have already touched on this. I am looking at the expenditure restraint act and the limit in the rate of pay for federal public servants. Take us again, if it is again, through what happens to employees who belong to a union that concluded an agreement for 2.5 per cent per year in 2008-09 and going forward, for example. Are those increases rolled back now?
Ms. Laurendeau: Thank you for asking the question, because it is an important feature of the legislation. No, I have not touched upon that yet, so I will be happy to answer your questions.
Anything on a go-forward basis that would be beyond and above the percentages provided for by the legislation that already has been agreed upon would be brought back to the level of the restraint.
Senator Murray: That would be 1.5 per cent.
Ms. Laurendeau: Yes. Anything done for year 2006 or 2007 that has already been applied on the rates of pay and, therefore, put in the pockets of employees would not be clawed back. I do not know if you understand the distinction I am making.
Senator Murray: I understand. What about 2008-09 — the fiscal year that ends in a couple of weeks' time.
Ms. Laurendeau: It depends on when those increases are supposed to happen. If they happened after December 8, 2008, they would be captured by the legislation. If they were implemented earlier in the year, let us say by March 1, 2008, for example, they would remain because they would have been already implemented.
Senator Murray: What is the significance of December 8, pray tell?
Ms. Laurendeau: Back in November when the fall economic update was announced, we felt a strong duty to try to negotiate with as many bargaining agents as possible with the hope of reaching settlements rather than having to contain costs by using a more dramatic mechanism like a restraint bill. We concluded successfully many collective agreements around that period. There was a flurry of activity at that time with a fair number of bargaining units wanting to sit down to try to reach an agreement with us. People could see that the economy was going down. We had allowed the negotiation process to stretch toward the end of November and into the beginning of December.
We did not agree with everyone, that is for sure. We still had to go ahead for all the non-unionized workforce and the remaining unionized workforce with whom we could not agree, to finish the work of putting restraint on expenditures. We tried hard to agree to it and we wanted to be truthful to the ones who generally negotiated with us to reach a settlement by leaving those settlements untouched. However, we wanted to ensure that we remained fair to the others on a go-forward basis. Time was of the essence.
Senator Murray: I remember seeing the announcements but I cannot place them at pre-December 8 or post-December 8.
Ms. Laurendeau: They were in the week of November 15, if my memory serves me correctly.
Senator Murray: Were they? Some of them, at least one of them, I believe, came in after the November economic statement, but you will correct me if I am wrong. When I saw that it was with a huge union, one of the biggest, it caused me to wonder why they needed to impose restraint when they had already negotiated a suitable agreement.
Ms. Laurendeau: We issued a final offer around the week of November 15, and we reached a settlement with the Public Service Alliance of Canada on November 29. It was around that period. With four groups of the Public Service Alliance of Canada, we reached a significant settlement through negotiations. You are correct.
Senator Murray: Coming back to December 8, anything that was negotiated and concluded before December 8 is not touched by this restraint bracket. Is that correct?
Ms. Laurendeau: It would be touched if, for the future years, the economic increase was to be higher, but the bulk of the ones we negotiated in October and November are within the parameters. The agreement we reached with PSAC was within the parameters.
Senator Murray: That is 1.5 per cent per year.
Ms. Laurendeau: That is correct.
Senator Murray: In respect of any money that starts to go into the pockets after December 8, there will be a rollback or a clawback. Is that it?
Ms. Laurendeau: I would not call it a clawback because a clawback will take money from your pocket that you already had.
Senator Murray: They will prorate it and take it out of your hide going forward.
Ms. Laurendeau: Yes, forward only.
Senator Murray: Others may want to get into this discussion in more detail. I have reached the bottom of my competence in this particular field.
Is it sheer coincidence that December 8 was also the date on which the government was facing a confidence vote in the House, which they later postponed? Again, why did you pick December 8? Has it a religious connotation?
Ms. Laurendeau: No. It has no religious connotation. In fact, it was a pragmatic choice, and I do not remember the date of prorogation. I am not in on the secrets of the gods with respect to when these things happen. When we reached the end of November, the sheer capacity of the system to have negotiators on both union and employer side available forced us to think through cutting a little bit of slack in terms of time, to let the negotiation process finish its course. We felt strongly, quite independently of the rest of the activity, that from a pure bargaining process, it would have been unfair to pull the plug on negotiations and not allow them to finish when they were so close and the issue was capacity. People were negotiating almost day and night. Our most important bargaining agents had people with many bargaining units to deal with. The timing of each table was impossible.
Senator Murray: I suppose we all had an email from someone who is a member or a leader of a union, I cannot remember which. I noticed that they represented, among others, the employees of the National Gallery. He was saying that they negotiated 2.5 per cent and that now it would be taken back going forward. There is no point going into particular cases right now.
The point was made very specifically, in the November statement as I recall it, to the general effect that private-sector wage settlements were outpacing those in the public sector. It is hard to know what that means — that is, whether it is a snapshot on one day, whether they are talking about the federal public sector or the public sector generally, or what it is. I do not expect you to have that at your fingertips, but I would like to see some supporting evidence for that statement, some documentation about that, if you could obtain it at some point for us.
Ms. Laurendeau: I would be hard-pressed to know who said that.
Senator Murray: I'm pretty sure it is in the fall economic statement, which I do not have before me.
Ms. Laurendeau: I do not have it before me, either.
Senator Murray: I remember putting a line by it and intending to ask some questions about it if I had the chance. Now is my chance.
Ms. Laurendeau: I am sorry; I cannot help you.
Senator Murray: See if there is some documentation, if you will.
One more matter. I do not expect to get far with this, but I will see if you can tell us anything. One of the union leaders who was a witness, I think, at the House of Commons committee, said — not in respect to the new public sector equitable compensation act but in respect of this restraint act — that they are going right to court and that this will involve protracted litigation. The way he spoke, as I read it, he felt that he had quite a strong Charter case.
I am familiar, in a general way, with Supreme Court of Canada judgments going back to six and five under the Trudeau government. I think there was another one at the time that the Mulroney government brought in some measures.
Beyond telling us, as I am sure you will, that the government is confident in the constitutionality of its legislation, is there any other information that you can give us in a general way about this?
Ms. Laurendeau: You will understand, senator, that I will have to remain very general. One thing needs to be understood. A lot of effort was put into trying to ensure that the measures would be achieving the predictability of expenditure that was required, while ensuring that the legislation remained as unintrusive as possible. I think your colleague from Toronto raised the issue of other mechanisms that could be considered. All of those options were weighed in the choices made in this particular legislation.
We also made a huge effort, to which I just referred, to settle, around those parameters, with as many bargaining agents and units, through separate employers and through the core public administration as we could. The objective of ensuring that the expenditure was brought within certain parameters remained and needed to be supported by other measures.
That sounds a bit long, but I am trying to say that a big effort on the negotiation front was made, with a fair amount of understanding. As you said earlier, we had successfully agreed with one of our major unions to settle within the parameters of the fiscal objectives that are supported by this legislation. As for the rest, I would not want to speculate on the intentions of bargaining agent leaders or on future court challenges. They tend to be creative in many ways when it comes to that.
[Translation]
Senator Ringuette: How many million dollars does the bonus or merit pay program for the upper echelons of the public service amount to for the year 2007-08?
Ms. Laurendeau: I am not able to answer.
Senator Ringuette: Will you be able to obtain an answer for the Committee? I know that the last time we looked at the estimates, it was around $20 million. I would like you to confirm the amount for us.
Ms. Laurendeau: I would be pleased to confirm the amount for you. I would like to be clear as to the question. You would like to know the annual expenditure?
Senator Ringuette: The bonus plan for senior managers in the public service, the merit bonus.
Ms. Laurendeau: I have friends at the back who are taking note of the questions. I do not have the answer in my head, but we will undertake to provide you with an answer.
The Chair: As quickly as possible. We are under pressure here.
Ms. Laurendeau: I understand. I am as well.
Senator Ringuette: I have one final question on this section. Ms. Laurendeau, could you explain to Committee members how salary reductions for members of the public service of Canada will stimulate the Canadian economy?
Ms. Laurendeau: I do not think I am in a position to answer that question. My specialty is labour relations and pay. I am not an economist.
Senator Ringuette: That is part of the current government's economic stimulus package.
Ms. Laurendeau: At the same time, I would say, without wanting to speculate on areas that are outside my domain, that the government of Canada remains the largest employer in the country and that when the time comes to make decisions regarding increases that will be first and foremost paid by the taxpayer, there will be a decision to be made. I cannot tell you how public servants' salaries stimulate the economy. That is beyond my area of knowledge. I can tell you that there is an employer responsibility to make decisions that fit with the government's priorities.
Senator Ringuette: I would tell you that all of the economists in the country that I have had the opportunity to hear over the last six months have constantly repeated that the economy will regain a certain equilibrium once consumers renew their trust in the economy and begin to consume at a more normal pace.
If the employees of the country's largest employer have less income, how do you think they will be able to stimulate the economy? I am not saying this as a professional in your field, but, in essence, we are being handed this Bill as a series of measures aimed at stimulating the economy. And if this particular element is a measure aimed at stimulating the economy, I would like your department to provide Committee members with your analysis confirming or negating the economic stimulus it will produce.
The Chair: Are you able to respond?
Ms. Laurendeau: I am not in a position to answer that question, given that it pertains to fiscal policy rather than to a labour relations issue I can respond to.
The Chair: Could you ask the other departments to provide this information to the Committee?
Ms. Laurendeau: I am not in a position to tell you if we will be able to commit to providing an answer to that question. But we have certainly jotted down the question.
Senator Rivard: I had another question, but in the context of what Senator Ringuette has just discussed, we must remember that there are increases. This is not a wage freeze nor a wage reduction. We are contributing to the improvement of the quality of life of public servants who will have more money to invest in the economy.
Ms. Laurendeau: And there are many similar workers out there who do not have a job at the present time. You are right, we are talking about a 350,000 member labour force that will benefit from an overall increase of 6.8 per cent. That has some strength to it.
Senator Rivard: Does the Expenditure Restraint Act, as far as salaries go, apply to Crown corporations such as Canada Post?
Ms. Laurendeau: It does not apply to Crown corporations that are completely dependent upon public funding. I would therefore refer you to the bill's schedule. Those corporations that earn income, for example the Canada Post Corporation, are not covered by this legislation. If you allow me time to find the page, the list mostly entails museums, agencies and Crown corporations that are "fully appropriation dependant." It does not cover the Canada Post Corporation.
Senator Rivard: Thank you.
Senator Chaput: Mr. Chair, thank you. My questions will be quite brief. Ms. Laurendeau, you have just stated that the public service is the largest employer in Canada. I am wondering what the savings will be, countrywide, with the numbers you have provided. If you could provide an answer on that, and then, with regard to these countrywide savings, what is the percentage of women in the public service? Who is not covered by this legislation? Who is under it and who is not?
Ms. Laurendeau: There are three parts to your question. I am not sure I fully understand the first one. When you use the term "économie" in French, by that you mean "the savings" and not the economy.
Senator Chaput: Yes.
Ms. Laurendeau: The third part pertains to the representation of women in the public service.
Senator Chaput: Yes, precisely, and with regard to this representation of women, do you have an idea of the percentage of people who have contributed the most to these "savings", as you say? Do we have an idea of that? Further, you mentioned that the Canada Post Corporation is not covered. Are there others? How many are there, and which ones are they?
Ms. Laurendeau: I will be able to provide an answer to this question, but it will take a few days. I would like to give you a clear answer. I do not want to speculate and give you simple approximations. We have data with regard to the prevalence of women in the public service. But I do not have the numbers for the armed forces. To be fair, I should give you the overall numbers.
As far as the savings are concerned, it all depends on the expenditures that had been planned. It is therefore difficult to quantify the savings compared with the expenditures that had been planned at a moment in time. That being said, what I would say is that each percentage point of economic increase for the group of persons covered by this legislation amounts to an expenditure of approximately $330 million. This percentage of increase corresponds to an expenditure of some $330 million. Therefore, every time we save 1 per cent, we are saving $330 million of public monies. I would hesitate to call that a savings.
We cannot speculate on what an economic increase would have been. We have taken measures to limit increases to the expenditure that is there.
Senator Chaput: These measures were not taken with a view to save money.
Ms. Laurendeau: Rather with a view to predict expenditure levels. With a view to having an expenditure line item for an increase in the payroll for all of these people such that it will allow us to face the various challenges in order to ensure some form of predictability, if you will.
[English]
The Chair: Thank you, Ms. Laurendeau. It has been pointed out to me that in the November 2008 economic and fiscal statement, the proposed initiatives would lower federal expenditures by $0.6 billion in 2008-09, $0.6 billion in 2009-10, $0.9 billion in 2010-11 and $1 billion for the next two years following that, each year. That is in the economic statement.
Ms. Laurendeau: I think that should be answered by my colleagues in Finance. It definitely includes some of the savings of that particular legislation, but there may be other measures in this bill that are covered by that as well.
The Chair: Thank you. I thought we had finished with this round and were ready to go to Part 11, but Senator Nancy Ruth has one question with respect to Part 10 before we move on.
Senator Nancy Ruth: When the decision was made to save a certain amount of dollars, whether it was the $330 million or whatever, was there any discussion around how to do it rather than just as a blanket? I am following on Senator Chaput's question. Was there a discussion that those say earning under $50,000 would get 2 per cent, those earning over $100,000 would get half a per cent and that kind of thing, so there was a ratio and more of a flattening to the pain?
Ms. Laurendeau: There were definitely assessments of various options to reach the expenditure target as it pertained to the growth of the compensation and flow. Various options were considered, but in terms of going by threshold and things like that, no, that was not. Things that were considered as options would have been reduction of the size of the workforce, which would have entailed layoffs, or things like freezing increments or progressions in pay rates, which was used in previous times of hardship and had proven to be quite hard to accept for the workforce. It was determined that this particular package was the one that was the most coherent, the least intrusive and would achieve the purpose.
The Chair: That went very nicely, Ms. Laurendeau, and that is the manner we would like to follow with Part 11. Could you now give us a brief overview of what is in Part 11 before we go to questions? I already have a list even before your overview.
Ms. Laurendeau: I thought we would go to another part first so I could get a break, but I guess not.
The Chair: You did so well on the first one.
Ms. Laurendeau: This one is a bit more meaty.
Basically, this particular piece of legislation is there to achieve the purposes that are provided for in its own preamble, which you can find on page 362. It is there to bring in something that pay equity experts say is the right way to go when it comes to pay equity, which is to have a pro-active regime to deal with equal pay for work of equal value. We had years of experience with the current system, which is provided for by section 11 of the Human Rights Act. Section 11 provides that an employer has the sole obligation to ensure that equal pay for work of equal value is achieved, and that it is a discriminatory practice to pay men and women differently for performing work of equal value. This statement of obligation that Section 11 of the current Human Rights Act provides for is, by the way, an international obligation that Canada has undertaken.
That being said, the system we have in place at the federal level is based on a complaints system. In other words, if you feel as an individual or as a group that an employer has not achieved equal pay for work of equal value, then you can file a complaint. There is investigation, there is protracted litigation, there is analysis on both sides, often supported by very wealthy unions, and you get into 15 years of litigation. At the end of the day, you have a result that presumably resolves whatever discrimination may have been found.
The problems with a complaint-based system are two. It is an extremely long process to actually get your results. Experience in the public service has ranged from an average of five years of litigation up to 15 years and, in the case of Canada Post, they were at it for 21 years. Results are hard to achieve. It also provides a very antagonistic platform for actually achieving equal pay for work of equal value.
Various provinces have experimented with what we call a pro-active system, which is basically to achieve pay equity as we go along as a positive obligation as opposed to being something that you have to assert as a matter of right. It is more conducive to proper labour relations. It actually provides results more quickly and is less confrontational.
This legislation is meant to move from a complaint-based system to a pro-active system. There are many ways to make a system pro-active. The one put forward in this legislation is to marry it with the decision making process related to setting wages whatever that process may be in a particular circumstance.
Let me explain what that means in real life. In the case of a unionized environment, when you periodically reflect on what wages should be, you factor in pay equity right away, not down the road when you realize you have done it wrong. An obligation is put on the players. If it is an employer alone, the employer has the obligation to ensure that when wages are set, issues of equitable compensation are considered. If wages are set through collective bargaining, when you sit down at the table, both parties have the obligation to come prepared to address issues of equal pay for work of equal value.
That is what this legislation does in a broad-brush summary. The preamble also reaffirms the obligation that women in the public sector of Canada should receive equal pay for work of equal value, which is in line with our international obligations. There is no doubt about that. It also affirms that it must be done in a pro-active way, not reacting down the road when you realize has been done incorrectly. There is also recognition that the public sector of Canada operates in a market-driven economy. When you determine the value of work, you must take into account market considerations.
The rest of the legislation outlines the decision making process to ensure that you consider issues of equitable compensation to achieve equal pay for work of equal value at the time you set wages. The legislation ensures that all elements of compensation, not only wages, are covered by this pro-active system. Some media coverage was only about the title "equitable compensation." It creates obligations to periodically reassess and demonstrate in a transparent way whether you have achieved equal pay for work of equal value.
In terms of mechanics, you go through your bargaining process, you agree on wages, and you also must — the legislation is specific on this — be transparent in describing, with your union partners or as a non-union employer, how you have achieved equal pay for work of equal value. When the collective agreement goes to the members in the democratic process of ratification, it includes this equitable compensation report. Therefore, members can vote on whether they agree that the parties at the table have achieved equal pay for work of equal value.
That is what this legislation does. It is very technical. I am ready to answer questions. Given the level of interest, I may have to make commitments to come back with responses because I may not be able to answer all questions.
The Chair: You have given a good overview. We appreciate that. Honourable senators will find that particular piece of legislation, Part 11, the public sector equitable compensation act in Bill C-10 from pages 362 to 390. It creates another piece of stand alone legislation. One of the questions Senator Eggleton of Toronto had earlier was the relationship between this legislation and the other piece of legislation for the finite period of time. I will let him ask that himself.
Senator Eggleton: You got most of it out for me. There is a 1.5 per cent restriction over three fiscal years. From the way you were presenting Part 11, I am unclear. Is it over and above that 1.5 per cent?
Ms. Laurendeau: No. Is that your question?
Senator Eggleton: Yes.
Ms. Laurendeau: Let me sequence this for you. That is one of the questions I tried to answer yesterday and, obviously, I did not do a good job.
The expenditure restraint act puts a restraint on wage increases up to 2010-11. It means that collective agreements will be locked in until that time. Do you follow me up to that point?
Senator Eggleton: Yes.
Ms. Laurendeau: The equitable compensation act is a change. It requires preparation on both sides — unions and employers. There is a series of regulations that we think will take a year to prepare. If you map out the time that we will be under restraint and have the parties and the regulation ready, they align near the end of 2011. At the next round of collective bargaining, those obligations will have to be married. At the next major exercise of collective bargaining wage setting, the level of preparedness for both the employer and the union is expected to be where it should be to comply with this new pro-active legislation.
Senator Eggleton: You are saying there will be no pay equity payments within the three-year restraint. It is a preparation period.
Ms. Laurendeau: Although the current complaint-based regime will remain in place during that period.
Senator Eggleton: You are speaking of the Human Rights Act system.
Ms. Laurendeau: Yes. The complaint-based system still remains. If there are any preoccupations about those years, you will have access to the existing system.
Senator Eggleton: The government is saying it does not think the present system works for people that have pay equity cases. Therefore it wants to change the system, but it will not do it in this three-year period of time. You can do preparatory work, but it will not provide any payouts. If you get any payouts, it will be via the old system.
Ms. Laurendeau: In part. At the same time, the obligations will come into force when the legislation comes into force. There is preparatory work for the next round of collective bargaining. It is normally when you sit down and review the wages that issues are identified. Underpinning this legislation is that every time you sit down and review the wages, you are supposed to pay attention to equal pay for work of equal value.
Senator Eggleton: First of all, it will only apply from 2011-12 forward, when collective bargaining is open again. You are supposed to pay attention to it, but from my knowledge of collective bargaining, unions will negotiate for the things that apply to the widest number of members. Many things involving specific groups of people — whether they are women, or some other specialized occupation or whatever is out of whack — tend to fall off the table when it comes right down to it because everyone wants to get the maximum they can. They will be coming out of a period of restraint in this particular case and will want get as much as they possibly can across the board. Why would they have any incentive to settle pay equity cases?
Ms. Laurendeau: They will because, unlike the current system, they will have the obligation to do it.
Senator Eggleton: Do the unions have that obligation?
Ms. Laurendeau: They will under that legislation. It is a joint obligation of employer and bargaining agent to address equal pay for work of equal value through the bargaining process.
That is precisely the flaw that this legislation is correcting from the existing system; namely, where you can sit down at the bargaining table, not pay attention to it and then file a complaint down the road about it.
Senator Eggleton: You mean you are tying the hands of union with respect to its collective bargaining. You are saying you have this complaint about pay equity and you must deal with it. I am saying the general tendency is to appeal to the largest number of members in the bargaining unit and many of these things fall off the table.
However, you are saying the union will not be allowed to do that. The union must say "Yes, you have to give us that and that means you will give us," et cetera. It is the general bargaining of things: You look at overall compensation package. They always do. That means other people will get less.
Ms. Laurendeau: That means that a real, hard look will have to be taken at the issue of equal pay for work of equal value within the process.
Senator Eggleton: I do not know if "hard look at it" means "you must implement it."
Ms. Laurendeau: You must address it.
Senator Eggleton: You must address it, yeah, I do not know that that is —
Senator Di Nino: You cannot ignore it.
Senator Eggleton: I agree with you but, at the end of day, you can say, "However, in the best interests of all of our members, we think it is best to put it aside for this year."
Ms. Laurendeau: However, you will have to have your report on equitable compensation on how you have addressed it. You cannot just do away with it.
I do not want to tie up too much time but, if I may, it is important to understand that, under the current Human Rights Act, when it comes any other working condition except wages, you have that joint obligation. We are, in fact, doing very well about women's issues and any other working conditions precisely because we can have difficult but intelligent conversations over those issues because two parties are bound to address them together.
I do not want to sound too passionate about this — though I am — but the issue with pay is that the obligation on the employer only. Bringing the issue to the bargaining table does exactly what you are describing: "I do not want to talk about this; I just do not want to talk about this." There is nothing that says that you have to.
This legislation says you have to sit down and, when you are doing wage setting, you have to jointly do analysis and ask if you are having a negative impact on the female part of your bargaining unit. If you do, you will have to choose another route, which is exactly the same thing we were facing a few years ago with male-dominated groups regarding other working conditions such as how you deal with maternity leave or how you deal with women who are pregnant in the workplace. However, the fact that the current Human Rights Act made it a discriminatory practice to agree jointly to a term and condition of employment that was discriminatory brought some rigour to the discussion about it. There was no shying away from addressing it. That is the underpinning of this legislation.
Senator Eggleton: All right, they are forced to pay attention to it, as you say. However, at the end of the day, if there is a disagreement between the people who run the union and a unit — which may be dominated by women — then it gets shoved to the back. Since it would be removed from the Human Rights Act, what appeal does that unit or those women have?
Ms. Laurendeau: Thank you for asking the question. That is the next step. The bargaining process itself has its own series of oversight through the Public Service Staff Relations Board, either through conciliation or through arbitration.
That oversight body, which is a specialized body in bargaining and wage-setting issues, will also have the obligation to ensure that this legislation is obeyed. Therefore, yes, you could have an impasse over that issue — granted, that is the nature of negotiations — but then all the players will be bound to ensure that, at the end of the day, at the tail-end of this process, this equal pay for work of equal value assessment is done and addressed.
It will be everyone's obligation as opposed to only being on the shoulders of one participant, the employer, which is the current system.
Senator Nancy Ruth: I wanted to ask you to explain more about the appeal process but you started your talk this afternoon by saying that pay equity experts had come up with models. Could you tell us about who they were and where this model came from? You talked about the three provinces but who are we talking about?
Ms. Laurendeau: You mean who has a proactive model?
Senator Nancy Ruth: I do not want to know the names of the provinces. You said "pay equity experts" and I want to know who they are.
Ms. Laurendeau: Generally speaking, you had at the federal level the Bilson Task Force that had a proactive model as one of its recommendations in 2004. Having a proactive model going forward was their recommendation. That is certainly one group of experts that spent a fair amount of time looking at that issue.
Senator Nancy Ruth: Did that report come out five years ago?
Ms. Laurendeau: Yes, it came out in 2004.
Senator Nancy Ruth: What is taking so long to get it into legislation, if that is the way you wanted to go?
Ms. Laurendeau: There were many recommendations and these types of things need to be assessed properly. Therefore, the time was appropriate now.
Senator Nancy Ruth: With respect to the appeal process, one of the concerns I have heard about is a fear that the jurisprudence that sits in the Human Rights Commissions will not get transferred over to the appeal boards. Is that correct?
Ms. Laurendeau: I am not sure I understand your question.
Senator Nancy Ruth: There is all the case law that has been built up over the years of people taking appeals.
Ms. Laurendeau: The ones that will be in the process, yes.
Senator Nancy Ruth: Also, the ones who may claim in the next three years. All of that is based on previous appeals. It is part of the basis of the legal theory around how you assess it. Will that knowledge be transferred over to the appeal board?
Ms. Laurendeau: You mean in terms of whether or not people will be transferred?
Senator Nancy Ruth: No, I meant in terms of case law.
Ms. Laurendeau: The case law is all there for sure. You are referring to the capacity to actually do equitable compensation assessments. The body of work will remain there. There are some definition changes that are being introduced in this legislation to clarify some of the things that were experienced through that case law. There is some clarification on there such as how we define value or how we define groups of employees; things that were under the existing regulations that are rolled in and clarified in the new piece of legislation.
Senator Nancy Ruth: Could you give us an example of that?
Ms. Laurendeau: A specific example of that would be definition of job class. Earlier I referred to the definition of compensation. I am at page 363 in the definitions. The definition of compensation is one of the areas of clarification, where there will be no debate as to what it includes. We made it very clear that it was all-encompassing. The female predominance is something that is defined at the bottom of page —
Senator Nancy Ruth: It is 70 per cent.
Ms. Laurendeau: Yes, it is 70 per cent, as in Manitoba. Job class is also defined specifically and not left to the regulation. Those are things that are already in existence but are rolled in and clarified in this legislation.
Senator Nancy Ruth: I was thinking of asking you why you are so enthusiastic but you said it. One could say you worked on this five or 10 years or something.
Ms. Laurendeau: I have worked on it for twelve years.
Senator Nancy Ruth: You as a woman in a fairly senior position are quite convinced for the women in Canada that this is the way to go.
Ms. Laurendeau: I am not here to give opinions but I can tell you that, since 1996, I have spent a lot of time thinking about these issues. As you said, I am a woman, I am a professional and I am a member of this public service.
I believe there were some fundamental flaws in the current system that did not necessarily give the right focus. We needed to have something fairly specific to operate the cultural change that is needed to actually ensure that equal pay for work of equal value was at the heart of wage-setting practices. I am not supposed to give opinion. That is policy.
Senator Nancy Ruth: Let me clarify once more; the obligation is entirely on the union's part to get pay equity.
Ms. Laurendeau: No.
Senator Nancy Ruth: What is the employer's responsibility?
Ms. Laurendeau: It is a joint obligation of the employer and the bargaining agent in a unionized setting; and it is the sole obligation of the employer when the employer does not face a unionized workforce.
In the case of the public service, for the portion that is unionized, it will be a joint obligation in the wage setting practices through collective bargaining. The employer will remain the sole bearer of having to achieve it, but the Crown will have to be transparent on how it does it and it will have to do it periodically.
Senator Nancy Ruth: If we are talking about a non-unionized workplace, what outside tests, what other jurisdictions — either in the United States or Canada or anywhere around the world — will be used to test what we are doing here in Canada?
Ms. Laurendeau: I do not think I can speculate, because the analysis will have to be done at the same time that wages are set. However, the existing body of case law will be a guide, as you pointed out. It will have to be.
In the case of the population covered by this legislation, we are talking about the Armed Forces and the RCMP, primarily. Those are the biggest chunk of population that are non-unionized. They will have to do their assessment — their pay equity analysis — and be transparent on how they have addressed any pay equity issues they may have found.
Employees, just like in the unionized world, will have the right to file a complaint if they do not like how this has been addressed through the transparent report. It is about ensuring that the process is transparent and has the right focus every time that we sit down and review wages.
Senator Nancy Ruth: I am looking for the intellectual context of what is the "right focus." How do you test that word, "right"?
Ms. Laurendeau: There will be a job evaluation assessment done. That is provided for by the legislation.
Senator Nancy Ruth: Is that done by Treasury Board?
Ms. Laurendeau: It will be done by whoever performs the role of the employer. In the case of the core public administration, Treasury Board will do it for the non-unionized portion; but it will do it jointly with the union for the unionized portion.
In the case of the Armed Forces, the Armed Forces as the employer will have to do it, with the guidance of Treasury Board and the regulations that will be put in place to assist.
Senator Nancy Ruth: As you know, the Auditor General is doing a gender-based analysis of some departments — I gather, including yours. That is partly why I asked the question in the last section about whether a staggered wage-increase model had been thought of. Since it had not, it makes me wonder what kind of GBA analysis was done, or if one was done.
Ms. Laurendeau: On what?
Senator Nancy Ruth: Part 10.
Ms. Laurendeau: On Part 10, the GBA analysis?
Senator Nancy Ruth: Yes, because you have a flat rate of 1.5 per cent. Those of us who earn our salaries also get 1.5 per cent, but it is not the same for someone who cleans my office.
Ms. Laurendeau: One thing to take into consideration is that at least in the core public administration, we are talking about a fairly high level of women. By treating everyone the same, we were ensuring we were capturing everyone in the same way.
That being said, when we do wage setting normally, from the employer's side, we do run some analysis to ensure we do not have an adverse affect on any working conditions, including wages, for women in particular or other insular groups.
Senator Nancy Ruth: But this also applies to the Armed Forces and the RCMP.
Ms. Laurendeau: Equitable compensation does and so does restraint.
Senator Nancy Ruth: Which is not a particularly female-dominated force.
Ms. Laurendeau: That is correct.
Senator Nancy Ruth: My point is made.
The Chair: Honourable senators, time is running by, so I would ask you to keep your questions as succinct as possible.
[Translation]
Senator Ringuette: Ms. Laurendeau, you spoke with great enthusiasm about your proactive plan for pay equity. I was listening to you speak and you seemed to be very convinced about the process. I was wondering the following: if one is so convinced that the proactive system will be effective, then why revoke the legislation and the ability to file complaints? If one is so convinced that the system will be effective, then why remove a second solution at the disposal of women?
Ms. Laurendeau: I would say two things in answer to that question. First of all, we are not removing the ability to file complaints. The legislation allows for complaints and allows the administrative tribunal, the Labour Relations Board, to evaluation those complaints and also grants it the authority to intervene, if need be. We are maintaining a complaints mechanism; that is the first thing.
The second thing we are doing is adding to the complaint system all of the support of the "oversight mechanism" that is provided for in the collective bargaining process, once again through the Labour Relations Board. In other words, as I indicated to Senator Eggleton a little earlier, if there were indeed an impasse in collective bargaining and the parties were unable to agree on an equitable compensation matter, all of the existing mechanisms in the area of labour relations under the Labour Relations Act would be accessible to support the negotiation process, including mediation, conciliation, strike and, ultimately, the other means of conflict resolution, until a result were achieved.
Senator Ringuette: It is in cases where there is a joint obligation for both the employer and the union, but when you are dealing with an entity that is the employer.
Ms. Laurendeau: The ability to file a complaint remains; it is there for the individual. The employer, in a non-unionized workplace, sets the wage standards and will also be required to provide an equitable compensation report explaining how it assessed equitable compensation and how it identified the problems. Transparency will be there. This is completely inexistent at present.
There will be a transparent obligation, through a report, because there will have been no bargaining agent nor ratification process, to demonstrate, to state: when we set such and such a salary, here is the analysis to support it. Here is how we viewed the equitable compensation problems. This obligation remains for employers in a non-unionized context. But the obligation is also there for employers whose staff is unionized, but it is joint, because wage determination in a unionized workplace is a joint exercise under collective bargaining. In both cases, it is proactive, there is the ability to lodge a complaint, and there is mandatory reporting as to the assessment of pay equity issues.
Senator Ringuette: Who receives the reports?
Ms. Laurendeau: That will be set out in the regulations. The employer will be required to provide a public report. This requirement for non-unionized employers will be set out in the regulations.
[English]
It will be communicated to the employees.
The Chair: As a point of clarification, there is still a possibility for a complaint, as you have indicated.
Ms. Laurendeau: Indeed.
The Chair: However, once this act receives Royal Assent, the complaint goes to the Public Service Labour Relations Board and not to the Human Rights Commission.
Ms. Laurendeau: Yes.
The Chair: That is the essence of the difference, is it not?
Ms. Laurendeau: It is.
The Chair: I just wanted to clarify that. We understand there can still be a complaint.
Senator Mitchell: You said that you have been thinking about this for about five years; or rather, you have been thinking about it since 1995, but this report was five years ago. If it has been that long, why is it so urgent that it be included in a budget bill where it does not belong? Why is it so urgent that it be settled by the end of this month, after being jammed through with almost no opportunity for real public inquiry and for women's groups and others across this country to have an in-depth analysis? Why is that?
Ms. Laurendeau: I am not sure that I can adopt the preamble that is included with your questions; there are elements of it that I am not sure I can answer. However, it is clear, both in my mind and from a policy standpoint, that it is important that we get this policy right. It is important that we use the opportunity of having a hiatus to finish the work, that we put in place the regulation; and that we allow the parties to do the proper preparation while there is some certainty of what wages will be for the next 18 months or two years.
That is the limit of what I can say on that topic. I think that it may be long overdue.
Senator Mitchell: Yes, but certainly this could be done stand-alone. There are all kinds of things left out of this bill. The minister has argued that over the years we have paid $4 billion into pay equity payments and that was wasted money, as though paying people equally is wasted.
Do you have any awareness of how much money will be saved in the budget, as it were, to government expenditures by virtue of these changes? Will it save some money?
Ms. Laurendeau: The Equitable Compensation Act?
Senator Mitchell: This process.
Ms. Laurendeau: The point is not to not save money but to ensure that we will plan and address it as we go along. The intention is not to do away with the equitable compensation assessment but to provide the right level of compensation equally to men and women. The intention is to ensure that there is rigour in the system and that it is done on a regular basis, on a go-forward basis, as opposed to being done after 20 years of waiting through a protracted litigation process. The saving on legal fees, however, will be real.
Senator Mitchell: Was there ever any indication that you might actually shift from a Canadian human rights process to this employer responsibility idea? Did anyone have any idea of that before this bill came out two weeks ago? If so, then people have had two weeks to react to something that you have been working on since 1995 and the report came out in 2005. Why would you have to rush it so much?
Ms. Laurendeau: There are a couple of things here with which I take issue. I did not say — and I hope the committee did not think that I said it — that we have been working on this bill for 12 years. We have not. That would be a wrong depiction. I said that I have been involved with pay equity issues for 12 years.
Senator Mitchell: Did we get any fair warning, though?
Ms. Laurendeau: The report has been out since 2004. There have been comments both from the employer and the union side. The suggestions that collective bargaining could be a venue through which we could be proactive had been suggested by FETCO — the Federally Regulated Employers — Transportations and Communications — before the Bilson task force in 2003.
This idea is not new. This is the time that we are coming forward with this legislation.
Senator Mitchell: This seems to be a one-sided process. The employer has lots of money, I would assume. I hope these different employers have some expertise now, because they will have to evaluate whether there is equal pay for equal value. Will you give us a budget of funds that can do that? Is there a pool of expertise? If not, where will they find it?
The person who wants to make a complaint, usually a woman, will not have the assistance from her union because it will be fined $50,000. How can that be fair? As an interesting corollary, while the union cannot help a union worker, imagine how much worse it is for a non-unionized worker. Where would she turn for help? She would not have a union that would risk a $50,000 penalty to help her. Would the union be able to help her and not get fined $50,000? I do not believe it is fair, if it is so stacked against women.
I can start to add up other things that do not make it easier. Why have you increased the "predominantly women" designation from 50 per cent, 60 per cent to 70 per cent? That does not make it easier, it makes it harder. Why have you reduced the comparability of one group to another? That does not make it easier; that makes it harder. You isolate the RCMP completely. They have huge problems with the representation of women in those ranks. There are six women out of 75 positions in the top ranks in the RCMP.
Why do you continue to say that this will be better when in fact you limit it time and time again? It is very one-sided. It is limited in its applicability and, to emphasize this, women, who generally will not have a lot of money, get no help from their unions and their unions are penalized if they do help. I can hardly fathom that.
Ms. Laurendeau: Regarding the use of unions and wage-setting practices, we must remember that unions are democratic organizations. In fact, the International Labour Organisation is proposing that collective bargaining is an efficient venue to ensure equality on any working conditions, including wages. I have an article here that I would be happy to send to the chair of the committee. It makes an analysis of that. It says that the democratic process of unions, the grassroots movement of unions, has proven to be a very useful mechanism, through the democracy process of formulating requests to an employer, to safeguard equity.
That is one of the things that this legislation is echoing here. Once you accept that a partner that is the bargaining agent has a positive responsibility to bring those issues to the surface, and will do that, and you have the safeguards of the bargaining process and the ratification process and the oversight of an oversight body like the PSLRB, it would not be logical to allow one of the parties to support or file a complaint something that is jointly accountable to achieve.
That is why this new system follows the logic that if you are on the hook to bring those issues to the surface and resolve them, it would not be appropriate that you would have a right of complaint against them. That being said, there was a need to ensure that complaints were still possible. That is what is achieved through that legislation.
Senator Mitchell: It is disingenuous to suggest that there is an appeals process in which no person on earth could afford to appear in front of against an employer, a government that would have huge money to fight that back. By the way, if unions are so democratic, what if they vote to support one of their members in one of these processes? So much for democracy.
My final point concerns the definition of "equitable compensation." I do not understand, and, as you can tell, I am quite suspicious. Why must we change this definition? In fact, in your own notes, you use the words "equal pay for work of equal value," which excludes that idea of equal pay, which is different than equal pay for work of equal value. Does equitable pay just apply to equal work of equal value? Does it also apply to equal pay for equal work? If so, why not use those terms, for which there are reams of jurisprudence and precedents, and which would work absolutely perfectly, it would seem to me.
I fear that "equitable compensation" becomes yet another impediment for women who have a legitimate concern but who do not have the money to fight this. Can you imagine the lawyers that will be employed by the government to define "equitable compensation?" Can you imagine that? This cannot work and it will not work. It will be very disadvantageous to women and I look forward to changing the government so we can fix this.
Ms. Laurendeau: I do not know if I am supposed to answer that.
Senator Mitchell: You could answer the definition part. I do not expect you to answer the other.
Ms. Laurendeau: I can certainly speak to the intent of the definition. The intent was to be all-encompassing and ensuring we were addressing the international obligation to which this country committed, Convention 100 of the International Labour Organisation, which is equal pay for work of equal value. The protection of equal pay for equal work remains where it is and it will carry on being addressed as it currently is.
It is important that we bear in mind the oversight of the Public Service Staff Relations Board. It has the capacity to do pay research and will have an extended capacity to support its obligations under the equitable compensation act. It is an independent oversight body that will take seriously its obligation to ensure that the rights of women are well looked after through both the bargaining process and the complaint process.
Senator Mitchell: In some condescending way, someone else will look after women's rights but women will not have the resources to do it. Great. Thanks.
The Chair: Senator Mitchell and Ms. Laurendeau spoke to section 36 of the act, which states that every employer and every bargaining agent shall refrain from engaging in any contact that may encourage or assist any employee in filing or proceeding with a complaint under this act. A fine of $50,000 appears later in the act.
Ms. Laurendeau: Yes.
The Chair: Is that correct?
Ms. Laurendeau: That is what I referred to indirectly.
The Chair: Senator Mitchell makes the point about the government having to answer this through the lawyers for the Public Service Labour Relations Board. Is there capacity within the PSLRB to award costs if the complainant is ultimately successful so that she or he can help to pay the legal fees that might be incurred?
Ms. Laurendeau: I will have to turn to my legal counsel on that. Yes, they have the authority to make orders and award costs.
The Chair: That mitigates some of the imbalance. They have the authority to make orders and award costs, as a regular court would do.
[Translation]
Senator Chaput: I want to be sure I fully understand the way this pay equity thing will work under Bill C-10. The first statement is that the bill takes care of pay equity for women in the public service. The bill defines what you call female predominant job groups and the criterion used is 70 per cent.
Ms. Laurendeau: That is correct.
Senator Chaput: This is used instead of the Canadian criterion, for example, which would be closer to 50 per cent than 70 per cent. Then the bill provides what you call an "equitable compensation assessment", and this assessment is carried out by the employer.
Ms. Laurendeau: And in the case of unionized workplaces, with the union partners.
Senator Chaput: When there is an equitable compensation assessment, it is only for female predominant groups, groups in which women account for 70 per cent, and this assessment must be completed before any complaints can be received.
Ms. Laurendeau: May I make a correction? The obligation of ensuring that there is equitable compensation is not limited to those groups that are predominantly female, being composed of at least 70 per cent female employees. This is a general requirement. You could have an insular group within a broad predominantly male category that is deserving of attention; it would be a smaller job class and the bargaining agent would have to look into it. This is not limited to large groups that are made up of 70 per cent female employees and are therefore female predominant. This is a general requirement.
Senator Chaput: So those women belonging to groups that are not female predominant, with 70 per cent of employees being women, would therefore be entitled to lodge a complaint?
Ms. Laurendeau: Yes, absolutely.
Senator Chaput: Would there have to be a prior assessment?
Ms. Laurendeau: I would suggest to you that if it is an identifiable and insular group, it would be preferable to deal with this when the group is identified, in other words, when the salaries are set. If, on the other hand, because we are talking about quite a large work force, a group of women sits down and says "Nous avons été oubliées là-dedans," then indeed they would have the possibility of identifying themselves and of filing a complaint. The mechanism is such that the Labour Relations Board would say: "yes, this female job class was forgotten in our process and we may direct the parties to see to the problem." Those women would have their say. There are predominantly male groups that might include predominantly female insular sub-groups. The first line of action for these women would be to ensure that they are identified at the outset. But if for some unfortunate reason they were not, it is precisely for such cases that the complaint process exists, to ensure that the Labour Relations Board tells the unionized employer or the separate employer, if we are talking about the armed forces, for example, "wait a minute, you have forgotten someone in your assessment. Go back to the drawing board."
Senator Chaput: Where would they seek out help for the assessment they would have to do with regard to their compensation if they are not part of a group composed of 70 per cent female employees? Would they get assistance?
Ms. Laurendeau: They would have the Labour Relations Board that would definitely help them determine if indeed there is a problem to be resolved. And the Labour Relations Board would most probably very quickly tell the parties involved: it seems that there is an issue here, so carry out the analysis, because it is your obligation to do so.
Senator Chaput: How many groups or job classes are there in the public service of Canada? And of those groups, how many are not female predominant, with at least 70 per cent of employees being women? Could you provide these answers?
Ms. Laurendeau: That goes back to what you asked before with regard to female predominance. I will ensure that you are provided with all of the necessary tables for these various job classes in order to avoid any errors.
Ms. Laurendeau: I would be very happy to do that.
[English]
Senator Callbeck: My questions stem from a letter that was sent to the Prime Minister and signed by more than 100 prominent experts on human rights law and women's law.
I believe that you said this act reaffirms that we are in line with international obligations. Did I hear you properly?
Ms. Laurendeau: Yes.
Senator Callbeck: These experts said in the letter that they hold it is inconsistent with Canada's international obligations under treaties that Canada has signed. Is it possible for this committee to obtain an analysis of what the government has done on that?
Ms. Laurendeau: What analysis is that?
Senator Callbeck: You are saying it is consistent.
Ms. Laurendeau: Yes.
Senator Callbeck: Yet, this group of more than 100 prominent experts are saying the opposite. I would like to see the analysis that the government has done to assure themselves that it is not inconsistent.
Ms. Laurendeau: Certainly, I can provide a written explanation of how this complies, from a policy standpoint, with the international obligations of the ILO. I have not read the letter, though. I am sorry.
Senator Callbeck: I will give you a copy of it later today. The experts maintain that this legislation is in violation of the Charter, and they quote from Newfoundland (Treasury Board) v. N.A.P.E., which is the Newfoundland and Labrador Association of Public Employees. The Supreme Court of Canada ruled that section 15 of the Charter guarantees women the right to equal pay for work of equal value. Basic rights guaranteed by the Charter are not negotiable in contract discussion.
Is the government sure that this proposed legislation falls within the Charter?
Ms. Laurendeau: The government would not propose it if it did not believe that it was within the Charter of Rights. That being said, I would like to address one of the comments that you made — a right cannot be bargained because it is a right. No one disputes that. This proposed legislation certainly does not suggest that a right can be negotiated away. That being said, how you comply with your obligations and those rights can be discussed and jointly agreed upon. I would suggest that this legislation is there to ensure that rights are respected in a joint fashion. That is one of the underpinnings that we wanted to ensure was covered in the preamble. The affirmation that women are entitled to equal pay for work of equal value is an expression of that fundamental right. As you know, senator, preambles are key to interpreting everything that follows after. Indeed, negotiating away something that would go against the right would be inappropriate, and that is not what this legislation is suggesting.
Senator Callbeck: I will give you this letter, and I would like to hear your response to what they say.
Ms. Laurendeau: I will respond to the policy question you asked me.
Senator Callbeck: It is interesting that, in the States, about a month ago, President Obama signed the equal pay legislation. In fact, that was the first law that he signed. Our American friends seem to be going ahead in this area, and we are going backwards, in my estimation.
You mentioned the task force of 2004. I thought that that task force specifically rejected this collective bargaining approach because it would lead to women having to give up the rights to discrimination-free wages in a compromise reached during bargaining.
Ms. Laurendeau: The task force recommended a pro-active model and suggested very strongly that unions, in their bargaining demands, should be mindful of equal rights. That is my understanding of the report.
Senator Callbeck: That is different from my understanding. I thought they specifically rejected that collective bargaining approach.
Senator Mitchell: They did. I have it here.
The Chair: How do we sort this out? If we leave it like this, it solves nothing.
Senator Mitchell: I have the recommendation of the 2004 task force.
The Chair: Why do we not ask our witness to confirm that point for us before she leaves today.
Senator Mitchell: I would like to read into the record the 2004 task force recommendation that you have been referring to in defending what you are doing and suggesting that it called for the collective bargaining process to be the way to do this. Now you have used a different word, which is that the union should be mindful. Here is what it says in Chapter 16 about pay equity and collective bargaining: The task force recommends that the new federal pay equity legislation provide that the process for achieving pay equity be separated from the process for negotiating collective agreements.
Senator Di Nino: I think this is inappropriate.
Senator Mitchell: I do not think so.
Senator Di Nino: Let me finish. I did not interrupt you, senator. We do not have the whole report. This is selective, choosing one segment. If we are to look at this, let us look at the whole report.
The Chair: Let us hear from the witness on this point.
Senator Di Nino: We can sit all next week if you are ready, sir.
Senator Mitchell: I am happy to.
Senator Di Nino: We will sit next week.
The Chair: Order, please.
Ms. Laurendeau: I would simply say that there were 49 recommendations in the Bilson task force report. I did not say that this legislation adopted the 49 recommendations. It has addressed the underpinnings that were identified as problematic issues with the current system. One of them was to introduce a pro-active system and also be mindful of the fact that unions had a role to play in ensuring that equitable compensation was achieved.
The Chair: Can you confirm that the portion that was read into the record by Senator Mitchell is, in fact, one of the recommendations?
Ms. Laurendeau: I will have to double-check.
The Chair: Will you do that and let us know?
Ms. Laurendeau: I will do that.
Senator Callbeck: Under this piece of legislation, an employee can file a complaint to the Labour Relations Board, but the union cannot help them develop that complaint as they can now if they want to go forward to the Human Rights Commission. What was the thinking behind that?
Ms. Laurendeau: The thinking is that as a joint partner in having the obligation to achieve and use the bargaining process and the democratic process, as an equal partner, it would be inappropriate if not illogical that, at the end of the process, the bargaining agent could actually challenge something it participated in developing in good faith and with proper preparatory work. Currently, for any other working conditions, once a collective agreement is signed, a union cannot repudiate the collective agreement that it, in good faith, bargained with the employer. It would be inappropriate once you are a full partner to a process of establishing and demonstrating that you have achieved equal pay for work of equal value. It would be like being a judge and a party at the same time.
Senator Callbeck: As Senator Mitchell said, I do not know where people will find the money to hire lawyers and develop a complaint. I think it is putting them in an impossible position.
Ms. Laurendeau: At the same time, though, the right to representation by a bargaining union entails some responsibility by such unions to ensure that it actually brings up all issues that pertain to its membership, including the female members that are part of that democratic process. It is important to understand that the aim of this is to ensure that, at the heart of wage setting, women's issues are not disregarded or put aside but are dealt with. The obligation is on the employer and the bargaining agent to trigger the conversation to ensure that those issues are addressed.
The Chair: Ms. Laurendeau, you are doing very well. If you are still fine to carry on, we will finish up here shortly.
Senator Di Nino: I also think you are doing very well. We have been tough on you, but that is okay, and you will be fine. The first question I want to ask you deals with the issue of other Canadian jurisdictions that have adopted similar legislation. Is it correct that a number of jurisdictions in Canada right now have the principles of this legislation, in effect, contained in their legislation dealing with this issue?
Ms. Laurendeau: Four provinces have pro-active systems. I must mention, though, that none of them have exactly the same system as is developed here. Manitoba, Ontario, New Brunswick and Quebec have pay equity proactive legislation similar to this one.
Senator Di Nino: I do not want to get into the specifics, because that would be very difficult, but I am talking about the principle of this legislation, and it is contained in at least four provinces.
Ms. Laurendeau: Indeed.
Senator Di Nino: You also talked about the savings on legal fees, or someone said that we would be saving a lot on legal fees. Would there not be huge savings as well on administrative costs, staff costs and things of that nature that would not normally be incurred if the process were streamlined as this legislation intends to do?
Ms. Laurendeau: It is fair to say that legal costs would be a saving, because protracted litigation tends to be costly. That being said, there will have to be a fair amount of research to support that capacity.
However, the fact that the process of wage setting will be a single process would likely bring administrative efficiency.
Senator Di Nino: I want to confirm without any doubt that the jurisprudence, the case law, will continue to be used even after the change from the human rights complaints system to the Public Service Labour Relations Board. I thought there was still some question when we dealt with that.
Ms. Laurendeau: Yes, inasmuch as the fundamentals of the obligation will be the same, the case law and instruments of interpretation will also be the same.
Senator Di Nino: You also made a comment about fundamental flaws that needed to be changed. I suspect you are comfortable that those fundamental flaws would be corrected with this legislation. You can deal with them specifically if you wish.
Ms. Laurendeau: From a policy standpoint, the difficulty we have with the current Human Rights Act that puts an obligation only on the employer and allows protracted complaints is being addressed with this system. I characterize this as a fundamental flaw.
Senator Di Nino: You briefly mentioned an oversight mechanism. Could you expand on that?
Ms. Laurendeau: The Public Service Labour Relations Board is an administrative body that has existed since 1967. It is currently the equivalent of an arbitration board and will be the oversight body to oversee the application of this legislation in two ways. First, it is there to assist the parties on wage research in the bargaining process. Second, it will be the oversight body to hear complaints. The PSLRB is an administrative body and its decision can be reviewed by the Federal Court.
Senator Di Nino: You also told us that you have been at this for approximately 12 years.
Ms. Laurendeau: Yes, I almost regret saying that.
Senator Di Nino: That is a long time in anyone's life to dedicate themselves to an issue.
Ms. Laurendeau: I think so too, sir.
Senator Di Nino: We applaud you for that. In that regard, you have obviously had a passion for this issue. You have seen this progress and develop as it has in the last while and you commented that it is in line with the position of the International Labour Organization. Do you think that this is a positive step forward in the case of pay equity for women?
Ms. Laurendeau: If I put my passion aside and I will do that because my boss will be upset if I do not, I would say that it is a significant refinement of existing pro-active models. It goes a step further. It addresses an issue that none of the provincial legislation addresses, which is how you maintain equal pay for work of equal value. We have a robust system in the four provinces we referenced on how to achieve pay equity, but how you maintain it is a bit elusive. This legislation is clear on how you achieve and how you maintain equal pay for work of equal value. In that sense, it is a refinement of existing models.
Senator Gerstein: Four of my colleagues referred to their long memories earlier in this meeting. I have no Senate memory as I am a new boy; I am new to the Senate and I am new to this committee. I can tell you that I know a good presentation when one is made. I most respectfully say, on behalf of all of us, this was not a good presentation; this was an outstanding presentation.
Ms. Laurendeau: Thank you, senator.
Senator Gerstein: I would like to compliment you, Ms. Laurendeau, on your enthusiasm and for your knowledge and the clarity of the responses that you have given us today on this most complex issue. We are very grateful.
The Chair: It is over two and a half hours that you have been sitting there.
[Translation]
Senator De Bané: Mr. Chair, our political system is one where the senior public service is there to explain what the government has decided to do. We of course do not have access to the other options that were put to the government, but only to those that the government has chosen. Ms. Laurendeau, who is the assistant secretary at Treasury Board, has explained with great skill what this policy that the government has chosen is about.
Mr. Chair, I would like to know if it is your intention, as Senator Callbeck suggested, to invite other specialists who could provide other viewpoints than that which the senior public servants, who advise the government, must provide? Ms. Laurendeau has properly fulfilled her duty to explain all of the merits of the option chosen by the government. But we are not in an area of absolute truth. There are other specialists.
[English]
What senator Mitchell and Senator Callbeck have suggested profoundly disagrees with that approach. In the short time we have, do you think we will listen to those who think that this approach is not well advised?
The Chair: Senator De Bané, I cannot tell you whether we will be listening to people that tell us this is not well advised. The approach our steering committee wished to start with was to have government officials, as you say, presenting the amendments and the legislation the government would like to see implemented. We have to understand what the government is seeking. That is what we are doing at the first phase.
We have a panel already organized for after we finish the government round, of those impacted by this proposed legislation. They will come and tell us whether they think it is a good or bad idea.
Senator De Bané: That is a very good point. I heard this afternoon an eloquent explanation of the option the government has retained. Of course, there are many other options. I am happy to know that another position will be heard. Those are issues open for debate. It would not be healthy to have only the opinion of the government.
I want to say that Ms. Laurendeau has explained very eloquently, as Senator Gerstein has said, the policy retained by the government. I hope we will hear other people. This is not absolute truth; it is something open to debate.
The Chair: Thank you, Senator De Bané. That is what we intend to do and we will follow your request in that regard.
We will continue and finish this round. Then, we have other members of government to help us with two other complicated areas of the legislation known as budget implementation.
Senator Nancy Ruth: My first question is on savings to Treasury Board. My understanding is that Treasury Board now must keep aside monies that might be payable for possible awards should the Human Rights Commission give an award in a pay equity situation, if it is a federal government situation.
Do you know what I am talking about? You look puzzled.
Ms. Laurendeau: I am listening carefully.
Senator Nancy Ruth: Do you have any idea how much that is and how much Treasury Board would estimate that amount would be over the next three years as the old system stays in place?
Ms. Laurendeau: What you are asking is a little touchy in the sense that there is an assessment that must be made when there is litigation underway. I do not think it would be appropriate for me to comment. There is an assessment made but you will understand that could reveal the position the government is taking in terms of the risk assessment.
Senator Nancy Ruth: It would be great for the lawyers on the other side. However, I see your point. I withdraw the question.
When Senator Callbeck was asking her questions, it reminded me of the pay equity case in Newfoundland four or five years ago. It was to do with hospital workers of various sorts. They received a pay equity award and the government of the time said, "We are broke and we cannot pay this." They went to court, the court sided with the government and the women lost their pay equity.
Can that kind of process happen under your new system and which court would they go to?
Ms. Laurendeau: The underpinning provides something to avoid that particular situation, which occurs most of the time after a long litigation and you have a big payout to do. If do you it as you go along and you address it in a pro-active way, the intend is to ensure that your expenditure is spread and spent at the time it needs to be, as opposed to very late down the road when your capacity may be different.
Senator Nancy Ruth: That was a good answer but it presumes that governments would only appeal because of the cost of the award. Can you imagine, with this new system, any other way? I guess governments would just change the regulations. That is how they would try and stop it, as Newfoundland did.
Ms. Laurendeau: Newfoundland was operating in a complaints-based system. It is difficult to compare that with a pro-active system for which you pay as you go, as opposed to not paying and then being held to pay with interest later down the road. It is hard for me to give you a straight comparison because the two things are purposely different. The underpinning is that a pro-active system makes sure you pay as you go or as your obligations arise. In this way, you do not have a big liability piling up somewhere that is hard to assess because you address you are obligation as you go.
[Translation]
Senator Rivard: Mr. Chair, this is not a question that I wish to ask Ms. Laurendeau. This question is more for you. As a new senator, this is one of my first meetings on this committee. Despite the friendship and esteem I have for the colleague to my right, Senator De Bané, I will venture to ask a question. Is it usual practise, when we are dealing with a budget or with bills, that we obviously question officials, but that we also be able to seek out other expertise?
The Chair: Yes, absolutely. It is important to hear both sides of any policy matter, and this is what we will do. We will begin by the bill. We must begin with the bill. We must understand what is contained in the bill, after which we are in a position to study its impact.
[English]
Senator Neufeld: I am also a new senator, so I am learning a little bit as we go along. We will always learn. Also, I have not ever been elected as a federal MP but I have spent almost 18 years in a provincial legislature in British Columbia; eight of those were in government.
I have been involved in developing a fair amount of legislation through that process. This relates to my colleague's comment about other opinions and ideas. I cannot ever recall a government I was a part of not having representation of different ideas regarding how to reach an end goal. It usually, but not always, is provided by senior people in government to elected people about how you reach that goal.
I would assume that, through this process, there would have been options given to government; that government would have actually viewed different ways of trying to reach what you explained so well here in this bill. Would that be correct or would you have been involved in those kinds of things?
Ms. Laurendeau: Are you referring to policy discussions?
Senator Neufeld: Yes.
Ms. Laurendeau: Yes, as a matter of course, we are called upon to provide options.
Senator Neufeld: At the end of the day, the government of the day that adopted this and said, "This is what we will move forward with" actually did so by reviewing other forms of legislation or other ideas for policy to develop legislation. Would that be correct?
Ms. Laurendeau: That is correct. It includes the Bilson report from 2004 which I mentioned earlier because there was a lot of research that was available through the assessment of that report, which was part of the analysis that went through the development of that legislation.
Senator Neufeld: That answers that question. When you get into something like this, I know there will be all kinds of ideas and, ultimately, you have to come to some decision on what you will do.
You mentioned the provinces that have similar legislation, those being Quebec, Manitoba, Ontario and New Brunswick, is that correct?
Ms. Laurendeau: That is correct.
Senator Neufeld: When was that adopted in those provinces?
Ms. Laurendeau: Some came in the mid-1980s and some are as recent as the 1990s, in the case of Quebec. I can give you a more precise breakdown in writing of when they were adopted. Ontario comes to mind as having been in 1985 or 1986 and it is one of the oldest. Manitoba was also around the same time, though Manitoba was first.
Senator Neufeld: That would suggest to me, if it was similar, and if there were all the pitfalls that we have heard about today, I cannot imagine those four provinces, knowing who is in government, would actually continue down the path of keeping that kind of legislation in place. That is a statement from me. You do not have to answer that but I just cannot imagine that if it was that bad, that you would have Quebec and Manitoba, Ontario and New Brunswick saying, "We are keeping this. We do not care how bad or how terrible it is, we will keep it."
I would expect the department that developed this and helped with the policy development would have looked at those four jurisdictions to ensure that things are working relatively well. Would that be correct?
Ms. Laurendeau: It would be correct to say that we educate ourselves by looking at existing models, both the positive side and areas marked for potential improvement.
The Chair: Senator Mitchell has a quick supplementary.
Senator Mitchell: When you draw comparisons with the four provinces, they are is quite sweeping. For example, I cannot imagine that Manitoba would not allow the union to help a union worker make an appeal and would be limiting them by imposing a $50,000 penalty.
While I appreciate Senator Neufeld's point, I think there are probably some very significant differences that might make their systems work in a way that this will not.
Ms. Laurendeau: They are different, but they are pro-active in nature, yes.
The Chair: You indicated earlier in your testimony that maintenance of equality was different and something new.
Ms. Laurendeau: That is correct.
The Chair: We have that on record. Thank you very much, Ms. Laurendeau. This has been a wonderful session that we have had with you. If you would like to retire from the front table, I will go ahead with Ms. Downie at this stage and Part 12.
Ms. Laurendeau: Thank you for freeing me up. We will ensure we provide you the written answers we committed to.
The Chair: We look forward to receiving those answers to the various undertakings.
I have already introduced Colette Downie, Director General, Marketplace Framework Policy Branch, Industry Canada. We have asked her to come along with a team who has been patiently waiting. We thank you for that. This indicates how huge this task is that we have. We will persevere, with your help.
We have a section called Part 12 of Bill C-10. We would like you to follow the same process. Please tell us what the government is hoping to achieve in this legislation and then we will have some questions and answers.
Colette Downie, Director General, Marketplace Framework Policy Branch, Industry Canada: I am joined by my colleague from the Competition Bureau, Adam Fanaki, who is the deputy commissioner at the Competition Bureau.
Part 12, which begins at page 407, is the first of two parts that contain recommendations of the Competition Policy Review Panel, which was chaired by Lynton Red Wilson, and which reported to the government last June. It studied the Competition Act, as well as the Investment Canada Act and other government policies related to overall competitiveness.
These two parts contain the core elements of the recommendations made by the Competition Policy Review Panel. I will stay with Part 12 first and then we can go into Part 13 afterwards.
Part 12 contains the amendments to the Competition Act. Briefly, I will describe the core elements of those proposals.
They propose to protect consumers from misleading advertising and deceptive marketing practices by allowing the courts or the Competition Tribunal to award restitution to victims of misleading advertising. They also increase deterrence by significantly increasing penalties for those offences. They increase penalties and make clear the boundaries of legitimate competition, particularly in respect of cartels or agreements between competitors to engage in things like price fixing.
The amendments amend a very broad provision that has been relatively unchanged for the last 120 years, which outlaws all agreements between competitors that harm competition significantly — "unduly" is the word used in the provision. It narrows it down to outlaw the most serious and fraud-like conduct.
These include things like price fixing; market allocation, when competitors divide up a market or divide up their customers between them, and output restriction, where competitors harm competition by agreeing to shut down a plant, for example, in exchange for things like price increases.
That proposal narrows the provision down and makes it much simpler for the Competition Bureau to pursue those offences by removing the requirement for the most harmful things like price fixing to introduce evidence of serious economic harm. At the same time, it creates a separate, non-criminal track for other potentially harmful forms of competitor conduct.
Just to be clear, it also takes out of its scope what is currently covered, which is non-harmful competitor alliances.
To continue with the key elements of the proposal, it makes merger review by the Competition Bureau more efficient and predictable for businesses. In particular, it reduces the number of transactions that are notifiable to the bureau, and also provides a mechanism that requires the Competition Bureau to give business certainty about whether they would be investigated within 30 days. The proposal increases the penalties for companies that have been found to abuse their dominant position by allowing the Competition Tribunal to award administrative monetary penalties.
Those are the key elements in Part 12. I will not go into any more detail, but I am happy to answer your questions.
The Chair: Is there anything further from your colleagues to add, or shall we begin with questions?
Adam Fanaki, Acting Senior Deputy Commissioner of Competition, Competition Bureau — Mergers Branch, Industry Canada: I am happy if we just proceed with questions.
Senator Callbeck: I understand that these provisions constitute the most far-reaching revisions that we have had since 1986 in that a lot of them have been discussed and had input from the legal and the business community. However, I am told that for the second-stage merger review process, there really has not been discussion and extensive input from the legal and business community. Is that true?
Ms. Downie: The recommendations on two-stage merger review were made by the Competition Policy Review Panel and are implemented in this proposed legislation. The panel conducted extensive consultations. It received over 150 submissions. It conducted a number of specialist round tables, including one on competition policy in particular, and numerous one-on-one meetings with business people. It also heard views from consumers and other interested groups.
I would say that these amendments did receive quite significant consultation and attention before they were recommended by the panel. The panel's report indicates what the concerns were that it heard and that it was responding to when it made these recommendations.
They were concerns from businesspeople about the awkwardness and rigidity of the tools that the Competition Bureau has when it is investigating mergers. It has to use a court order process which is rigid. It also recognized the public interest in the Competition Bureau having the information that it needs to analyze or assess a merger before the parties can close a transaction, which is not the case today.
Senator Callbeck: I am sure you are aware the Canadian Bar Association has been critical of this bill because they say it has been introduced without public consultation. In fact, the chair of the competition law section for the Canadian Bar Association has said:
Most competitive law experts in Canada, the U.S., and elsewhere in the world would agree that the U.S. 'second request' process is excessively burdensome, expensive, and time consuming. After 30 years it has not been adopted as a model in any other country in the world.
Do you agree with that?
Ms. Downie: I have not seen that particular statement, but I would say, just to address one element of it, that in the United States, a body called the Antitrust Modernization Commission, which was made up of government officials but also very experienced competition law experts, looked at the U.S. and Canadian systems and found that the issue was more about the implementation in the U.S. of the U.S. two-stage system rather than about the provisions themselves.
In light of that, and anticipating parallels that may have been made, the Competition Bureau plans to issue guidelines, which I will ask Mr. Fanaki to speak to, that will address all those potential concerns.
Mr. Fanaki: Senator, I thank you for that question because I have heard that concern expressed regarding the adoption of what the Canadian Bar Association's National Competition Law Section calls a U.S.-style, second request process. I will take a step back and give you a brief background on what is occurring in respect of merger reviews, not only in Canada but also in the United States and globally. We are experiencing a growing need for more complete and accurate information in conducting merger reviews. That is directly attributable to the changes in the ways that mergers are analyzed under a modern competition law regime. We have moved away from simple presumptions that the merger is anticompetitive if the merging parties hold a particular market share, to a more nuanced analysis of competitive effects. Although that analysis yields more accurate results, it requires additional information to be supplied.
As well, we are using more sophisticated modes of analysis, such as merger simulations, et cetera. At the same time, parties are retaining a great deal of information and data because of reduced storage costs. Some of the concerns that you are hearing in respect of burdensome requests and merger reviews stem from the nature of the merger review process. However, they all underline that to conduct an analysis as demanded under a modern merger regime, you need time to complete the review and an effective means of gathering that information.
We are very much alive to this issue of avoiding unduly burdensome information requests in merger reviews. That is not simply because we do not want to impose burdens on the merging parties that are unnecessary. Rather, the reality is that we have no interest in requesting additional information that will not be useful in our analysis because that imposes a burden on us. We have a common interest in ensuring that requests for information are narrowly tailored, as much as possible, while still securing the information that we need to properly review that merger.
Coming back to the question that my colleague posed, if Bill C-10 is enacted, the Competition Bureau proposes to issue guidelines that describe its approach to implementing the amended merger review process. Those guidelines will demonstrate that the bureau is very much committed to an approach that allows mergers that do not raise substantive issues under the act to proceed quickly. This encompasses the vast majority offers that it considers in a year. In the limited number of cases where it is necessary to protect the public interest and competition, the bureau will seek the relevant information through the information request process, but will do so in a manner that ensures that the burden on parties in fulfilling those obligations is no greater than necessary. We will do this, for example, by limiting the number of company officials whose records need to be reviewed and submitted, by limiting the time period that is covered by those information requests, and by working with the parties on the most expeditious and effective means of gathering that information.
Senator Callbeck: I have read from three or four different people who have quoted these amendments that they will be more time consuming, more costly and more burdensome. No other country has ever followed this, besides the United States, which is somewhat disturbing.
Mr. Fanaki: If I may respond, I am glad that you raised it again because I did not answer the point that no other country has adopted the system that is found in the United States. I should also point out, for what it is worth, that no other country has adopted the Canadian system. The Canadian system is unique in the sense that we are obligated to obtain court orders in order to secure the information that is necessary to review mergers. The time period within which those mergers need to be reviewed does not stop ticking throughout that process. There is no linkage between the supply of information and the time period within which mergers have to be reviewed. Certainly, no other country has adopted the Canadian system as well.
Senator Callbeck: The fact is that this second-stage process could be more burdensome, time consuming and costly.
Ms. Downie: I would say that is not the case. The provision has been designed to reduce the current burden on businesses that have to respond to subpoenas because of the rigidity of that process and because of the way that the time periods work.
The parties are able to run out the clock and, in some cases, they have incentives to do that. They can close their transactions within 42 days, even if the Commission of the Competition Bureau does not have the necessary information to assess the impact of the transaction on prices or choice on competition.
The amendments take away the ability of parties to do that. At the same time, they enable the Competition Bureau to issue a second request for information. It will now have the time and the incentive to sit down with parties to sit down to take issues off the table and to understand exactly what information is required and what information exists. As will the parties. Currently, that cannot happen with any great flexibility under the existing system.
Mr. Fanaki: If I may add, we are focusing on one aspect of the merger review process that would apply in those relatively rare cases where substantive competition concerns arise. The proposed process will be a more flexible and more cooperative because we will be taking it out of the litigation world of applying for court orders to secure information and bringing it into a more cooperative process world.
In addition to that change to the process, Bill C-10 would reduce the number of mergers required to be notified to the Competition Bureau by raising the thresholds that trigger the notification obligation.; would reduce from three years to one year the time period within which the bureau may challenge a merger following closing; and enshrine in law that it must decide and notify parties within 30 days of the receipt of the relevant information, whether a merger will be challenged.
Senator Callbeck: I have one question on the consultations. I said earlier that the Canadian Bankers Association said that they have not had input in this second-stage process. I know that consultations were held on many matters in this proposed legislation but was this discussed at those consultations?
Ms. Downie: Neither of us was present at the in-person consultations held by the Competition Policy Review Panel. In addition, written submissions were made and some parties made submissions on merger review. Beyond that, I cannot tell you what the panel heard or did not hear.
Senator Callbeck: The complaint about input that I am hearing is that of the many aspects in this proposed legislation, most of them were discussed but this second-stage review process was not discussed with the legal and business community.
The Chair: Is there further comment on that?
Ms. Downie: As I said earlier, the panel's report says that in making its recommendations on two-stage merger review, it is responding to concerns that it heard from the business community about the rigidity of the tools the bureau has and the general process.
The Chair: To clarify the record, you said "the panel's report." Is that referred to as Mr. Red Wilson's report at times?
Ms. Downie: Yes.
The Chair: I wanted to clarify the record on that.
[Translation]
Senator Rivard: Should I understand that this part of the bill amending the competition act deals with all business mergers in order to prevent cartels and conspiracies, and will it also be applicable to retailers? For example, in the area of gasoline sales, in a city like Quebec City, you can have 100 service stations that all of a sudden set the same price at the same time.
[English]
Ms. Downie: I will talk about the intent as it relates to allegations of price-fixing. Mr. Fanaki can go into more detail about the case that the Competition Bureau is currently working on to do with that very matter in Quebec.
As I mentioned earlier, the proposed amendments are intended to reform the conspiracy provision, as it is called, which is 120 years old, to narrow it down to ensure that it covers the most egregious forms of harmful cartel conduct. Price-fixing is one of the most common ones. Currently the commissioner is required not only to find evidence of an agreement to fix prices but also to build evidence that that price-fixing agreement, for example, harms competition unduly.
In a case like the price-fixing case in Quebec, I heard the former commissioner say that, after that agreement to fix prices had been proved and established, it took another two years to put together the economic evidence, to get the economic experts to establish that that price-fixing case unduly lessened competition in those markets.
These amendments are very much intended to simplify that process — that is, to make criminal what everyone agrees is criminal and fraud-like, and to take away, reduce or narrow what is a very broad provision that applies to all forms of collaborative competitive conduct as well as imposing this burden on the commissioner.
The Chair: Before you begin, when you make a comment about changing something like you just did, perhaps you can refer us to the section. We all have the acts in front of us. I was trying to find it while you were talking, but it is difficult to do so.
Ms. Downie: I apologize for that. I will find the clause.
The Chair: Thank you very much.
Mr. Fanaki: It is clause 410, on page 391 of the bill, which proposes changes to section 45, which is the conspiracy provision of the Competition Act.
To fully answer your question, senator, you may already be aware that, in June of 2008, criminal charges were laid against 13 individuals and 11 companies in respect of alleged price-fixing in the supply of retail gasoline in four communities in Quebec: Victoriaville, Thetford Mines, Sherbrooke and Magog. At the time these charges were laid, three companies and one individual pleaded guilty in the Quebec Superior Court for their part in that conspiracy for price-fixing.
Senator Di Nino: I was reflecting on the question about public consultation. You dealt with the Competition Policy Review Panel. This bill also adopts a number of provisions that were contained in the bill that was presented in the Thirty-eighth Parliament, Bill C-19, which also had received consultation and had been exposed to opinions on its validity.
Tell us how much of that bill is reflected in this one. Is it just one or two provisions or is it a great deal of it?
Ms. Downie: I would say a great deal. In fact, all or virtually all of that bill, Bill C-19, is included in this set of proposed amendments, in addition to some additional amendments that were recommended by the Competition Policy Review Panel. I cannot say that the language is identical, but the vast majority of the amendments in this bill reflected or dealt with the same issues as Bill C-19.
Senator Di Nino: We have received opinions from a variety of sources that indicate that the consultation process for Bill C-10 was not as extensive as one would have expected. I think you are correct in stating that the Competition Policy Review Panel, in effect, did consultations. As well, I think the record should show that a large part of this bill is really Bill C-19, which had received its own consultation at the time.
Ms. Downie: I agree.
Senator Di Nino: I have been reading this and some of the information that was provided to us by our researchers. It seems to me that the bill is attempting to streamline, and make more efficient and more effective, the business process, as well as the business conduct. At this time, when we are facing so many economic challenges, that would be a welcome change by the business community in that it would allow it to do business in a better way.
I also believe that the bill implements and increases, where applicable, penalties for non-compliance. Am I reading this correctly? Would you agree with that?
Ms. Downie: Yes, I would agree. On the issue of streamlining the merger review process, I should have clarified that the vast majority of merger transactions will not be subject to these so-called second requests. The expectation is that, on average, about four to six transactions per year will be affected by that process. The vast majority will receive guidance from the bureau within 30 days and the bureau will be required to provide certainty about whether they will be investigated.
Senator Di Nino: I thought your presentation was quite good and covered pretty well all of the provisions. However, there was a provision that applied to airlines. You did not touch on that in your comments. Can you enlighten us on that?
Ms. Downie: Previous amendments had added what are called the airline-specific amendments or provisions to the Competition Act. For example, the main provision was to provide administrative monetary penalties for abuse of dominance by airlines. This bill broadens that to apply to all industries.
In an abuse of dominance case, currently the competition tribunal could award administrative monetary financial penalties against airlines if they engage in abuse of dominance. This bill would broaden that so the tribunal could award those kinds of penalties to deter abuse of dominance in all sectors of the economy.
Senator Di Nino: I thought it dealt solely with the airlines, but it is the other way around. What is contained in the provisions already is now expanded to catch the dominance abuse of other corporations as well. Thank you very much.
Senator Mitchell: I have two questions that address the issue of why these provisions must be in this particular bill. First, what is the rush? Would it matter if we pass this in April instead of March?
Ms. Downie: I cannot really comment on the construction of the budget implementation bill. I can tell you about the importance of Competition Act reform and about the types of anticompetitive conduct that are commonly seen during a period when the economy is shrinking — that is, during a period of economic uncertainty. That type of anticompetitive conduct can be more prevalent when an economy is shrinking.
Just to use an example, some competitors in declining industries may have strong incentives to collude with each other to fix prices at artificially high levels in order to avoid losses in such a context. Those types of agreements harm competition by increasing pricing, reducing output and stifling innovation, which affects consumers and businesses that are supplied by those businesses. Canadian consumers and businesses count on their suppliers to deliver competitive products and, without competition, Canadian firms cannot remain competitive.
Similarly, to use another example, when the economy is shrinking and business is down, it can be tempting for some dishonest businesses to engage in deceptive marketing practises. They may use misleading advertising, for example, to attract consumers, harming consumers who are misled but also harming honest competitors that are trying to compete against them. These amendments aim to deter that kind of conduct by increasing penalties and also providing for restitution to victims of that kind of conduct.
To use another example based on some of the key amendments in this package, the current economic situation is obviously already leading to a great degree of restructuring in some industries. As I mentioned before, currently, parties to mergers can close their transactions without providing the Competition Bureau with the information it needs to be able to assess whether that transaction harms competition. These amendments will deal with that situation, as I explained before. I hope that answers your question.
Senator Mitchell: Every one of the crimes or excesses that you have just listed has a law or regulation or a provision against it now, so if we were stuck with those for another two or three weeks, or three or four months, or until the middle of April, it would not seem to me to make a huge difference.
The things you mentioned in your answers are pure regulation, pure clean-up stuff, but does they have anything to do with stimulus? This will not stimulate the economy at all. Why would it have to be in some substantive way a part of this particular bill? Why could it not be severed and dealt with three weeks from now?
Ms. Downie: I cannot comment on the construction of the bill.
Senator Mitchell: You could tell me whether you think it is stimulus.
Ms. Downie: I think it is about strengthening the economy, and competition and productivity are what make business thrive and grow. If competition is harmed as a result of some of the types of conduct I described, that is harmful to the economy and to businesses. These proposed amendments aim to ensure that businesses and consumers are not victimized.
Senator Mitchell: The Canadian bar, and I think you have seen the letter, makes exactly the opposite point. They say this will be very chilling to Canadian businesses. The per se illegality of certain types of agreements will be absolutely chilling to Canadian businesses trying to compete with international and U.S. businesses that will do this with absolute confidence. Has any analysis been given to the fact that this may not be anywhere near as clean and, in fact could be de-stimulative, if I could use that word? On what basis have you just discounted what the Canadian bar is saying?
Ms. Downie: Extensive analysis has been given to that very issue, because the last thing we want to do is chill competition or harm legitimate business conduct. The amendments propose to do exactly the opposite. It is based on consultations and examination of a wide variety of business agreements. All kinds of different business agreements have been put through the filter of this proposal to ensure that we are doing exactly what we intend to do about criminal price fixing, market allocation and output restriction. At the same time, we are taking them out of that criminal sphere, which currently, and I have heard this from stakeholders directly, has a chilling effect on business conduct. It takes those out of this very broad, 20-year-old criminal provision. At the same time, it makes the Competition Bureau more effective at dealing with those provisions.
Senator Mitchell: Did you have any public consultations, yes or no? If did you, could you tell us who you consulted with in public or private or reasonably private consultations, and could you tell us if you had any consultations with the Canadian bar on these particular provisions before you brought this out? Did you telegraph at all that these significant changes would be in this piece of legislation so people would have had more than two or three weeks to consider them?
Ms. Downie: A number of consultations were held. The most detailed consultations were held first in private, going through a number of different scenarios, the scenarios I mentioned to you. Two groups were consulted. There was an internal working group, a group of competition specialists and Justice lawyers, and an external working group made up of a large number of competition lawyers as well as economists who specialize in this area. That was a very lengthy discussion of all of the different types of agreements and a number of different models. Certainly there were members of the Canadian Bar Association at those meetings. Following that, we also held technical round tables on text. We held three of those sessions across the country, again with a larger number of mainly competition lawyers, but also with economic experts as well.
In terms of the telegraphing of these amendments, I cannot answer that. That was a political communication.
Senator Mitchell: I will finish my questioning, but I would suggest that we bring the Canadian bar here, if we could, because there seems to be a disconnect.
The Chair: The Canadian bar and Mr. Wilson have both been invited to come, as well as many other organizations that are being impacted or may be impacted by this legislation.
Senator Mitchell: It is one thing to say you consulted and another thing to overrule whatever you heard.
The Chair: Mr. Red Wilson is the chair of the panel that did a review.
Before I go on to the next name on my list, Mr. Fanaki, you mentioned preparing guidelines in answering one of the earlier questions. Is that a provision in the act, or is this just something you would normally do internally, and what are they in relation to?
Mr. Fanaki: The bureau has a number of guidelines that describe its enforcement approach to the main provisions of the Competition Act. The answer earlier was in respect of the proposed amendments to the merger review process. The bureau would issue guidelines that would describe how it will implement the merger review process and the steps it will take to try to minimize the burden on Canadian businesses and to try to tailor information requests to avoid seeking unnecessary information, as well as a process setting out how those information requests will be handled and how that provision will actually operate in practice.
The Chair: They are not regulations; these are just documents to help people understand your thinking.
Mr. Fanaki: That is right. Our typical process is that we would issue the guidelines in a draft form. We would engage in consultation, again with our friends at the Canadian Bar Association, National Competition Law Section and other stakeholders, and then prepare a final version.
The Chair: Do they get published in the Canada Gazette?
Mr. Fanaki: They are available on our website and also available in a printed format.
The Chair: To clarify that, there are at least seven places in Bill C-10 where there are the provisions for rules, guidelines, whatever you might want to call them, that are said not to be statutory instruments and therefore not available for Scrutiny of Regulations review, which is what we are accustomed to. These guidelines do not fit into that category.
Mr. Fanaki: That is right. These are guidelines that the bureau is preparing on its own initiative.
The Chair: On page 419, and you are probably quite familiar with this, it says:
123.1 (1) If, on application by the Commissioner, the court determines that a person, without good and sufficient cause, the proof of which lies on the person . . .
That sounds like it is reversing the onus and requiring some person to meet a proof, and all you have to do is allege something. Am I reading that correctly, and is this something that has been traditionally found in your legislation, where the onus is reversed?
Mr. Fanaki: I would take a closer took at this. I believe it uses the existing terminology wherein the proof lies on the person. This is on the basis that information is readily accessible to the person to explain why they have not complied with that provision.
The Chair: The way I read this suggests also that the person might be thinking about something. The Canadian Bar Association typically is quite nervous and reluctant to see reverse onus, putting the onus on the individual, where the government has only to allege something and then require someone to come in and prove their innocence. Will I hear from them next week when they appear before us that this is one of the provisions they are concerned about?
Mr. Fanaki: I cannot speculate on what you will hear from the Canadian Bar Association. That section is directed to a circumstance where a party has failed to notify the Commissioner of Competition of a transaction that requires notification. That is the way the system operates currently. There is no change in that respect. In a circumstance where a party has failed to notify, they would be obligated to provide good and sufficient cause why they have not done so.
The Chair: Thank you for that explanation. From your reluctant to speculate, I interpret that to mean that you have heard nothing from the Canadian Bar Association expressing a concern about this particular provision.
Mr. Fanaki: That is correct.
Senator Ringuette: What percentage of market share would be required for a business to be seen as non-competitive or a monopoly?
Mr. Fanaki: The latter part is easy. A monopoly would be 100 per cent of the market. We have guidelines that discuss market shares. It would depend on the provisions and they are not cast in stone. For example, in the merger enforcement guidelines, we tend to examine a transaction more closely where the combined share of the parties exceeds 35 per cent of the relevant market. The abusive dominance cases brought to date tend to have higher market shares than that.
Senator Ringuette: For example, would credit card companies come under this act?
Mr. Fanaki: The act would apply to credit card companies.
Senator Ringuette: Would it also apply to banking institutions?
Mr. Fanaki: Yes. Are you talking about somewhere in the act generally?
Senator Ringuette: Price fixing and non-competitive attitude et cetera. Would that be included in this?
Mr. Fanaki: There is an explicit provision existing in the act now found in section 49, which deals with agreements between federal financial institutions. That provision would remain as part of the act.
Senator Murray: I apologize for coming in and out to other meetings and telephone calls, but that is what happens when we are in these marathon sessions.
The Chair: It is when we are encouraged to rush things.
Senator Murray: I hope this information has not already been discussed on the record. It has been a long time since I had any acquaintance with this area of public policy. I am so old that I remember when there was a director of research and investigation under the Combines Investigation Act and the restrictive trade practises commission, both of them under the Minister of Justice. That is a long time ago and I know it has gone through several versions since then. I cannot figure out where everyone is in this universe today.
Who gets to administer this act? Is it you, Mr. Fanaki, or Ms. Downie?
Ms. Downie: The act was amended in 1986 and the restrictive trade practices commission was abolished. It is now the Competition Bureau, which administers and enforces the Competition Act.
Senator Murray: That is not you, it is Mr. Fanaki who is listed here under Industry Canada. Is that correct Mr. Fanaki?
Mr. Fanaki: Yes, it is correct. My title is Acting Senior Deputy Commissioner of Competition, Competition Bureau — Mergers Branch. The Competition Bureau is part of Industry Canada.
Senator Murray: The Competition Bureau seems to have what a layman would consider to be quasi-judicial powers.
Mr. Fanaki: I would not describe them as quasi-judicial powers in the sense that the commissioner does not have the ability to grant remedies, issue orders or directives that affect the substantive rights of parties. Rather, the commissioner is a litigant who would seek a remedy from the competition tribunal.
To take the example of a merger, the commissioner of the Competition Bureau does not have the ability to prevent a merger from taking place. Rather, he or she must go to the competition tribunal and initiate an application to seek a remedy from the tribunal.
Senator Murray: Are administrative penalties imposed by the tribunal?
Mr. Fanaki: In respect of deceptive marketing practices, those are imposed by the tribunal or the courts.
Senator Murray: Is the tribunal coming before us? Who or what is the tribunal?
Mr. Fanaki: The tribunal is made up of a group of federal court judges as well as expert economists and lay members. I am not sure what you are asking me. We could provide you with names of the members.
Senator Murray: Are they serving federal court judges, people who were federal court judge or have the status of federal court judges?
Mr. Fanaki: Some of the members are current federal court judges.
Senator Murray: They are serving. Therefore, it is only part-time that they are serving on the tribunal.
Mr. Fanaki: Yes, that is my understanding.
Senator Murray: Sections 410, 429 and 442 come into force one year after the day on which this act receives Royal Assent. Why is that and is it totally explained by the transitional provisions in section 440?
The transitional provisions give you one year to apply for an opinion as to the applicability of the agreement or arrangement, et cetera.
Mr. Fanaki: I can try to address your question. I understand what you are asking.
The bill includes a transitional provision in section 444, which I believe is what you were reading. It provides that the proposed changes to the —
Senator Murray: Excuse me, section 444 is the coming into force. It says that sections 410, 429 and 442 come into force one year after the day on which this act receives Royal Assent. May I presume the rest of it comes into force upon Royal Assent?
Mr. Fanaki: That is correct. The transitional provision relates to the amendments to the conspiracy provision that we were discussing earlier.
It would delay the coming into force of those provisions for a period of one year. During the course of that year, the bureau would provide advisory opinions regarding the application of the amended conspiracy provision to any particular agreement at no cost to the person requesting the opinion. That is how those provisions are designed to operate.
Senator Murray: Is that why the coming into force of sections 410, 429 and 442 is to be one year after the day on which this act receives Royal Assent or are there additional reasons why sections 410, 429 and 442 are coming into force one year after Royal Assent?
Ms. Downie: As Mr. Fanaki was saying, it is being done to give businesses the year to be ready for the introduction of the provisions and also to give the Competition Bureau the time to be ready.
Senator Murray: I do not want to take too much time but I do want to get some sense of this. Every day is part of a learning curve for some of us. It certainly is for me.
What is the Marketplace Framework Policy Branch? What does it do? You are the head of it, are you not?
Ms. Downie: I am the Director General of Marketplace Frameworks Policy and I am responsible for the three federal intellectual property statutes, the Investment Canada Act, the agreement on internal trade and a number of corporate statutes, as well. There are about 15 statutes in all. Also, I am supporting the amendments to the Competition Act.
Senator Murray: Good, we may see you again in that case. The marketplace framework policy that we are talking about is really the legislative framework.
Ms. Downie: That is right. It is the federal legislative framework around the operation of markets, which all of those statutes that I listed are really about.
Senator Murray: How long have you been in that position, Ms. Downie?
Ms. Downie: Since December.
The Chair: That was very helpful, Senator Murray. Are you the Commissioner of Patents and the Registrar of Trademarks, as well?
Ms. Downie: No, I am not.
Senator De Bané: My colleague, Senator Rivard, has alluded to the fact of those gas stations in la region des Bois-Ronds that are being prosecuted for illegal price-fixing, et cetera. In Canada, I assume we have now over 1 million businesses. If you had to give me a number of how many Canadian businesses have a business volume over $10 million a year, how many would you say there are?
Ms. Downie: I am sorry, I do not know. I have never seen figures in that regard.
Senator De Bané: They exist. We know that there are over 1 million businesses because you can segment that into different parts and see how many there are.
Tell me about the number of investigators you have to supervise the commercial activities in this country.
Mr. Fanaki: The Competition Bureau is comprised of approximately 450 employees now, not all of whom will be engaged in investigative functions. I could try to provide with you a more accurate figure if that is important to you, senator.
Senator De Bané: The thing that struck me is that, if you look to the Income Tax Act, it is based essentially on voluntary compliance. Of course, the reverse of that is that there is a system in place where, for me — like the greatest number of Canadians — every dollar we earn is computed automatically in the databank of the income tax department. Every taxpayer knows what must be paid. Ninety-nine per cent of taxpayers pay what they owe because they cannot hide it, anyway.
I will refer to something I have lived through as a former smoker. The price of cigarette packages was all identical. Of course, it is not a trade which is regulated like milk, butter or whatever. As a smoker, I was always wondering why all of them have exactly the same price. Is someone sleeping at the switch?
I have another example from today: why do all the banks charge you $1.50 if you want to use their ATM if you are not one of their clients? Why is there no competition and the Competition Bureau is not saying anything? It is so self-evident.
Senator Ringuette: It started out as branch closures.
Senator De Bané: I remember a spokesman of a financial institution who said some years ago, "I do not understand why we are charging that amount of money." Of course it is a big profit centre. All of them charge exactly the same thing. There is no competition. Someone must be sleeping at the switch.
Ms. Downie, you are in charge of market framework. What about misleading advertising? Look at the billions of dollars that Canadians waste on weight-loss schemes. It is such a fraud. As you know, the people who put their money in that are desperate; they want to do something and they believe in those miracles they see on TV: "I have lost 100 pounds in the last two months," et cetera. Nobody cares? You are in charge of market framework and we let that happen. It has been happening for years and it is public. It is not right.
I recently saw an article saying that one of those clinics will be prosecuted for fraudulent advertising. That company has existed for years.
Regardless, you have about 400 people to oversee millions of transactions. The other group in charge of inspecting the accuracy of weights and measurements has more employees than you have. All they do is ensure that consumers are not gouged when they go and buy something based on weight and quantity. There are many more inspectors on the road to ensure the accuracy of those. I do not think that you have the workforce or the capability of other institutions in the federal government like the weights and measures or the income tax people at the agency have. If you do a study among Canadians that asks if they think they are protected from illegal activities and price fixing, et cetera — if they think they are properly protected — I would bet that most would say, "No, we are not protected properly."
I would like to ask a question, Mr. Chair.
The Chair: You have us all warmed up.
Senator De Bané: We are all consumers. We have before us two important people in charge of the marketplace and anti-competitive practices.
There is something that I would like you to explain to me or to remind me of first: If you look at the last 10 years, how many cases have you won before the Competition Bureau?
Mr. Fanaki: In a particular area?
Senator De Bané: I am told that, if we look at the overall numbers, very few companies have been convicted of infractions to the law, if you look at the last 10 years.
Mr. Fanaki: There are a number of things I would like to say in response to your comments, if I could. Perhaps I will take them sequentially.
I appreciate the sentiment about the importance of active competition enforcement and the large task that we face at the Competition Bureau.
The first point you raised was about the importance of voluntary compliance. That is an important point that I would ask the members of this committee to keep in mind when people come before you and speak about this legislation. Certain aspects of this are to ensure that we have effective deterrence, that we have the penalties in place to promote compliance with the act.
The issue you raised specifically was on criminal misleading advertising cases. I believe you said it was a fraud. I would agree with you, senator. It is a fraud on consumers and it is a fraud on the Canadian marketplace generally, because it makes it more difficult for businesses that engage in honest forms of advertisement to compete. However, our law does not currently treat it in the same way as the Criminal Code offence of fraud.
One of the things that will be achieved through the amendments proposed in Bill C-10 is to significantly increase the penalties associated with that criminal form of misleading advertising — misleading advertising where advertisers know that the statements are false — to bring it into line with the Criminal Code offence of fraud.
The other point you raised was in respect of price fixing, when you see a common price. That speaks to the difficulty of some of the tasks that we face in the area of cartel enforcement. It is not enough to establish that the price is the same. We also have to find evidence that would establish, beyond a reasonable doubt to the criminal burden of proof, that there has been agreement among those competitors to fix prices at that level.
Under the current law, that would not be enough. We would then have to establish that indeed that agreement had a significant anticompetitive effect in the marketplace. These amendments are designed to allow for more effective enforcement of the cartel provisions, and greater incentives for compliance with the laws around misleading advertising, so that we can do more with the limited resources that we have and administer and prosecute the act in a more efficient manner.
Senator De Bané: Do you have any idea about the comparative size of the workforce of the weight and measures inspectors compared to your 400?
Mr. Fanaki: I do not, I am sorry.
Ms. Downie: I do not have that information either.
Senator De Bané: Ms. Downie, sometime in the future, could you provide us with data about how many businesses there are in Canada, and if those can be segmented between $0 and $10 million, $10 million and $20 million, et cetera, so we can have an idea if we are set up to do effective monitoring and oversight?
Senator Di Nino: You may want to ask whether that should be in the capital of a company, the sales of a company or other indicators. Obviously, you will get a variety of different answers, depending on what it is.
Senator De Bané: You are much more knowledgeable than I in that area. Perhaps Senator Di Nino can give you some parameters.
Senator Di Nino: I thought you were asking for companies that would have a capital base of $10 million or more as opposed to sales of $10 million or more. I thought that is what you were asking — or profits of $10 million or more.
Senator De Bané: I rely on you. What is the most revealing, the most relevant?
Senator Di Nino: I am not sure exactly what information you want. That is why I ask.
The Chair: It is the witnesses who have to determine that.
Senator De Bané: I do not think we want them to monitor the commercial practices of the convenience store at the corner, but there are some players that have a lot of weight in the market. I do not know what should be the cut-off.
Senator Di Nino: The capital base would probably be the most help.
Ms. Downie: I will see what exists. I am not aware of what exists, but I will do my best to find out.
The Chair: Senators, that brings us to the end of my list. That is Part 12. Ms. Downie, who has been here all afternoon, has indicated that she is here to help us with respect to Part 13, Investment Canada Act. That may go fairly quickly.
We also have three other sections that we wanted to deal with tonight. However, once we do the Investment Canada section, I think we can let Ms. Downie and her team go. We will have a quick caucus to determine where we go with respect to the rest of the work that we had hoped to get done tonight.
Ms. Downie, if you could continue with the Investment Canada Act, which is Part 13. It appears at page 421 of Bill C-10. Could you tell us, using the same general approach?
Ms. Downie: I will introduce my colleagues who have joined me. I have Richard Saillant, Director of Investment Policy, Marketplace Policy Planning Group, Market Framework Policy Branch, Industry Canada. I also have Eric Dagenais, Director General, Investment Review and Strategic Planning Branch, Industry Canada.
I will try to keep it brief and give you the highlights of what is proposed in the amendments in Part 13 of the budget implementation act. Again, the amendments respond to the core recommendations of the Competition Policy Review Panel. They lower obstacles to foreign investment by focusing net benefit reviews that currently are conducted by Eric and his staff. They propose to focus those net benefit reviews on large transactions by raising the threshold for review.
They improve transparency and administration of the act by allowing the Minister of Industry to publish decisions conducted under the net benefit review process and they authorize the government to conduct national security reviews, to look at whether transactions or potential transactions threaten to harm national security, bringing us in line with most other industrialized countries.
Again, with time in mind, I will leave you with that overview and I am happy to answer questions.
The Chair: Your overview was so quick that I have no senators who have questions, other than Senator Di Nino.
Senator Di Nino: We are talking about raising the minimum threshold for WTO investors each year according to the nominal growth rate of the gross domestic product. I think you are calling for a formula to be established. What kind of formula is that? Will it be set by regulations or is there an established formula already?
Ms. Downie: There is a formula that currently raises the threshold using GDP to inflation.
Senator Di Nino: Is that an existing formula or is that something that is to be regulated? It would make a difference. If it is an existing formula, they can tell us what it is.
Ms. Downie: There is an existing formula, which we can explain shortly. Just so I am clear, these proposals also propose to increase the threshold for review for net benefit, in a phased-in way over four years.
Senator Di Nino: That is a different formula.
Ms. Downie: Yes.
Senator Di Nino: Give us both so that we can understand.
Eric Dagenais, Director General, Investment Review and Strategic Planning Branch, Industry Canada: The first one is not actually a formula; it is just a set increase over the next four years. After that, there will be a formula.
There is a formula in the act right now that we use to increase the threshold on an annual basis. That is the current nominal GDP at market prices divided by the previous year's nominal GDP at market prices. It is as straightforward as that; it is based on Statistics Canada GDP and we take last year's versus this year's.
Senator Di Nino: We have heard that some people have not been happy with the consultation process. Have you had business communities' opinion on this change?
Ms. Downie: I will give you the same answer as on the merger review provisions of the Competition Act, that the consultations were extensive, that they were conducted by the Competition Policy Review Panel. They invited submissions, held round table discussions with specialists, and held individual sessions with stakeholders including the business community. These proposals respond to the issues raised in that context during those consultations.
Senator Di Nino: They emanate from the panel's review.
Ms. Downie: That is right.
Senator Di Nino: What is the general practice in WTO countries? Is this proposed process similar to other thresholds in the world and in reasonable balance with others or are we far out in one sense or the other?
Richard Saillant, Director, Marketplace Policy Planning Group, International Investment Policy and Branch Planning Directorate, Industry Canada: This is a good question because Canada is one of the few countries that has a formal law to review transactions on primarily economic considerations. Australia and New Zealand also have such laws in place. Generally speaking, most other countries rely on reviews on the basis of national security. The Investment Canada Act currently reviews investments based on considerations that are economic in nature. Some of the amendments that have been put forward would provide authorization for the government to review transactions on a national security basis, should it identify potential threats.
Senator Callbeck: I have a couple of brief questions. In your opening remarks, you said that the recommendations from the review panel included raising the threshold, publishing decisions and allowing the government to do a national security review. I wonder how each of those will help the economic situation today, given that they are included in this economic stimulus bill. Could you explain how each of those three things will help the economic situation today?
Ms. Downie: The Competition Policy Review Panel conducted consultations and spoke to representatives of foreign governments and it travelled overseas. It found that the existing thresholds in the Investment Canada Act send an unintended signal to potential investors about Canada's lack of openness to foreign investment. It recommended that the thresholds be raised to reflect Canada's openness to foreign investment. Obviously, the connection to our current economic times and to stimulus is the need for access to sources of foreign investment.
At the same time, the panel recommended that we bring ourselves into line with other jurisdictions with a national security tool, and that in the post-9/11 world, that is an important introduction. The other amendments I mentioned are governance-related to improve transparency and to send signals to investors about the basis on which the minister makes decisions.
Senator Callbeck: It does not have much to do with stimulating the economy today. We have been talking about the shovel-ready projects and infrastructure money, et cetera, and yet this is in the same bill. It seems strange that we are raising thresholds when the stock market is way down in every country of the world. Why would we do that now? What is the rush?
Ms. Downie: We are an open economy and we rely on foreign investment and trade with other jurisdictions to prosper and to thrive. The intent is to send a signal to the world to address this misperception that the Competition Policy Review Panel identified and ensure that we have access to foreign capital and that it is not deterred from entering Canada.
Senator Callbeck: I accept your answer but I still do not understand why there is a rush to do this now.
Senator Ringuette: My questions follow Senator Callbeck's question. I question the timing of this legislation. On the one hand, the market value of Canadian businesses is down on the stock market and on the other hand, you are proposing to raise the review threshold up to $1 billion, without question, for foreign takeovers. It is a kind of double jeopardy. At a time when Canadian businesses are fragile on the stock market, the government is increasing its investment from $312 million to $1 billion — a 300 per cent or more increase. I do not understand why you would do this now.
Ms. Downie: As I explained before, foreign investment provides numerous benefits, including higher-paying jobs.
Senator Ringuette: I heard you say that but foreign investment of $1 billion for one business is one issue. Foreign investment of $1 billion for 200-400 Canadian businesses is a completely different issue. We are talking about one Canadian business entity with an investment of $1 billion. We are not talking about 500 businesses. What you are saying and what this bill intends are two different views of foreign investment.
At this time, our publicly traded Canadian businesses are at their most vulnerable in a decade and a half, and increasingly so in the coming year. Yet, we are increasing the potential of foreign takeovers by going from $312 million to $1 billion. It is triple jeopardy if you include the devaluation of the Canadian dollar.
I question the end result of this agenda for Canadians. This is not a political issue but an honest concern that such a proposal is in this bill. I clearly understood your arguments and they would be good ones if we were looking at company X from Germany, for example, coming to invest $1 billion in 500 Canadian companies. However, they are not good arguments when we are talking about a German company investing $1 billion in one Canadian company. It does not make sense to me at a time when we need to be supportive. From my perspective, this is not supporting our Canadian businesses. It is opening the door for others to take advantage of us.
Maybe you do not understand or do not agree with my perspective on this. I welcome your comments.
Ms. Downie: Thank you. I think these amendments are proposed on a different premise, which is that foreign investment benefits Canadians and Canadian firms need access to Canadian capital.
Senator Ringuette: To Canadian capital?
Ms. Downie: To foreign capital. I misspoke.
The government recognizes the importance of moving carefully in the current economic climate. The proposal in the bill is to move forward progressively, to phase in the increase over a five-year period to $1 billion.
Senator Ringuette: I still have grave reservations.
The Chair: As a point of clarification, on page 426, clause 448(3) of this act amends sub-sections 14(4) and 14(5) of the Investment Canada Act. What is the WTO investor exempted from?
Mr. Saillant: To clarify this, investments from WTO investors are currently reviewable under the act. Subsequent to the negotiation of NAFTA in the early 1990s, the threshold for those investors is higher. The amendments to section 14 essentially are the shift to enterprise value. For WTO investors, we will be shifting from the general review threshold of $312 million to $1 billion, progressively over a four-year period reaching that level at the beginning of year five. For the few non-WTO investors, we are preserving the existing regime. That also applies for investments in cultural businesses, recognizing the particularities of the cultural business world. Takeovers in that area will still be reviewable at $5 million.
The Chair: The cultural business exemption appears in sub-section 14(5) of the Investment Canada Act?
Mr. Saillant: Yes.
The Chair: I see that on page 426.
Mr. Saillant: That is right. Essentially, that whole provision provides for the increase in the threshold for WTO investors. For non-WTO investors and cultural businesses, the existing threshold will remain at $5 million for direct acquisitions.
The Chair: What does proposed subsection 14(4) mean, ". . . is not reviewable under section 14 if it is made by . . . a WTO investor"?
Mr. Saillant: That is to clarify an obligation taken under trade agreements that indirect transactions — when a foreign firm is acquired that happens to carry a Canadian business into Canada — would not be reviewed if they came from WTO investors. This is a technical amendment that confirms this practice, which has been ongoing since the negotiation of these agreements.
The Chair: However, it is a double negative if there is a cultural business involved in effect?
Mr. Saillant: Yes. The cultural business has a special regime that continues to apply.
The Chair: That is helpful for senators.
[Translation]
Senator Chaput: I would like to ask about foreign investment in our businesses and more specifically about thresholds. Some are being raised, others remain unchanged and still others are being abolished. I presume that the intention behind these increases or decreases is to protect our country and also its economy.
My question is this: based on what considerations do you recommend to increase, leave unchanged or abolish these threshold? What is the underlying rationale?
Mr. Saillant: I will try to put into context the various existing thresholds and what we do with them. Presently, under the Act, four sectors are identified as having lower thresholds than the so-called standard threshold, which is presently set at $312 million. The specified sectors are culture, transport, financial services and uranium production. These have a threshold of $5 million for direct takeovers.
Now, we propose a first change, which would eliminate the lower thresholds for three of those industries, excepting the cultural sector. The reason behind this is that we agree with the panel's finding that there already exists a set of regulatory tools that are specific to each industry and that allow to properly meet the challenges faced by each of those industries. For example, there already exists a very clear process that regulates the uranium industry as a whole. So we propose to eliminate the special treatment of those sectors.
The second change has to do with the general threshold, in other words the threshold for all transactions that are not specifically identified. It would be increased from $312 million to $1 billion over four years. So in a nutshell, these are the changes to the various thresholds.
Just in closing, there will be no threshold in terms of national security. Any transaction will be reviewable for potential threats that might be identified.
Senator Chaput: Did you abolish the threshold for banks and financial institutions?
Mr. Saillant: We did not abolish the threshold, but we increased it to the standard level. I should note that there is already a review process of bank mergers and that at the present time all financial institutions coming under the Bank Act are not reviewed under the Investment Canada Act.
[English]
Senator Mitchell: Could you give us insight into what would be defined as national security? Is it strictly something that has a military defence connotation or could it relate to security of food, finance or Canadian ownership of our oil industry, for example?
Ms. Downie: I will let Mr. Saillant expand on my answer, but I will say that WTO agreements apply to how national security reviews will be done or potentially done. They must be consistent with those obligations. They define a preset series of national security-related issues. They relate mainly to the military and security-related factors that you outlined.
Mr. Saillant: I will complement that answer by saying that there is an agreement amongst countries that national security issues have evolved since September 11 and they are constantly evolving. Therefore, there has been a tendency to accept that concerns are self-judging.
Countries have been reluctant to challenge each other on their definitions of national security because they accept, first of all, that national security is a prime concern but is also something that is evolving. Therefore, there is no explicit definition of the term "national security" in the act, but there is clearly intent to comply and to be consistent with our trade obligations.
Senator Mitchell: Therefore it is up to us. Do we have some sort of a matrix to define what we would consider or is it kind of "judge as you go"?
Mr. Saillant: There has obviously been a lot of work done in the past in looking at the various issues that might arise. However, the policy decision which was made was that, because national security is evolving and constantly changing, we need the flexibility to be able to identify threats as they arise.
Very few countries have employed an explicit definition of national security. For instance, in the United States they provide examples but, in the end, the illustrative lists being provided covers a very broad swath of the American economy.
This is a decision that had to be made in terms of whether we define the term. Finally, the decision was to keep it as it is right now.
Senator Mitchell: Is there any kind of limit considered in this process as to how much of our oil industry should be Canadian owned versus foreign owned? What if the last purchase was to take 100 per cent of it out of Canadian hands, would there be some limit to that?
Ms. Downie: Are you asking if we took it into account?
Senator Mitchell: Did you, in this process, take into account ownership of certain industries?
Ms. Downie: I cannot speculate on how that would apply to the oil and gas industry. I do not know if Mr. Dagenais has anything to add in terms of how that works now.
Mr. Dagenais: There is no consideration under the net benefit of the percentage of an industry that is already being acquired. There are six factors in the act and we stick to those.
Senator Mitchell: There is no problem with the North American Free Trade Agreement. Has all of that been thought through?
Ms. Downie: Yes.
Senator Mitchell: You mentioned this formula of GDP to GEP that increases the threshold every year.
Mr. Dagenais: Yes.
Senator Mitchell: What if you have a decrease in GDP? Does it slow down?
Mr. Dagenais: Yes.
Senator Spivak: I am not a member of this committee. I have a very short question. Is there anything in this legislation that could affect or impact provincial restrictions on foreign purchase of land?
Mr. Saillant: I am not aware of anything specific that relates to that. Obviously, if the company owning the land is a Canadian firm and meets the threshold with regards to the net benefit review process, one could presume that it would be a reviewable company.
The purpose of the act is to review transactions that are acquisitions of control of Canadian companies. That is the first point that we could make.
The second point is that national security is not defined under the act but, if there is a concern that would arise as a result of that, it could be considered.
Senator Spivak: For example, a country like Saudi Arabia, which will no longer raise wheat, and is looking to purchase land in various countries, and Canadian land prices are not high. I wonder if the provincial restrictions would still apply. Also, I wonder whether this might not be a question of food security because they are looking for land for their purposes.
Mr. Dagenais: Thank you for the question. If I understand, you are asking whether the change to the Investment Canada Act will have an impact on existing legislation at the provincial level. No, the provincial governments who have put in place restrictions on purchasing land are not affected by this. In terms of the Investment Canada Act, we would review a proposed investment. If it involved land, we would recommend to the minister to make a determination on net benefit.
That does not change or does not override any provincial legislation that could be in place.
The Chair: Honourable senators, we should thank Colette Downie and her team of Richard Saillant and Eric Dagenais for helping us through two important part of this legislation. As a result, we are left with a much better understanding and will be better able to deal with the Canadian Bar Association and others who have written to us with their concerns.
We thank you very much for being with us. I am sure you will be following our deliberations with interest. You will hear what the other side has to say about this in due course.
Ms. Downie: I certainly will. Thank you, senator.
The Chair: Thank you very much. I will let you take your leave.
Honourable senators, we have had a lady sitting and waiting to deal with things. I recognize the time but the two parts that we have left are Parts 13 and 14. We have with us Ms. Brigita Gravitis-Beck, Director General, Air Policy, with Transport Canada. Hopefully, she can help us with Parts 13 and 14. They take up only two pages of this bill. They are not major portions of the bill.
If you agree, we will deal with these two parts and then break for 15 minutes to have a short recess and determine where we go from there. We did have intentions of proceeding with Mr. David Osbaldeston with respect to navigable water protection. Whether we proceed with a hearing at seven o'clock will be a decision we make collectively, since the team has been here throughout the day.
At this stage, Brigita Gravitis-Beck, why do you not just deal with Part 14 first and tell us why that is appearing here in Bill C-10 and how it impacts on the stimulus package.
Brigita Gravitis-Beck, Director General, Air Policy, Transport Canada: Part 14 is intended to support the government objectives of sectoral competitiveness by reducing barriers to investment. Specifically, and with regards to the policy that underpins the legislative change that you are seeing here, the Government of Canada is proposing to increase the limit on foreign ownership of voting interest in Canadian carriers from the existing 25 per cent to a 49 per cent level, with that eligibility for the increase to be determined through air transport negotiations with foreign governments.
There would be no change proposed to the Canada Transportation Act with respect to Canadian control, so that is an important consideration. That is the policy intent.
The legislation would enable the government to recognize different categories of non-Canadians for the purposes of being allowed to own voting shares in Canadian carriers. Pursuant to this legislation, if it were to be passed, regulations would be drafted to retain the current 25 per cent ownership level for everyone as a base line and allowing for an increase to 49 per cent ownership level for investors from certain countries, as granted through air transport negotiations.
The Chair: Are we only dealing with air carriers?
Ms. Gravitis-Beck: That is Canadian air carriers, correct.
Senator Eggleton: You say it changes the ownership levels, obviously — 25 to 49 per cent — but it does not change the control factors. Is that what I heard?
Ms. Gravitis-Beck: That is correct. You retain the requirement for Canadian control.
Senator Eggleton: Which means the majority of shareholders would be Canadian.
Ms. Gravitis-Beck: That means Canadian control has to be determined by the Canada Transportation Agency as part of their licensing procedure.
Senator Eggleton: If the 49 per cent owner has appointments to the board, how does that impact upon your separate regulation with respect to Canadian control?
Ms. Gravitis-Beck: Nothing will change with respect to the approach taken now with determination of Canadian control. That is done by the Canada Transportation Agency on an ongoing basis with respect to attesting to the fact that carriers remain Canadian, as required under the legislation. They do not have particular criteria or parameters they use, so that they can retain flexibility for the creative kinds of arrangements that can occur in a market transaction. However, it would consider things like the participation on the board. There is no change proposed to that process as it exists today.
Senator Eggleton: How do you see this affecting competition, airline routes, jobs, et cetera? How do you see the impact?
Ms. Gravitis-Beck: The intent is to create a greater opportunity for investment for Canadian carriers, to give them greater choice in terms of source of funds. It does not change any of the underlying policies with respect to where those carriers fly or what routes they take. Those continue to be determined separately and distinctly as part of their decision-making with respect to the marketplace.
Senator Eggleton: Is there something similar in the United States? How do they regulate the ownership issue?
Ms. Gravitis-Beck: All countries have provisions that determine national designation, what constitutes a national carrier. The United States currently sets the allowable foreign ownership level at 25 per cent. That would require a change by Congress to be increased. It is an element that has had a lot of attention in the context of their ongoing negotiations with various countries internationally.
Senator Eggleton: They are at 25 per cent; we are going to 49 per cent. Why do they feel they should stay at 25 per cent?
Ms. Gravitis-Beck: You would have to ask the United States that.
Senator Eggleton: What I am getting at is if someone has a 49 per cent share, they will effectively have control. You say Canadian control will be maintained; I am not sure how that, in a practical sense, will occur. I am wondering what advantage there is for us to allow it to go to 49 per cent. What advantage is it to Canadians in terms of jobs or routes? Will they add to the routes in the country? What will be the advantage to Canadians?
Ms. Gravitis-Beck: Any time that we increase the flexibility and scope that is available to our industry — in this case, Canadian carriers — to access more funding in a more flexible way, we are creating opportunities to support that business. With respect to the 49 per cent — sorry, I think I have lost my train of thought here — but that is what I would say.
The Chair: I suppose what you are getting at is how widely held the 49 per cent is, and how widely held the 51 per cent is. If the 51 per cent is very widely held across the market and one entity owns the 49 per cent, then as Senator Eggleton points out, it effectively has control.
Ms. Gravitis-Beck: Those considerations would be taken into account by the Canada Transportation Agency, as they are at the present time, in terms of assessing control.
The point I was going to make is that even today where we have our 25 per cent constraint on voting shares, carriers have found creative approaches to continue to attract investment while respecting that 25 per cent constraint. They use something called a "variable voting share structure." This requires them to manage closely at any time that they have shareholder meetings or they are making decisions so that they continue to respect that Canadian control and the 25 per cent voting element every time decisions get taken. Our large carriers are managing that process but it is a constraint. Opening the opportunity to go up to 49 per cent of voting interest, while retaining control, was felt to be a more accommodating approach.
The challenge of ensuring that Canadian control is maintained will rest with the Canada Transportation Agency. They have indicated that they are capable of continuing to exercise that due diligence.
Senator Eggleton: What kind of criteria would they use in exercising due diligence to ensure that? Canadian control, I guess, would mean Canadian interest too, so what kind of criteria would they use to exercise this? If a single owner has 49 per cent, what kind of tests, what kind of criteria will you use to ensure Canadian control?
Ms. Gravitis-Beck: Again, the Canada Transportation Agency takes a very flexible approach; it is not a rigid approach. It looks at every situation on its own merits, based on the circumstances of that particular situation or context.
Senator Eggleton: It does not use criteria of some sort?
Ms. Gravitis-Beck: It would take into account the predominance of a single investor in terms of control or in terms of say. It would take into account the degree of influence on decision making, participation on the board, covenants, et cetera, that may get built into the financing, which may create obligations with respect to that particular investor. There is a very broad range of considerations that would go into their determination of whether that, in the end, constitutes control or not.
Senator Eggleton: What about service to Canadians and job opportunities for Canadians? Does that get considered as part of it as well? The 49 per cent owner could be another airline in the States, which would say we will do the servicing out of Cincinnati.
Ms. Gravitis-Beck: Again, to the extent that control remains in Canada, that would not be a concern. The question is whether control remains in Canadian hands, regardless of the level of ownership or voting interest.
Senator Eggleton: Does "control" mean that the majority of the board must be Canadians?
Ms. Gravitis-Beck: One of the considerations that the Canada Transportation Agency would take into account is board participation and the degree of influence that those investors have on the board.
Senator Eggleton: Could it be independent board members; is that part of it as well? As opposed to ones that are nominated by the 49 per cent shareholders.
Ms. Gravitis-Beck: I think the Canada Transportation Agency does a rigorous assessment of how influence could be exerted.
Senator Di Nino: I think we should emphasize, and I would ask our witness to do so, that 49 per cent is the ceiling; it is a maximum. Obviously, it could be reached, but we are talking about a maximum as opposed to an absolute. Am I correct?
Ms. Gravitis-Beck: That is correct.
Senator Di Nino: The question of consultation comes up all the time. This was a recommendation of the Competition Policy Review Panel.
Ms. Gravitis-Beck: It was.
Senator Di Nino: They obviously had consulted with the industry and with other stakeholders?
Ms. Gravitis-Beck: I believe so.
Senator Di Nino: I read it, but I cannot remember; it was a long time ago.
Is Air Canada one of those that were consulted?
Ms. Gravitis-Beck: I cannot say for certain.
Senator De Bané: You are the director general of air policy. What I understand is peculiar to that industry is that you need the point of departure and a point of arrival, which are large urban centres. Do you agree with that?
Ms. Gravitis-Beck: Carriers fly between small points, small cities and communities, as much as they do between large centres.
Senator De Bané: The fact is that 80 per cent of Canadians live in 10 cities. At certain times during the winter, I can buy an air ticket from Ottawa, Montreal or Toronto to Florida, and return, for $200-$250. If I want to travel from Canada to a small community in the Maritimes, it costs me a bundle more. Is that of concern to the Director General, Air Policy.
Ms. Gravitis-Beck: Thank you, senator. If I may, the question goes outside the context of the bill's provisions before us. In an economically deregulated Canadian marketplace, Canadian carriers decide where they want to travel, and the marketplace determines the appropriate price. Competitive factors determine the appropriate price that can and should be charged on any given route. The carrier considers the amalgam of all of its routes and pricing structures in terms of trying to remain viable and sustainable.
Senator De Bané: As you know, so many products and services in this country are regulated because there is another purpose that we would like to achieve. We want to protect the income of a farmer or we want to attain another desirable objective. Therefore, those prices are regulated, and you are telling me that we leave pricing to market forces. I remind you that not only do 80 per cent of Canadians live in 10 cities but also the rate of urbanization of our country is the fastest in the Western World. Why? People are not fools — they realize where the services are and where air travel is possible, et cetera. This is the kind of thing that you should think about.
If we want all Canadians to live in only a few cities, then it is fine. Then do not dream about efficient services for large territories of our country, which, I remind you, is the second largest in the world. To simply say that market forces will deal with it, I put to you respectfully that there are many services, products and commodities with regulated prices for higher public interest. I would like you, as Director General Air Policy, to be sensitive to that. It all depends where we sit and what our values are. Perhaps because I represent a distant area, I am sensitive to the issue. I was always shocked to know that I could go to Europe for a cheaper rate than I could go to my riding in the Gaspé Peninsula.
Senator Mitchell: I am interested in your response to Senator Eggleton about the steps and considerations by this group if it looks like there is loss of Canadian control. For example, let us say that American interest was up to 49 per cent but the 51 per cent was very widely held. Would you force the American concern to sell shares? Would that be one of the remedies? You say what they consider but you are not giving any specifics.
Ms. Gravitis-Beck: I will try to answer your question but I am not the Canada Transportation Agency and they do not report to me.
Senator Mitchell: Have you ever seen what they have done?
Ms. Gravitis-Beck: We work closely with them but their decisions are internal in terms of deliberations. In substantial assessments of Canadian control, they will issue a summary statement or document that is publicly available. In most cases their deliberations are in camera, and I am not any more privy to them than anyone else would be. Again, the Canadian Transportation Agency looks broadly at all of the parameters that could constitute influence and control in its assessment.
Senator Mitchell: What steps do they take if they find that, having considered all those parameters, there is a disproportionate foreign control? How would they dilute that control?
Ms. Gravitis-Beck: My understanding is that they provide an indication of their assessment to the carrier in question, and the carrier in question then looks at whether it is prepared to consider alternatives to address the concerns raised.
Senator Mitchell: Has this ever happened in the past that you are aware of? You must have some experience with this in order to defend this piece of proposed legislation. I would think that you must be quite certain if you are prepared to allow it to go to 49 per cent that if there is a problem, there will be remedies. I would like to hear one or two of them. Are they forced to sell and if they do not sell, what is the recourse?
Ms. Gravitis-Beck: The remedy is that the Canada Transportation Agency can deem that a carrier is not Canadian controlled and, therefore, is not eligible for a Canadian licence, which allows it to operate in Canada.
Senator Mitchell: They would cancel the licence.
Ms. Gravitis-Beck: It is usually a granting of a licence in the first instance. As is the case with many of our large carriers, they are starting to use a variable voting structure to find a work around to attract additional investment while respecting the 25 per cent voting consideration. As a result of that, the Canada Transportation Agency has been very active and engaged with those companies to ensure that the 25 per cent continues to be respected.
The Chair: Ms. Gravitis-Beck, could you tell us about Part 15, the Air Canada Public Participation Act, which I suspect is similar to what we have been talking about except that it deals specifically with Air Canada. Could you tell us about that?
Ms. Gravitis-Beck: The Air Canada Public Participation Act is the responsibility of the Minister of Finance. It is proposed that parallel provisions put into place in the Air Canada Public Participation Act with respect to ownership and management of voting shares be removed. This means that Air Canada would to be governed by the same ownership and control requirements that apply to all carriers through the Canada Transportation Act.
The Chair: Presumably, the Canada Transportation Act, if and when amended, would be along the lines we have just discussed and Air Canada would fit into the same group of carriers.
Ms. Gravitis-Beck: That is correct.
The Chair: Are there questions, honourable senators? It seems pretty straightforward.
[Translation]
Senator Rivard: We remember that Air Canada was privatized under the Mulroney government. At that time, the government ensured that in the articles and regulations of the company bilingual services would continue to be offered. Would this be affected in any way by the amendments to the Act?
Ms. Gravitis-Beck: There is no impact on bilingual requirements.
[English]
The language provisions of the Air Canada Public Participation Act will not be touched as a result of this amendment.
The Chair: I understand. That is helpful. I thank you, Ms. Gravitis-Beck, and your team for appearing before the committee today to help us with our deliberations on Bill C-10.
Honourable senators, there is an issue outstanding with respect to the report. Honourable senators will know that there is a budget. From that budget flows budget implementation and supply also flows through Main Estimates. The main estimate supply bill is not here, but our report on the work that we have done thus far has been prepared and circulated. It should be in the Senate during the final week of March.
Honourable senators have all received it. Are there any changes that should be made to that interim supply report?
Senator Gerstein: I know we are pressed for time. There are a couple places where there are expressions that refer to "senators." If we could use the phrase "some senators," I think it would reflect what took place.
The Chair: Most times that is the form we use.
Senator Gerstein: Usually, it is.
The Chair: Senator Callbeck had some changes. She is not back yet. Senator Mitchell, did you have any comments in relation to the report?
Senator Mitchell: No.
The Chair: I do not see any changes, but we should wait for Senator Callbeck. Perhaps we will deal with this during the latter part of the meeting. I will table that issue until she comes because she raised the issue.
I apologize, Mr. Osbaldeston. We are trying to do a lot of things together.
My clerk suggests that there is one other item we could deal with quickly. This budget will lead us only to the end of this fiscal year, which is two weeks away. It is almost emergency funding; it does not include anything other than basic funding.
Senator Di Nino moves approval of the budget. Those in favour? Contrary minded?
Hon. Senators: Agreed.
The Chair: Motion carried.
We will develop a full budget for the coming fiscal year in due course. However, as we are meeting night and day, we thought perhaps we should have some funds to cover extra costs that we normally would not incur. Thank you.
Senator Mitchell: I wanted to ask the chair's advice whether I could move the motion we had discussed earlier. It concerns gender-based analysis documents from the Department of Finance with respect to Budget 2009. Would it be appropriate?
The Chair: Would that impact on Bill C-10?
Senator Mitchell: Definitely, because much of Bill C-10 will have profound implications for women, particularly the pay equity measures.
The Chair: That motion is in order to be received because we are dealing with Bill C-10.
Would you read the motion for the honourable senators?
Senator Mitchell: That the Senate Standing Senate Committee on National Finance requests from the Department of Finance the gender-based analysis of Budget 2009, and that the response from the Department of Finance be made available to all committee members.
The Chair: We do not need a seconder at committee.
Senator Eggleton: It is the same as the motion in the House of Commons.
Senator Gerstein: Was it provided?
Senator Nancy Ruth: It is in the midst of being provided. It is in the cabinet office being gutted.
The Chair: Honourable senators, all those in favour say "yea." Contrary minded say "nay."
Hon. Senators: Agreed.
The Chair: Motion carried.
We have agreed that we will adjourn in about half an hour to give you a chance to go home and see your families.
We have Mr. David Osbaldeston, Manager of the Navigable Waters Protection Program, Transport Canada and Brigit Proulx, Legal Counsel, Legal Services, Transport Canada. You have been very faithful in staying here throughout the afternoon and well into the evening.
This portion of our discussion will focus on Part 7 of Bill C-10 dealing with the Navigable Waters Protection Act. You have seen the process we are following. We ask you to give us an overview referring, where it is convenient, to portions of the bill itself. We all have the bill in front of us and that helps us to understand what we are addressing.
I can tell you at the outset that there is probably no other part of this bill that honourable senators have received more emails on, protesting the legislation. We expect to have panels of those groups and individuals that have expressed an interest in appearing. However, we have to understand the government's position first, which is why you are here.
Mr. Osbaldeston: Thank you for having us. I hope to give a quick background on the Navigable Waters Protection Act as it is today, how we got to where we are and then go into the amendments. We hope to provide you with some layman's insight into how the amendments the government hopes to implement will benefit Canadians at large.
The Navigable Waters Protection Act was written in 1882 and, indeed, it is one of the oldest pieces of legislation in Canada. It balances the common law right of navigation, along with the need to construct works in navigable water. Unfortunately, it has not been amended since 1886. It simply has not kept pace with the needs.
The act as now written has become an impediment to economic development and to the development of Canada's transportation infrastructure. This has prompted government agencies, private industry and the general public to request changes to the act to reflect current economic needs and respond to the increased volume and variety of uses of Canada's waterways.
The act was conceived at a time when the navigable waters were intended to support commercial transportation, commerce and fishing interests. Indeed, our waterways were the highways of the time in 1882. No one thought about climbing into a canoe or kayak for a recreational purpose. They used those vessels for work.
Court interpretations over the last 100-plus years have expanded the scope of the act to include all waterway uses, including those waterways barely capable of supporting canoes and kayaks. During that time, nothing has been removed from our legislation. The courts have only added to it.
I will go through the amendments, in particular, that are being proposed as part of this bill. We would like to add a provision to specify that the Navigable Waters Protection Act is binding on Her Majesty in right of Canada, the provinces and territories.
Prior to 1992, the Crown did not believe that it was subject to the NWPA for works constructed by the Crown. As a result of a Supreme Court decision in 1992, it was determined that this interpretation was incorrect and that such works constructed by the Crown over the course of the previous 100 years were subject to the legislation. It was retroactively binding.
This new provision will bring clarity to the act, specifically identifying that this act binds Her Majesty.
The amendments proposed are the creation of new regulations and regulation-making powers in the act. The existing legislation is prescriptive in nature. In 1882, they told you in the legislation not only what your overall objective was but how to do it. Indeed, in this particular legislation, for example, we not only tell a proponent, when there is a substantial interference to navigation, that he must advertise his proposed work in local newspapers, our legislation tells him how many local newspapers he must advertise in. We also tell him in our act where he must deposit plans. Because our act has not changed over many years, it says he must deposit plans in public land registry offices. In certain jurisdictions, such offices no longer exist.
Regulation-making powers are required in the Navigable Waters Protection Act to provide the minister with greater flexibility to properly administer the act in a more efficient and effective manner to meet the needs of Canadians and to better reflect these modern-day governance policies. Such regulations would include: the granting, modification, renewal, suspension and cancellation of approvals; the notification requirements for a change of ownership of a work; establishing classes of works and classes of waters; respecting the construction, maintenance, operation, safety, use and removal of works; and respecting consultations on how they should be carried out.
While the proposed amendments would provide authority to the minister to make regulations respecting the exclusion of defined classes of waters and the exclusion of defined classes of works from the application of approval processes of Part 1 of our act, such cannot be accomplished quickly enough to respond to the current economic crisis. It is recognized that timely action is required in order to expedite the development and delivery of critical infrastructure projects immediately after the budget implementation act receives Royal Assent.
To that end, we do propose instituting orders. These orders would cover these specified classes of water and specified classes of works.
There is a lot of misinformation. These are the subject of many of the emails that we are all receiving. With respect to what this actually entails, let me see if I can provide you some clarification.
Under the concept that the government is putting forward, waters on a specified class of water would be things such as waters on which a work can be built without application for approval requirements in advance. There has been information conveyed that such works would no longer require the approval of the government. That is not correct. These works would fall under our review but they would be meeting pre-determined criteria in advance. They would not be excluded from our legislation; they would remain under the purview of our legislation. They would just be exempted from having to apply for that approval in advance as long as they constructed the work in the manner as described within the order.
Classes of waters will be clearly defined within the orders and, in essence, identify waters that cannot be reasonably navigated by the public. What types of waters would these be? Minor water is a water that is too narrow, which would mean that, every time you tried to paddle it, you would be banging the shore line with your canoe paddle. Too shallow means it is too shallow in that you would be falling off the canoe by trying to paddle it. Too steep covers waters that are too steep and too obstructed by natural obstacles — you would be out of your canoe or kayak more than in it. Too sinuous relates to waters that are too sinuous — you would be going left and right more than making any forward progress.
All of these relate to being within a specified length of waterway. It is parts of a river. I know there has been information out there that we would be eliminating rivers that canoeists or kayakers paddle right now from being covered under our legislation. That is not so. We would be identifying portions of that waterway that would have these particular characteristics which would mean it would not be reasonable to use that portion of waterway as navigable water.
Also covered under that is seasonally flooded lands, human-made irrigation canals and ditches and small private lakes surrounded by single landowners with no public access by air, land or water.
What would specified classes of works be? They are works that can be built on otherwise navigable waters without application for approval requirements in advance. We currently have minor works policies in place which establish an initial class of works, known as "minor works," whereby, as long as we can tell the individual in advance how to construct it, we can assure ourselves that, constructed in that manner, on that type of water as described within a given order, it would not pose any interference to navigation.
What sorts of things would I be speaking of here? Things covered would be a dock at your cottage, which is no longer than the dock next door to you; a directionally-drilled pipeline that never touches the water — that literally goes under the bed of the water, never to touch the water surface whatsoever, or an aerial cable on a canoe or kayak creek in British Columbia, aerial cable being 100 feet high.
These sorts of items, minor works and minor waters, these types of classes of waters that we would be proposing, are not excluded under our legislation. They are reviewed and they are approved. It is simply done so in a different manner; a pre-approval process based on criteria that we, as the navigational experts, have identified and have made public.
The government proposes to amend the definition of "work" to provide greater clarity to applicants and greater flexibility for the minister to deal with such works. A key example in this particular scenario is "temporary works." Right now, on a given construction project, if there is a need to put in a temporary bridge for even a period as short as 48 hours to get equipment from one side to the other, because it is a bridge, it undergo a full navigational impact assessment by our officers. It would also, because it is also a named work as a bridge, undergo a full environmental assessment in accordance with our current legislation. There is no provision for "temporary."
The amendments as proposed recommend the deletion of reference to the four specific "named" works within the NWPA. These specifically are bridges, booms, dams and causeways. We are aware there is information in the correspondence that is on the network that the proposal is to remove bridges, booms, dams and causeways from the purview of our legislation.
That is not the case. It proposes that all works reviewed in our legislation, including all bridges, booms, dams, and causeways, should be reviewed and assessed in accordance with the degree of potential impact they pose on navigation.
The footbridge going over the golf course creek which is a clear-span bridge and does not touch the babbling brook underneath it perhaps should not be reviewed and assessed in the same manner as the Confederation Bridge leading to Prince Edward Island. Currently, it is.
The amendments propose that we add inspection powers and increase our fine limits, creating a continuing offence provision in our legislation. At the current time, you will not find the word "inspection" within our legislation; currently, no inspections are contained within the act. The largest fine available is $5,000. Quite often, businesses that we confront, who are conducting work without prior approval to do so, simply ask who they write the cheque to and consider it the cost of doing business.
Inspection powers and fines that create a substantive deterrent to non-compliance are critical in order to enable the timely review and approval of sites and works, to ensure compliance with safety requirements once constructed, and to take measurable and meaningful action should such compliance requirements not be adhered to. The fine we are proposing is a penalty of $50,000 per day, per infraction, as a continuing offence.
The amendments propose the grandfathering of Crown works. As noted earlier, in 1992, a Supreme Court decision indicated that the assumption that the NWPA did not apply to Crown works was incorrect. Consequently, there are a multitude of Crown works that have never received NWPA approval.
By way of practice, when such works require some form of repair or modification, we demand that an application be made for approval of the existing work prior to reviewing the application for the modification or the repair. To remedy the situation, the amendments that we propose would grandfather these existing Crown works — many of which have been constructed for many decades — currently owned by the Crown, originally constructed by the Crown or no longer owned by the Crown, as of the coming into force of this particular legislation. Any subsequent repair, altering or rebuilding of these works will be expedited without diminishing the government's oversight responsibilities.
Furthermore, there is provision within the legislation that any one of these grandfathered works, although they do not subsequently come to us for an alteration or a repair of any type, may be ordered to be altered should it come to our attention. If we, after review, determine that there is a safety concern, we may order them to alter those works.
The amendments propose the removal completely from our legislation of section 13, which is approval of bridges over the St. Lawrence River. The NWPA currently requires that all bridges constructed over the St. Lawrence River, with the exception of international bridges, receive formal parliamentary approval. The international bridges are covered under the International Bridges and Tunnels Act.
Bridges not on the St. Lawrence are currently covered under the NWPA. Unfortunately, through the passage of time and the inability of our legislation to be modified to reflect more recent legislation like the International Bridges and Tunnels Act, there is a problem. To rebuild, replace or even construct new bridges that are not crossing international waters — for example, a bridge to the Island of Montreal that is crossing St. Lawrence River waters that are only Canadian — would require a separate act of Parliament.
Currently, there is a project in Cornwall leading over to the Akwesasne Reserve and onward into the U.S. The first section of the bridge which goes from Cornwall onto the island with Akwesasne is completely over Canadian waters and is desperately in need of replacement. Currently, in order to do so, that section of bridge would require a separate act of Parliament.
Our proposals would also include a five-year review clause in the act. This would allow us to identify both the successes, via a report to Parliament, of the amendments that we propose here, together with any shortfalls that may arise, and make recommendations on how to satisfy them. In short, those are the amendments the government has proposed within the legislation.
In summary, I would like to say an amended act would focus legislative oversight on waterways that are truly of navigational value and works that interfere significantly with such navigation. They will provide a timelier and more predictable process for the review and approval of critical infrastructure development and refurbishment projects in support of the recently announced Building Canada Plan and the infrastructure push. It will ease ever-increasing pressures to respond to complex natural resource projects, growing environmental assessment requirements and increasing consultation responsibilities in a timely and, we believe, efficient manner.
The Chair: Mr. Osbaldeston, thank you for your overview. Until the very end, you did not tie any of this into budget implementation and the stimulus package. This piece of legislation was last amended in 1886. Was there some driving force that required this bill to be dealt with as part of a budget implementation at this time?
Mr. Osbaldeston: I can only speak to the amendment process itself. I am aware of four separate project teams that have attempted to have this legislation put forward for modification in the last 20 years. Each project team has been cut short due to circumstances, be they election campaigns or other government priorities.
We started this process publicly by putting forward amendments back in February 2008, to SCOTIC, the Standing Committee on Transportation, Infrastructure and Communities of the House of Commons. In the process of SCOTIC's review and our subsequent response, the election was called. By the time the government sat, we had the new problem on our hands.
It just so happens that the recommendations we were putting forward, many of which are captured in the ones we have here, would provide a positive response to the economic crisis and the infrastructure push that is under way right now.
The Chair: Thank you for that background. I have a number of senators who have indicated an interest in having you expand on and develop some of the points. If you are able to refer us to specific sections of the act, we all have the act in front of us. Rather than just general words, it is helpful for us to look at the bill. Ms. Proulx could help us in that regard as legal counsel.
Mr. Osbaldeston: She will help me.
Senator Callbeck: These amendments remove "minor waters" from the legislation. Government claims that will do a lot to stimulate infrastructure projects, but I am having trouble seeing that.
If you look at the last statistics that are available from the Department of Transport, they say they get roughly 2,500 applications a year. In those last statistics for March 31, there were 361 cases that triggered an environment assessment, which is roughly 14 per cent of your 2,500. As 355 went to screening, the decision was made quite quickly, and you had 6 that went to a comprehensive review.
These six, in my understanding, are for very major projects that would have nothing to do with these minor waters. Therefore, why are you removing minor waters from this legislation?
Mr. Osbaldeston: First, I want to emphasize that we are not removing minor navigable waterways from this legislation. All navigable water in Canada falls under the purview of this legislation. We are proposing a different format to a formal application and review process.
We put forward that you should be able to define clearly the types of navigable waterways whereby reasonable navigation occurs. Although you might be able to float a canoe or kayak in it, in paddling it, you would be scraping the bottom of your kayak or canoe and scraping your paddles.
Such a waterway would not be used reasonably for navigation. We should be able to define that and simply say, if that is the type of water you are proposing to build the particular work in, then there is no need to apply to us for approval in advance.
If we find out that for whatever reason that is not the water that you have constructed it in, then you are kicked out of class and brought into the full application and full review process under the legislation. We are not excluding these works from review of the legislation at all.
Senator Callbeck: I cannot see a problem with them now, when you look at the figures.
Mr. Osbaldeston: Our problem with them now, Senator Callbeck, is that we have so many of these minor works with a predetermined fate if constructed in a specific manner or positioned in a certain way in the water. As long as they fit that criteria every single time, we will tell you are approved. All of these little applications come in only to get the exact same answer. The concept is to tell them up front what they need to do in order to avoid the administrative processes down the road. Then, they save time and construct it in the manner as required. We save as well because without paper coming in the door on the small stuff, we can use the resources to deal with the larger issues that are more meaningful from a navigational and environmental aspect.
Senator Callbeck: Will these projects require review under other legislation, for example, Fisheries and Oceans?
Mr. Osbaldeston: By the nature of our business, where things are proposed to be constructed in, on, over, under or through water, the answer is, yes. In 99.9 per cent of the cases, Fisheries and Oceans, review the project proposal, along with provincial authorities who also have an approval process.
Senator Callbeck: You will put the minor waters through a different process, which will reduce the time involved, but they will still have to go through an assessment by other departments. Will that be changed as well?
Mr. Osbaldeston: I cannot speak for other departments, senator, but the benefit and streamlining, for the purposes of expediting infrastructure, removes a redundant layer of review and assessment within our offices and within the government, writ large.
Senator Callbeck: When I look at these figures, I cannot see how the minor waters create a problem.
Mr. Osbaldeston: If I may, senator, we do not see applications for many of these minor works on minor waters. People do not make application for these. Under the current legislation, we are breeding noncompliance. For example, when a guy wants to re-construct a cottage dock that has been there for 40-60 years, it should come under our legislation. With the advent of the internet, the legislation is readily known and lawyers who come along to sell a property ask whether the property has the required approval documents and the answer is, no. There are untold numbers of these properties out there that pose absolutely no concern from a navigational standpoint. As such, we think we can cover them under these minor works policies.
Senator Callbeck: How much input from the public was there on this proposed legislation? That is one of the main concerns that we hear time and time again. The Canadian Rivers Network has expressed that concern, and I have probably had 2,000 emails that express that common theme. I want to know how much consultation there was with the public.
Mr. Osbaldeston: Our process was to make our recommendations based on a policy review that we conducted internally from our written files and from our regional management office experience. Subsequent to that, our proposals went to SCOTIC, to SCOTIC processes and other government processes. From a public consultation standpoint, we have not gone out to consult publicly other than to pull in our material on recommendations based on public comment that we received over 20-40 years.
Senator Callbeck: Why would you not take this to the public and let people make comments?
Mr. Osbaldeston: I cannot answer that, senator. Unfortunately, that is a policy decision.
Senator Mitchell: I share Senator Callbeck's bewilderment. It seems that so often the government tells us one thing but it never turns out to be what they want it to appear to be. We continue to hear that the justification for this initiative and for it being in a budget bill is that there is so much duplication in the environmental review process. The provinces and the federal government make the approval process of a megaproject very difficult, things are usually held up or they never get done. It is said that if we could only break through that, we would be able to stimulate the economy.
It seems that you are not talking about any of that. Instead, you are demonstrating quite a diminished impact when you talk about creeks that you cannot paddle down and about wires that are 100 feet above the water. We are not talking about a process that will change delays to megaprojects. Could you flesh that out for me and say whether this will reduce duplication. If so, what is the consequence of duplication now? How many projects are held up for how long?
Mr. Osbaldeston: I will give you an example of the megaprojects and how the small stuff can cause the problems. A highway of 20-odd kilometres might have two major highway bridges and 10 small culverts. Each one of those culverts is classified as a bridge under our current legislation because it is used to transport something over top and, as long as it is navigable water underneath, it needs to be reviewed. Many of those culverts are associated with drainage ditches, which would never see a canoe or a kayak or a powerboat. Each one of those crossovers requires review and environmental assessment. Yes, assess the two major bridges but do we need, from the navigational standpoint, to assess the culverts, even though they can float a canoe or a kayak?
You mentioned aerial cables. Many hydroelectric projects are on books in various provinces. Many hydroelectric transmission lines come off that and each time one of those transmission lines crosses any navigable waters — canoe, kayak or major water — every crossing of every line currently requires our review. If we can identify that over these types of waters that support this kind of vessel traffic, and ensure that a minimum of "not less than" is maintained, then I am not sure why we would not do it. It would be more efficient and more effective. They could design to the known safety requirements, similar to building codes for your homes.
Senator Mitchell: Is it not true that the environmental assessments required under this act do not only consider impediments to this water being navigable, they also pay attention to and consider habitat implications, wildlife implications and whether habitat will be destroyed?
One would think there is also relationship status between a body of water and water tables. Therefore, it is not only whether you can navigate the body of water, it is also whether you are polluting it. Who is doing those checks if you are not?
Mr. Osbaldeston: The sections that trigger an environmental assessment in our current legislation are those that identify a potential for substantial interference to navigation. That is what triggers an environmental assessment by Transport Canada.
The same holds true in the new legislation. Section 5(1) of the current legislation identifies substantial interference. Clause 5(2) in the new legislation does exactly the same.
Any work that poses a substantial interference to navigation, either under our existing legislation, or should these amendments get passed, will not only undergo a substantial navigational review, but will trigger an environmental assessment to look at many things other than navigational concerns.
Senator Mitchell: If there is no navigational concern, you do not look at its environmental implications. If you do not, who does?
Mr. Osbaldeston: The provinces do under their particular approval process for the work. Fisheries and Oceans Canada do with respect to fisheries and habitat aspects. Other regulatory bodies that may have an environmental assessment trigger also do.
Senator Mitchell: The delays we have been told are precipitating this initiative are so significant as to have delayed major projects even though they concern a small culvert here or there. Is that true, even though that area will still be reviewed by a province?
Mr. Osbaldeston: I will refer to statements made by virtually all provinces and territories when they presented at SCOTIC, as well as the Federation of Canadian Municipalities. That answer would be a resounding yes.
The Chair: Mr. Osbaldeston, we appreciate your help and understanding of what we are trying to achieve here.
[Translation]
Ms. Proulx, thank you for appearing before the Senate Committee on National Finance.
[English]
Honourable senators, I will adjourn the meeting shortly. It has been a long day. We have been sitting for quite a few hours. We have more work to do, but I am sure we are all up to it. Thank you for your understanding on the imperative from the public point of view to get at least the stimulus portion of this bill working. We have to get it passed.
Honourable senators, I would ask for a motion to accept the report for interim supply that has been prepared based on the two hearings we had of Main Estimates. We are seized of the Main Estimates for the entire fiscal year 2009-10. There is a request to add a note that ACOA, the Atlantic Canada Opportunities Agency, the National Arts Centre and the Residential Rehabilitation Assistance Program were discussed. We will follow up on those items. I think we are all in agreement on that. There is also a request to put "some honourable senators," where it might have indicated that all senators were thinking exactly the same, which is seldom the case. We will make those slight changes.
Could I have the motion first? The motion to allow the steering committee to make those minor changes and file it in the Senate when prepared?
Thank you, Senator Neufeld so moves.
Senator Callbeck: On the "RAPP" should be "RAPP and emergency repair." Those two things were mentioned.
The Chair: Okay. Do we have that? Everyone remembers the discussion.
Senator Callbeck: I have a copy of the minutes.
The Chair: I have seen the minutes as well. It was referenced, it simply was not noted. We intended to do it anyway. Now we will note in the report that we will do it.
Is there anything else on the question? All those in favour say "yea"? Contrary minded?
Hon. Senators: Agreed.
The Chair: Thank you. Your steering committee will make those changes in conjunction with the Library of Parliament. That will be filed and will form the basis for interim supply, which we will see in about a week.
I will ask the clerk to get in touch with Mr. Osbaldeston and Ms. Proulx to determine when it is convenient. I hope you are available on Monday. We are intending to have a full day of hearings on Monday as well. This time it will be at your convenience. You tell us when it will be convenient for you and we will work with that.
(The committee adjourned.)