Proceedings of the Standing Senate Committee on
Banking, Trade and Commerce
Issue 34 - Evidence - May 23, 2013
OTTAWA, Thursday, May 23, 2013
The Standing Senate Committee on Banking, Trade and Commerce, to which was referred Bill C-377, An Act to amend the Income Tax Act (requirements for labour organizations), met this day, at 10:30 a.m., to give consideration to the bill.
Senator Irving Gerstein (Chair) in the chair.
[English]
The Chair: Good morning, honourable senators. Welcome to the Standing Senate Committee on Banking, Trade and Commerce. Today we continue our consideration of Bill C-377, An Act to amend the Income Tax Act (requirements for labour organizations).
Yesterday we heard from the bill's sponsor, Mr. Russ Hiebert, MP, as well as representatives of the legal profession in Canada.
As a reminder, honourable senators, our meeting today will be three hours in length. In our first hour, we have officials from Canada Revenue Agency, namely Brian McCauley, Assistant Commissioner, Legislative Policy and Regulatory Affairs Branch; and Ted Gallivan, Director General, Business Returns Directorate, Assessment and Benefit Services Branch.
Mr. McCauley, I understand you have opening comments, and then you will take questions.
Brian McCauley, Assistant Commissioner, Legislative Policy and Regulatory Affairs Branch, Canada Revenue Agency: I have very few opening comments, Mr. Chair. We are here to answer questions. We do not have particular views and opinions on the private member's bill, so we thought it would be best to simply address any questions you might have that we can answer. It is as simple as that. We are here to do what we can to help.
The Chair: That may be as concise an opening statement as I have heard given before this committee; very focused. Thank you.
[Translation]
Senator Massicotte: You are aware of the bill adopted by the House of Commons. I presume you have already read it. You are familiar with what it proposes.
Yesterday, we discussed the words being used in the bill with it sponsor, Mr. Hiebert. In it, loan statements are mentioned frequently. In English the word used for that is statements. The bill states there is an accounts receivable statement, an accounts payable statement, a statement indicating total disbursements for organizing activities, et cetera.
When I asked how the word ``statement'' was defined, Mr. Hiebert answered that it was up to the government to interpret that word. He mentioned accounting standards. I do not believe they define the word ``statement''. If you were in charge of managing this bill, how would you interpret the word ``statement''. What would be the definition? What type of information does that mean?
[English]
Mr. McCauley: That is a very good question. The challenge we have, once and if the bill is passed, is to go through the bill in detail and provide guidance and clarity around a number of definitions and terms. We would do that by referring to other references to similar nomenclature in the Income Tax Act, for example, or other acts where we can do so by inference, including consultation with the sector that would be implicated. I think the bill provides that we would prescribe the nature of the information, the forms and the details that would be provided electronically.
We would probably, in the first instance, try to mirror what the definition of a statement would be for purposes of the Income Tax Act and what you would provide in your normal books and records so that it would be the least demanding, if I can put it that way, administratively on the organization, yet consistent with what we would try to determine to be the purposes of the bill.
Senator Massicotte: You would probably try to find out the intention of the legislature if they approved the bill, I presume?
Mr. McCauley: We had an interesting discussion after listening to the testimony yesterday afternoon, which was very interesting. Yes, we would want to try to best understand not just the legal letter, what is in the law, but we would try to build an appreciation of what Parliament intended and was hoping to accomplish through the law and, therefore, that would give us some guidance in coming up with our views as to what might be required for reporting purposes.
Senator Massicotte: Proposed subsection (3) itemizes a lot of information. Subparagraph (3)(b)(v) refers to ``a statement of accounts payable'' and a similar phrase is used frequently, ``statement of loans payable,'' a ``statement showing,'' et cetera. If you look at the definition in the Webster's Dictionary, the word ``statement'' could be interpreted as simply having to say, ``Yes, we have accounts payable,'' or in your mind does it imply a listing of accounts payable?
Mr. McCauley: We would probably look at it as more of a listing because, again, with the word ``statement,'' this change is going into the Income Tax Act and, therefore, you would look at how we would treat and view the word ``statement'' and interpret and define it within that context because this is the act it is being embedded in. Therefore, it would, in all likelihood — again, this is bit of speculation — be more detailed than a single line. It would require a degree of specification.
Senator Massicotte: When you see ``a statement of accounts receivable'' under subparagraph (3)(b)(i), therefore, the party would be required to list by supplier, I presume, or by account all the list of his receivables. It is not only one sentence saying ``here is the total.'' It is actually a listing of every creditor. Is that correct?
Mr. McCauley: Yes. Again, if the bill was confirmed or as it might be adjusted, we would talk with the organizations to the degree to which we could define what that word meant and what we were expecting, and that could mirror how they currently organized their books and records. My understanding is these are all professional organizations. They are incorporated; they are not informal organizations. We would seek to try to parallel how they currently do things, and if that met our requirements and met the intent of the bill, we would try to work it out that way.
Senator Massicotte: Your flexibility is towards the formatting. The intent is a listing of accounts receivable. You are flexible with the formatting, depending on how the company or the union does it, but it is still a listing. Is that correct?
Ted Gallivan, Director General, Business Returns Directorate, Assessment and Benefit Services Branch, Canada Revenue Agency: Yes. Our current interpretation would be if the aggregate amount was over $5,000 for any individual entity involved in the transaction, it would be itemized. We would also look to the U.S. Department of Labour LM-2 form, which is partially influencing this measure, and that document clearly has a listing of discrete and specific transactions.
Senator Nancy Ruth: Mr. McCauley, you said that when the bill passed, you would examine it and try to figure out ``what Parliament intended through the law.'' You have had a look at it. Have you any idea what Parliament is intending through this law?
Mr. McCauley: I think probably people around this table would have a more informed view of that than I right now. We would not treat this bill any differently than we would any bill. Once it has been passed, we would look to a family of information, if you will, both the letter of the law and any policy statements.
I appeared before a committee last week and we were referring to Hansard from 1928 in the house to help inform us about what the government intended when a bill passed.
We would look at all those things, and we would not have to come to a view until such time as the bill was passed. We would then have to deal with that issue, but this is actually part of the process of giving us that information if and when it would be passed.
Senator Nancy Ruth: The Parliamentary Budget Office has estimated that it will cost $11 million to implement this with an annual $2 million in costs to produce it. What kind of resonance does this figure have with your department?
Mr. McCauley: My understanding is that that number is probably in the same ballpark that we have as well, although I do think it is one that was generated prior to some of the amendments in the bill that scoped it back a little bit in terms of some of the data matching and other things that would have been required in the first version of the bill.
While we have not done a hard number analysis — and I am not sure the PBO has, either — I expect that a big chunk of that number was for systems and technology. That number, with the current amendments, would probably go down, but the ongoing costs for current purposes is about in the ballpark we saw as well, so we are consistent with PBO on that.
Senator Nancy Ruth: Is it in the same ballpark of costs for CRA to administer charitable returns with the same kind of relative disclosure?
Mr. McCauley: We looked at a number of charities but also at basic processing. When we looked at our costing, we did not look at the substance of what the bill might require us to do; we looked at simply our process, prescribing the information, collecting it and posting it. There is little review called for in the bill for this information, whereas on the charity side, when we receive information, we do review it. We have a lot of keying to do because it is not all required electronically.
Therefore, our charity costs are probably higher simply because it is a bit more of a demanding review and inputting process, but we also look to — and perhaps Mr. Gallivan can talk about this — some of the other processes where we drew the costs.
Mr. Gallivan: We are considering the focus of this measure as disclosure, not for income tax administration purposes or tax assessment purposes. In the last five years, we have done three measures: one on softwood lumber, one for partnership information return and the third for selected listed financial institutions. All three were done in my area, and we did them in the range of $2 million in terms of the IT setup. That assumes relatively few linkages to the rest of CRA operations, which seems to be consistent with the focus here, the public disclosure of information.
The differential between a $2 million and a $10 million cost is how many extra features we build into it, such as reporting. If we anticipate significant access to information requests or significant reporting on this, then we build in automated reports. If we do not build them in, every time we are called to report, we have to do a manual select to produce that information for Parliament or others.
As we develop our plans for this bill, we will have to make judgments on the level of reporting and whether we make those investments up front or after the fact. That is the difference between the lower cost and the higher cost amount, how many features we build in and invest in up front, which would be informed by our judgment on how much activity we expect on this program.
Senator Nancy Ruth: To clarify it for me, when I give $50 to a charity, I get a receipt and file it. Someone looks at my income tax return and someone looks at the charity's income tax return to see that the monies they received indeed were used for the intent they were given, apart from the 10 per cent for political activities, for example. Is that theoretically right?
Mr. McCauley: Broadly speaking, I will say yes.
Senator Nancy Ruth: In this, union dues are paid. The union receives money to operate for the benefit of its membership. The union dues are deductible on the individual's tax return. Is there not similar accountability to make sure that unions have used their monies for the intent of the members who have paid into the dues, such as a $50 donation to charity?
Mr. McCauley: My understanding is that certainly this bill does not seek to do anything other than make information public, so we would not be using this to trigger, for example, any further review of financial or income tax consequences for labour organizations than we currently do.
Senator Nancy Ruth: There would be no equivalent like removing a charity's number in this bill? There is no judgment?
Mr. McCauley: Not as I currently read it.
Senator Ringuette: I am happy you have confirmed that CRA sees this piece of legislation as just disclosure and not for tax purposes because that reaffirms the fact that this bill is not within the jurisdiction of the Parliament of Canada.
Moving on to the costs that you have ascertained, I have information from your statement in front of the House of Commons committee that looked at this bill that based on 1,000 reporting entities, the cost would be $2.4 million for two years, with ongoing costs of $0.8 million.
PBO has ascertained that the cost per entity to the CRA is $1,800 per reporting entity. There will be at least 25,000 reporting entities, so we are looking at anything between $45 million and $50 million to taxpayers. For what purpose? Who will be benefiting, except a select few that have been lobbying intensively for two years?
Given what you have estimated would be your cost for 1,000 entities and what the Parliamentary Budget Officer has maintained since last fall, the same cost structure — I am sorry, it would be $2,100 with regard to the setup costs and the ongoing costs per entity. Do you agree with the estimates of the PBO?
Mr. McCauley: I would like to clarify the statement Mr. Gallivan made around disclosure. Our understanding is that the bill is to provide information that is available to the public. There are other provisions in the Income Tax Act where we are required to do that, so we were not making a statement or any conclusion about whether it was appropriate to do this through the Income Tax Act. I wanted to clarify that that was unintended, and I apologize if we left that impression. We do not have a view; that is Parliament's prerogative.
On the costing, it is an excellent question. I will start and then Mr. Gallivan can clarify, because in my perspective — although certainly the PBO can speak for itself — I do not think there is really a difference of view between us.
When we developed the numbers, we looked very much at what it costs us to develop the technology system that will handle this work. To a certain degree, that is quite scalable. Whether or not you put 40 or 40,000 reporting entities through it, to a large degree we scale those things so that the sunk cost, the investment to put the system in place, is pretty well standard. In some ways, that is why, even if it is a small number, it seems high, but once you get to larger numbers, the average goes down.
As Mr. Gallivan said, on the systems side, what rings up the cost is when you add features to it like wanting to do cross-matching, system checks and things like that. Our understanding is that the bill was narrowed somewhat during amendments, which would tend to lower those costs a little bit.
On the processing side, I believe — but, again, the PBO would be best placed to speak to this. We had said the ongoing costs to receive and post the information was going to be around $2.2 million, and that again was an estimate based on very preliminary information.
Senator Ringuette: Based on 1,000 entities?
Mr. McCauley: Yes, and that is exactly where you get the $2.2 million. What Mr. Gallivan will speak to is that that, too, is somewhat scalable. Our view is that you add another 10,000 to 15,000 reporting entities and it is not going to go up by a factor of 10 or 15 because we have the capacity. Mr. Gallivan can touch briefly on that, if you would like, or we can defer.
Senator Ringuette: No, I just want you to confirm to us the findings of the PBO when the PBO compared what was required in regard to disclosure in the U.S. and what this bill requires in regard to disclosure; the cost per entity to process in the U.S. and the cost here; and the yearly cost of setup, plus ongoing, of the requirements of this program for CRA alone. Never mind the 25,000 entities of hard-working Canadians. There are at least 25,000 reporting entities, so we are looking at — ballpark figure — $48 million of taxpayers' money for this bill that is unconstitutional.
Mr. McCauley: CRA is not expecting that cost, but, again, it is this issue of processing a larger number versus a smaller number.
In fairness to the PBO, and we have been providing information to them, you are dealing with a bill that has changed a couple of times, and we may be talking about a set of facts that has been costed and now another set of facts. I am not being argumentative, but things have been moving on the file.
Mr. Gallivan: It is a logical question: Why does it not cost more to do more? It is because most of our costs are fixed. In other words, if we build an interface to allow these organizations to have a fillable, ``fileable'' form, the cost for one entity or 45 is roughly the same.
In terms of the specific question of why the costs do not increase significantly, if the scope of this legislation increases significantly, most of our costs are fixed costs that we incur whether there is one entity or a number of entities.
Senator Ringuette: I do not assume that the way you operate is different from the system in the U.S. The promoter of this bill was before us yesterday and said he wanted to create a level playing field. Well, the PBO research in regard to the processing cost for government alone in the U.S. was $1,800 per entity, and we are looking at 25,000 entities.
Now, I certainly understand the issue of the number of entities, but that is the average experienced cost in the U.S. The PBO, which as far as we know since it has been in place, has provided quite accurate estimates has based its estimate on the experience in the U.S.
We are looking at $48 million a year for this bill at a moment. A few months ago, I think you announced a reduction of 300 employees at your offices, at a time where many senators have been asking for increased activity at CRA in regard to offshore money tax evasion.
I understand that you will not comment on a political issue, but this is a political issue that will cost taxpayers $48 million a year at a time when you are being cut, and I find that this is absolutely unwarranted insofar as cost to the taxpayers government-wise, and that is notwithstanding the cost to disclose as per the bill before us, to all those 25,000 entities that also have a mandate to provide training to working Canadians.
You look at all the money that is involved to satisfy maybe one or two Canadian entities, one being Merit Canada.
The Chair: Senator, is there a further question that you want to ask? You made a statement. I have not heard confirmation from the witnesses that it is $48 million, and perhaps they would like to respond finally on that issue.
Is there a final comment you would like to make?
Senator Ringuette: Perhaps they want to counteract the PBO estimate.
Mr. McCauley: I do not think I would ever want to counteract the PBO.
Senator Ringuette: Thank you for your answer.
Mr. McCauley: I would simply point out that we have provided some information to the committee. If the committee wanted to ask for revised numbers, we would certainly endeavour to do that. I do think, in fairness, that the PBO should speak to its numbers. I think at the end of the day we will find that there is not the difference; it is a difference of what you are actually costing.
I would also only observe that we do things the way they should be done in Canada. What happens in the U.S. might be informative, but it is not necessarily always the way we will do things in Canada.
Senator Segal: My general view of CRA is that its main purpose in life is to collect taxes that respond to the provisions of the tax act and any other taxation legislation that comes from Parliament.
I think, Mr. McCauley, you were very clear this morning in saying that this legislation, to the extent it will force trade unions to file a Canada Revenue Agency disclosure form, will have absolutely nothing to do with collecting taxes.
I have always thought, and correct me if I am wrong, that if an investment house filed a T5 that they had sent to one of their clients, in the normal course of random auditing, based on whatever point scale your system provides, you would see whether that client, in his or her personal filing, had also declared the T5, if it was taxable. You have a system for doing that, which I think is intrinsically fair, balanced and appropriate.
I hear you saying that nothing that would emerge from these filings would be used in that normative way to see whether, for example, a recipient of a $365,000 legal fee, who is an individual lawyer, actually included that in the revenue that he might have filed in his personal or law firm or partnership statement to the Crown through Canada Revenue Agency. You are saying that unlike all the other data sets that you largely collect, this would not be part of your tax collection intelligence system on which we all depend for the fair collection of taxes and the provision of revenue to Her Majesty for the good services that her governments perform. Am I misunderstanding?
Mr. McCauley: To nuance it a bit, you are right in terms of tax. We also provide a number of benefit programs on the part of the provinces and other acts and provisions, such as softwood lumber and the Importation of Intoxicating Liquors Act, where there are, perhaps, peripheral connections to tax services.
I was saying that, as I understand the bill, and having listened to yesterday's testimony as well, its primary purpose was for this information to be disclosed and made public. That system, namely, the actual technology that would receive this information and post it, under the current scenario as we understand it, which is partially why our costs can be so low, would not be hardwired into our other major systems, so the data would not be connected. It would not be embedded as part of our huge macro infrastructure for business intelligence and things like that.
Senator Segal: On the fairness question — and this comes from the other end of the telescope in a sense — let us assume a small business has to file its tax form with you and has a series of receivables that it has listed, some of which are at a substantial number. Those activities would be caught by your tax services system to ensure that there are counter filings that equal what has been filed at a particular place. Why would you believe, therefore, that whatever is filed in this legislation should not be part of that system? What is it in this law that would say to you as Canada Revenue Agency officials: ``All the data sets that come from the 25,000 entities are interesting. We will make them public. That is what the law asks us to do, but we will not glance at any of it to see if it connects with the tax system at all''?
I am interested in why would you would take one view with small CBCA companies, for example, and another view with respect to a large trade union local in British Columbia.
Mr. McCauley: I do not know that it is a different view. We collect a certain amount of information, as you say, on small business, in other words, for the reporting. A lot of the more detailed information, of course, is not necessarily captured in the systems. It is available when we go out to do an audit or review. That is not required.
The view is that when we looked at, as we understood it, the purposes of the bill and, frankly, trying to look at what would be the best way to provide this information in the most efficient manner, hardwiring it in would have been a significant cost. Therefore, our estimates were provided on not hardwiring it in.
I would not prejudge. If I misled you, I apologize for that. If the bill was eventually passed and if that information was coming in and it was being posted publicly, would we look at that information, for some reason, if we felt we should? In other words, as an auditor or as a source of information, might we look to that to be helpful? We might. I guess what I was saying is that we would not start a program that would look at reviewing that information, auditing it and challenging it. However, if we were going in to look at a labour organization and doing a review just as part of a normal review, would we probably look at that information at the same time? Likely so, if for no other reason than to prevent the organization from having to report it again, et cetera.
If I meant to indicate that it would not be used at all, I meant in the sense of an active program that the bill does not foresee to follow up in terms of our making those connections.
Senator Segal: This will be a hypothetical. As public servants, you are free to say, ``We do not do hypotheticals.'' I respect that; the odd politician has been known to say that.
Let us assume that there is a particularly difficult strike situation in some context. There is bad blood between both sides. You do have a whistle-blower program, particularly with respect to foreign tax evasion. If someone were to call in and say, ``I know so-and-so has a massive account somewhere,'' you would do with that information what is appropriate in terms of protecting the public interest. Assume someone were to call you as part of that unpleasant union and employer fight and say, ``If you take a look at the filing last year of that union local last year, you will see a number of $125,000 that went to a guy by the name of Jones, and we think he is not filing his taxes properly and he could be stealing.'' Would you say, ``Interesting, but we do not do that because it is another part of the system, so we will not look at that,'' or you would say, ``Having received a legitimate whistle-blower call, we have a duty under the tax act to pursue it to see if there is a violation of the tax act in this particular circumstance''? I am interested as to how the department would respond in that type of context.
Mr. McCauley: Separate from the proposed whistle-blower initiative, and you are quite right that it is focused on international, a leads program is currently in place and has been for a number of years. We get many calls from many individuals in many circumstances with many varying degrees of veracity attached to them. A call like that would get treated within that context. There is a whole process, as you can well imagine, behind what we would do in terms of going through that, including, at certain points of time, whether it is even an income tax matter or another legal matter to be referred. In that sense, this bill would not change that in any way.
Senator Segal: Nor would the data filed necessarily be outside the purview of what inquiries might then pursue as necessary based on a lead.
Mr. McCauley: Again, if information is posted publicly, just as members of the committee could look at it, I think we would look rather foolish if we came back in three years and said, ``No, even though we got the lead, we never bothered looking at information that is already publicly available.'' We would look at it; people would expect us to.
Senator Ringuette: The Privacy Commissioner has flagged privacy concerns with regard to this bill. In doing my research, believe it or not, I reread the Privacy Act. It is clear that all federal government status is subject to the Privacy Act. It is also clear that personal information to be disclosed needs the written consent of that person.
When you look at the process required in Bill C-377, it has two disclosure steps. The first disclosure step is from the labour entity that will need to get the written consent of the people of whom this bill requires any disbursement over $5,000. That is the first privacy issue for which the organization will need written consent.
The second part of the disclosure process is your minister putting that data on a public website. That will require an additional requirement of your own department or of the minister's staff, however you choose to do that, an additional written consent from each and every one of these persons with regard to their personal information. How will you handle that?
Mr. McCauley: It is a question that maybe you know more about the answer than I do, but I will try.
On the second part, again, if passed, the bill does provide the agency with the authority to make the information public. The legal authority would have been provided by Parliament. As a normal process, we would then discuss with the Privacy Commissioner how best to do that in the most respectful manner. Again, we are not into the how-do-we- implement-this stage at the agency.
Senator Ringuette: We have to look at all the implications.
Mr. McCauley: Yes. We would not be seeking nor would we require written consent before that information would be posted. We have provisions, for example, for charities and others where there is specific authority and the information is posted. That does not mean that that could not be challenged and that we would have to go through a process of dealing with a challenge in that regard. I think most people would appreciate that there are privacy and legal challenges to many elements of the statutes that we try to administer every day. This, too, would perhaps fall into that category.
On the first question, I am not sure. I would have to get back to you on the issue of the labour organization needing to get written consent before, for example, the information would be posted.
Senator Ringuette: Absolutely.
Mr. McCauley: I have to admit that I have not researched that piece of it.
Senator Ringuette: The Privacy Act applies to the government, but any self-disciplined organization will adhere to the same policy with regard to the Privacy Act. I can understand your point of view.
Let me move on to another issue. This is with regard to the definition of ``labour organization'' in this bill, which reads:
``labour organization'' includes a labour society and any organization formed for purposes which include the regulation of relations between employers and employees.
When I look at CRA Interpretation Bulletin 158R2 and 103R with regard to dues, reading from these two interpretation bulletins from your organization, I definitely see that Bill C-377 would include annual professional membership dues in the same category. With this bill, any organization that is formed for the purpose, which includes the regulation of relations between employer and employees, is subject to this bill. It is further increased by your interpretation bulletin that also includes annual professional membership dues.
You have certain medical associations in provinces.
The Chair: Could you ask a question, please?
Senator Ringuette: Yes.
Do I need to be clearer? I want to understand that you have looked at the definition here. It says, ``and any organization formed for purposes,'' and looking at your interpretation bulletin, that will also include professional membership dues.
Mr. McCauley: We have not made a determination about the scope of what would be carved in. That is part of the process that we would have to go through if and when the bill is passed. We would look at a variety of things to give us guidance as to what should be scoped in or not. We do appreciate that there has been discussion about, is it $1,000, is it $4,000, is it $25,000? That is the kind of challenge that we would be left with.
In terms of sorting out, yesterday's discussion was informative. More certainty and clarity in the bill makes our job easier. We have to deal with the consequences of whatever the bill says and then we would have to undertake a certain level of effort to define that, looking not just at our past interpretation bulletins but at what Parliament was trying to achieve, and looking at other sources.
The Chair: Senator Ringuette, I gave you very ample time. If you have further questions, would you just list the questions and we will leave them with Mr. McCauley for a reply if we have time. I do have another questioner.
Senator Ringuette: I certainly understand the difficulty of the scope, but do you not think that it is the responsibility of parliamentarians to ascertain the scope of a bill with regard to how it will impact Canadians?
Mr. McCauley: It is our responsibility to do our best with any bill we are provided.
The Chair: The specificity that he receives determines how much they will have to go forward with the scope.
Senator Segal: I was going to ask what I thought would be a straightforward question, but based on your most recent response about scoping, I am not sure that it is. I apologize if it seems unhelpful.
Will you, within the context of the overall fiscal and operational budgets of the department, have to make some reallocation to accommodate the requirements of this law? Whatever the number may end up being, you do not have an endless supply of cash; you have to deal with an existing budget. That was going to be my core question. However, with you having just said that one of the things you have to do at a departmental level is determine the intended scope once the bill is passed, should it be passed, and that would help you better understand the financial issue, this may be a premature question, which is unfair of me to ask you to address. Am I fair to assume that, based on what you know now, you could not achieve what is being asked for in this law without some modest reallocation of resources from within your existing departmental budgets?
Mr. McCauley: I think it would be fair to say, would the administration of the bill require a certain level of effort and a certain expenditure? Yes. I think the other reality is that we are a $3.4 billion organization. When you get down to certain numbers, it is an issue of — if I am a senator's office and I get another 5,000 letters this year, I find a way of making that work. I do not know that with these kinds of numbers we would actually have to go through a reallocation exercise. It might be one where those of us who would be asked to take this on would have to figure out how to accommodate that within our work program. It would create obviously some pressures in other areas, but, like everyone else, can you do it by being more efficient in another area?
There probably would not be formal reallocation. Again, as you pointed out, scale would make a big determinant on that, but it would be one where we would be trying to accommodate it within the departmental allocation because, frankly, we would not have a choice.
Mr. Gallivan: I think your point there would be, at the very least, an opportunity cost. There would be other activities that we would forego.
Senator Segal: Those are activities that people are not doing because they are doing this.
Mr. Gallivan: Yes.
The Chair: Mr. McCauley and Mr. Gallivan, thank you for participating in the committee's study of this bill. You have been very helpful in allowing our study to go forward. On behalf of all members of the committee, I express our great appreciation for your appearance today.
In our second hour, we are pleased to welcome, as individuals, Bruce Ryder, a professor at Osgoode Hall Law School; Ian Lee, a professor at Carleton University; Douglas Forer, Partner, McLennan Ross LLP; and Alain Barré, a professor at Université Laval. Each will have an opening statement and I have asked that each will give a brief thumbnail sketch of their background before entering into their opening statement.
With that, I will turn to Mr. Ryder, if you would be good enough to start.
Bruce Ryder, Professor, Osgoode Hall Law School, as an individual: I am very pleased to have the opportunity to speak to members of the committee today about your consideration of Bill C-377.
My area of expertise is constitutional law. It is an area in which I have taught since 1987 at Osgoode Law School about the Charter of Rights and federalism. I teach courses in the area and I have published frequently in relation to the division of legislative powers between Parliament and the provinces. That is the focus of my remarks today.
I am here to share the bad news that Bill C-377 is beyond the legislative jurisdiction of the Parliament of Canada. Its dominant characteristic is the regulation of the activities of labour organizations, a matter that falls predominantly within provincial jurisdiction to pass laws in relation to property and civil rights pursuant to section 92.13 of the Constitution Act, 1867. If Bill C-377 is passed by Parliament, it will be declared unconstitutional and of no force and effect by the courts.
I hope senators will forgive me for briefly addressing two arcane doctrines of constitutional law that lead to this conclusion, the pith and substance doctrine — or le principe du caractère véritable — and the ancillary powers doctrine.
To be validly enacted, the dominant characteristic, or what the courts refer to as the pith and substance of the law, must be a subject matter allocated to the legislature's jurisdiction, and in the case of Parliament by the Constitution Act, 1867, principally in section 91.
To determine the dominate characteristic, or the pith and substance, the courts examine the purpose and legal effects of the law. The stated purpose of Bill C-377 is to require labour organizations to provide detailed financial information for public disclosure. The bill would accomplish this purpose by adding a new provision, proposed section 149.01, to the Income Tax Act. The legal effect of proposed section 149.01 is to place detailed disclosure obligations on labour organizations, subject to a financial penalty of $1,000 per day for non-compliance to a maximum of $25,000. This is Bill C-377's only legal purpose and effect. It is not difficult to determine the dominant characteristic of such a law.
The subject matter of the bill, the imposition of financial disclosure obligations on labour organizations, is simply not within Parliament's jurisdiction. The power to pass laws regulating labour relations and labour organizations is predominantly provincial pursuant to section 92.13 of the 1867 act. Federal jurisdiction over labour relations is an exception to the general rule of provincial jurisdiction. Parliament has jurisdiction over labour relations in the federal public sector and at federally regulated workplaces such as banks, airlines or telecommunication companies.
Jurisdiction over labour relations, including the regulation of financial disclosure obligations of labour organizations, is thus divided between the provincial legislatures and Parliament. Indeed, financial reporting requirements already exist in each jurisdiction in Canada. At the federal level, section 110 of the Canada Labour Code requires every trade union to provide ``. . . forthwith on the request of any of its members . . . free of charge, with a copy of a financial statement of its affairs to the end of the last fiscal year . . . .'' This provision applies only at federally regulated workplaces. If it applied to all labour organizations across the country, it would be ultra vires, unconstitutional, of no force and effect. Similar provisions in provincial labour laws likewise apply only in provincially regulated sectors. Provincial labour laws cannot constitutionally apply to federally regulated workplaces.
The division of powers problem with Bill C-377 is that it does not respect the constitutional division of legislative jurisdiction in relation to labour relations and labour organizations. If Parliament considers the disclosure obligations imposed on trade unions to be deficient, the constitutionally proper course would be to amend section 110 of the Canada Labour Code accordingly in a way that it applies only to the labour organizations in federally regulated sectors.
However, that is not the end of the matter. The Income Tax Act is a valid exercise of Parliament's power pursuant to section 91.3 of the Constitution Act, 1867, to pass laws in relation to the raising of money by any mode or system of taxation. Can Bill C-377 or the proposed new section 149.01 be saved by virtue of its connection to the rest of Income Tax Act? This is the key issue for the committee. This depends on a consideration of another arcane constitutional doctrine — again, forgive me — called the ancillary powers doctrine.
According to this doctrine, even if particular legislative provisions when considered in isolation, like the proposed section 149.01, fall outside a legislature's power, they can be upheld as valid if they constitute an integral part of a broader legislative scheme that is valid, that is within the legislature's power. In other words, the doctrine, in the name of practical necessity, throws a constitutional lifeline to provisions that would otherwise be ultra vires. Chief Justice McLachlin wrote in a recent decision considering the doctrine that:
The ancillary powers doctrine permits one level of government to trench on the jurisdiction of the other in order to enact a comprehensive regulatory scheme. In pith and substance, provisions enacted pursuant to the ancillary powers doctrine fall outside the enumerated powers of their enacting body . . . Consequently, the invocation of ancillary powers runs contrary to the notion that Parliament and the legislatures have sole authority to legislate within the jurisdiction allocated to them by the Constitution Act, 1867. Because of this, the availability of ancillary powers is limited to situations in which the intrusion on the powers of the other level of government is justified by the important role that the extrajurisdictional provision plays in a valid legislative scheme. The relation cannot be insubstantial.
There must be a substantial relation between invalid provision looked at in isolation and the broader legislative scheme. This is the key issue for the committee. Is there a strong enough relationship between the bad provision and the rest of the act from a division of powers point of view?
According to the Supreme Court, this would require that the provisions be at least rationally and functionally connected to the purposes of the legislative scheme that they purportedly further. If not, they will be severed from the act and declared ultra vires, of no force and effect. The question is: Can we say that the financial disclosure provisions proposed by Bill C-377 would be an integral part of the broader scheme of the Income Tax Act? The relationship must be more than insubstantial, the Chief Justice says. Are they rationally and functionally connected to the taxation goals of the statute?
In my view, the connection between the disclosure requirements of Bill C-377 and the objectives of the Income Tax Act are elusive and too tenuous to meet this test. The ancillary powers doctrine, therefore, well not rescue the ultra vires provisions of Bill C-377. The bill does not in any way address the tax status of unions or the tax consequences of union activities or union membership. Its provisions do not make any connections to the existing tax treatment of union activities or membership. It feels like it is using the Income Tax Act as a Trojan Horse to regulate unions. I am confident that judges would reach the same conclusion.
The unprecedented detail of the disclosure obligations it places on labour organizations — and only on labour organizations — connects to no discernible tax policy issue or objective. For this reason, I conclude that Bill C-377 in its current form is beyond Parliament's jurisdiction and will be declared invalid, of no force and effect, by the courts.
The Chair: Thank you, Mr. Ryder.
Ian Lee, Professor, Carleton University, as an individual: I will first introduce myself as requested. I am a professor in the Sprott School of Business at Carleton University where I teach the Capstone Strategic Management Course. For those who may need archaic language, it is the course equivalent to the honours dissertation course in fourth year political science, economics, sociology or journalism. I have been a member of CUASA — the Carleton University Academic Staff Association — which is the name that professors apply to unions because we do not like admit we belong to unions. We call them staff associations. However, CUASA is recognized, as are the other faculty unions in Ontario, under Ontario's collective bargaining or the collective legislation. They are actual unions, although professors will not admit that.
It is a pleasure to appear before this august historic committee that dates to 1867. I will begin by providing some disclosures.
First, I do not consult directly or indirectly to any corporation, business, business association, government, NGO, union, political party or body or person anywhere at all.
Second, I do not have any investments or assets of any kind, save and except my personal home in Ottawa and my share of the Carleton University pension plan.
Third, I do not belong to any political party — and I am sure this committee knows I ran once in 1993 against then MP Mac Harb — but I do not now and have not for some time belonged to any political party, nor do I donate any monies or attend any political events.
I published two op-eds in February and last week in very strong support of the Senate of Canada.
Finally, I published an op-ed on Bill C-377 in the Ottawa Citizen in December.
If there is any single word or phrase that captures contemporary Canadian or American values concerning public institutions and their relationship to society, that word is ``transparency,'' or openness. As I argued in my recent Citizen op-ed, in strong support of the PBO, the genius of constitutional democratic governance in English speaking countries is the continual evolution in developing checks and balances not only imposed on the executive branch that everyone understands but on institutions in civil society. In that op-ed I stated:
. . . the PBO is a natural, logical, inevitable evolution no different than the democratic innovations — such as rule of law, habeas corpus, elections, freedom of speech, religion and assembly, Question Period, political parties, Main Estimates, the Auditor General, a free and independent media, audited financial statements, a Public Accounts Committee, independent universities and public inquiries — that have become part of the essential institutional furniture in modern constitutional governance.
To that list of checks and balances in constitutional democratic governance I would add the principle that has evolved in the last 40 years of transparency and openness in all institutions. Properly understood, the evolution of transparency as an overarching value, I think, started with FDR's New Deal legislation that enforced disclosure on banks and corporations and was quickly adopted in Canada under the R.B. Bennett government and later the King government.
Over the past 70 years or so, transparency and disclosure have been broadened and extended from corporations, in the SEC legislation under Roosevelt, to universities, the public service, public servants, charities, professionals such as accountants and lawyers, and of course political officials. Today, for example, in both Canada and the U.S., corporations that are publicly traded must file corporate disclosure documents that compel the most intimate corporate information that runs from 150 to 300 pages of disclosure in the SEC's so-called 10-K report, or its analog, the Ontario Securities Commission reports filed with SEDAR.
These documents are listed for free on the Internet to anyone, anywhere in the world. You do not have to register and tell them why you are getting the information. I have taught in many countries around the world, including 10 times in Iran, and I have taken great pleasure in the classroom in Iran going on to the Internet, going to the SEC and downloading a 10-K report of a public corporation not just for the U.S. but any Canadian, Chinese or other company that is publicly traded in the U.S.
This is an excellent example of transparency. The value of transparency gradually spread to the public sector and back again to the private sector and civil society over the past 50 years or so. For example, in Ontario, a sunshine law was passed by the NDP government led by then Premier Bob Rae in the early 1990s that compelled salary disclosure of not only public servants in the Government of Ontario earning more than $100,000, but was extended to non- government employers including universities, colleges, school boards, hospitals and municipalities. My salary is disclosed and has been for quite some time, along with many other people in Ontario.
Indeed, unions should be applauded for originating and strongly lobbying for the successful passage of the Ontario sunshine law, as they argued — and I agreed then and now — that it would significantly enhance scrutiny and lead to better policy decision making, not only in government but in private organizations in civil society.
More recently, the McGuinty government extended access to information, yet another form of disclosure and transparency, to universities, hospital, schools and other non-governmental employees in Ontario. Moreover, when we survey other English-speaking countries, including the United States, we learn that these countries have long required very significant disclosure by unions. Thus, it is no exaggeration — and I say this respectfully as a strong supporter of the Canadian Senate — to state that the last two bastions of secrecy and opaqueness in Canadian society are the Canadian Senate and Canadian unions. Each senator knows far better than I that the Senate has come under enormous scrutiny during the last several months because many Canadians believe you are not transparent. Thus, it is most unfortunate for the Senate and all senators, I believe, that some senators are perhaps reinforcing negative stereotypes of the Senate by opposing transparency and sunshine in unions that has long been standard practice in other English-speaking countries.
In closing, I want to directly address those senators opposed to Bill C-377 by stating the following: Transparency and disclosure is a public good, not a public bad. It is something that makes institutions stronger and more legitimate. Secrecy and opaqueness is a public bad, anachronistic values from our dark past that are no longer acceptable to large numbers of Canadians. Transparency and openness makes us more informed, not less informed. It produces better organizational decision making, not worse. We become stronger, not weaker. I would suggest this bill represents an opportunity for senators to repudiate those negative stereotypes in the court of public opinion by rejecting the archaic, illegitimate values of secrecy and opaqueness practised in this context by unions.
My algebraic formula: Transparency equals accountability which equals stronger public and private institutions. In the words of the late Chairman Mao, let a thousand flowers bloom. Finally, in channeling my inner FDR, unions have nothing to fear but fear itself, unless they have something to hide.
Douglas J. Forer, Partner, McLennan Ross LLP, as an individual: Members of the committee, it is indeed an honour and privilege to appear before you. I appreciate the invitation to express my views on Bill C-377.
I come at this perhaps a little differently than the other members of this panel in that I am a partner in a law firm and I restrict my practice to tax. Our law firm, McLennan Ross, is a western-based firm with offices in Edmonton, Calgary and Yellowknife. My restriction is perhaps a little bit of a misnomer. I practise personal, corporate, trust, non- profit, charitable law. I practise internationally. I practise in the areas of Canada Pension Plan, Employment Insurance, straight into fuel tax. Essentially, if you looked at my biography it would indicate that if the file involves the word ``tax,'' I will take it on, so I approach this bill differently than my colleagues on this panel.
I look at Bill C-377 and go instantly to the definitional section and look at the phrase ``labour organization.'' Curiously in this bill, and in the Income Tax Act, labour organization is not defined. As such, as tax practitioners, if we were to present before a court, we would have to look to the standard interpretation guidelines of a court. There are very few. As a result of that, inserted in proposed subsection (1) of this bill is a definition of labour organization that includes a number of organizations that might not have to file any type of statement with the Canada Revenue Agency to claim that very valuable thing called tax exemption under paragraph 149(1)(k).
As such, I refer to what I consider to be the definition of labour organization from the jurisprudence, which is the regulation of relations between employers and employees. However, I am not aware, and it would have been interesting to quiz the members of the Canada Revenue Agency, of any action that was taken against a labour organization for not complying with the jurisprudence and definition.
When we look at 149.01(1) definitions, we look at it from a labour organization perspective. As a tax practitioner, I am often involved in corporate tax planning or other types of tax plans. The very first thing that I would do if I simply had to look at a labour organization would be to set up a labour trust, because it is not a labour organization. Therefore, I believe that the inclusion of ``labour trust'' is, in effect, an ability or indication that members of Parliament and the Senate might take into account that we are trying to capture reporting for an organization that has had very little reporting requirements in the past, and to my knowledge has not been challenged by the Canada Revenue Agency as to the nature, extent and scope of its activities to be able to qualify for the tax exempt status. As such, the very first page of this bill is very instructive and informative to a tax practitioner like myself who looks at this and states they have captured what could possibly be the ways and means in which to ensure that all of those entities and organizations are part of this reporting process to not only the Canada Revenue Agency, but to the public.
I think it is also a remarkable and innovative bill because it takes that type of scenario where you are saying, here is a labour organization, so what does it have to report? Proposed subsection 149.01(2) refers to electronic reporting and 149.01(3)(a) deals with the content of the return, a set of financial statements. Certainly in the context of today's environment where financial statements can address a whole host of issues, there is an opportunity to fail to conclusively determine in those financial statements what materiality is. This bill is innovative; it sets forth a materiality threshold in the statements. It says these are the types of things we would like to know about. You cannot simply make a financial statement, one or two pages, turn the page and that is it. It says we have certain quantifiable thresholds and we want you to identify what those are so that the members of the public and the Canada Revenue Agency can take a look at this information and determine whether or not a labour organization is complying with what I will call the very loose definition of labour organization.
As such, when we look at these statements, we try to parse out what are the types of statements. Statements take on a definitional characteristic that reflects some sort of information and materiality. It is very interesting how this bill seeks to balance those levels of materiality by not only a numerical statement, but also excluding certain types of information, such as providing only names, not addresses, social insurance numbers.
When I look at the bill, I look at its measured approach to how it has taken an informational reporting requirement, made it more particular and germane to the institution and provided valuable information. The Canada Revenue Agency and the public can look to these types of disclosures and determine how the organization is carrying on its activities.
The final thing that I will address is that this is forming part of what I would consider to be some of the modern jurisprudence or tax decisions out of the Tax Court of Canada. In a very interesting statement by Justice Patrick Boyle of the Tax Court of Canada in a case we refer to as BBM, there seems to be a perspective that if you operate a non- profit, it does not have any type of rules or regulations to it, which is, of course, contrary to the definition of a non- profit. It must operate exclusively for purposes like social welfare. However, Justice Boyle turned this around and said not only do non-profits have to comply with the Income Tax Act, but they should operate in a business-like manner. Operating in a business-like manner does not mean that you are not a non-profit; it means that you may be a very successful non-profit by adhering to the principles of business-like behaviour.
Some of this information achieves that very purpose. My view is that this legislation addresses, in that balanced way, a labour organization, its objects, what it is required to do under the Income Tax Act. It then permits the public to look at that information as well the Canada Revenue Agency.
The Chair: Mr. Forer, I have to ask you to wrap up.
Mr. Forer: Finally, I want to mention the fine and penalty. It appears also for these organizations to be a measured capped maximum at $25,000, which, compared to the information that is required, appears to be a very measured response.
[Translation]
Alain Barré, Professor, Laval University, as an individual: Mr. Chairman, I am a professor at the Department of Industrial Relations at Laval University, where I teach labour law. I have in fact been teaching labour law for the last 35 years. When one specializes in labour law, one must become interested in the issue of legislative jurisdiction in terms of labour relations, in order to answer the question, which workers are governed by the Canada Labour Code and which workers are governed by provincial legislation?
I find that over 80 per cent of the case law dealing with the notion of a federal enterprise is essentially derived from special labour tribunals. This is an issue that has interested me for a long time. I would like to thank those who have made my appearance before the Senate Committee on Banking and Commerce possible.
Last October 29, at the request of a union, and I am myself a union member, I was asked for my advice on Bill C- 377. I was simply asked what I thought of it. Thanks to an article written by a journalist from Le Devoir about a bill that preceded Bill C-377, Bill C-317, I had already begun to reflect on the issue. I was able to provide the union with a quick response. My answer was very brief.
The issue is, who will this bill apply to? The bill will not be applicable to any union organization in Canada. A week or two later, the union asked me for a written opinion on the subject. Last October 29, I produced this legal opinion. The request only dealt with the constitutional validity of Bill C-377.
There are several issues I do not raise in my legal opinion, among others, the issue of relevance with respect to the proposed regulations, the issue of costs that will be borne by the state and union organizations, the difficulty of interpreting and applying the proposed legislation. Those are all important questions which, in a free and democratic society such as ours, are worth debating.
Given that I was only interested in the issue of the division of legislative jurisdictions, I will restrict my comments to the constitutional issue.
My opinion was signed October 29. Since then, I have read two other legal opinions, one produced by Professor Henri Brun on January 22, 2013 and one dated last week on April 28 — I only read it last week — produced by Professor Robin Elliot of the University of British Columbia.
Essentially, I am comforted by these two legal opinions as well as Professor Ryder's comments a few minutes ago, since all these legal opinions are in agreement. Bill C-377, were it to enter into force, would be totally unconstitutional.
In order to decide whether a statute is constitutionally valid, one must follow two steps: become acquainted with the true nature of the statute, what a statute bears upon, the essence of the statute and then, once the content of the bill has been established, one must identify which subject category under sections 91 and 92 the content could be inserted into.
What is the true nature of Bill C-377? What is it all about? In my opinion, I clearly stated that it dealt with union organizations, rather than fiscal issues. There is every reason to arrive at this conclusion.
In this bill, I see no real link with various statutory prescriptions, for example tax exemptions that benefit unions, nor with allowable deductions for Canadian taxpayers who pay union dues when they are calculating their taxable income.
The legislative summary does not contradict this. Professor Brun refers to the very title of the act, which mentions union organizations. Professor Brun tells us that when attempting to analyze the true nature of the statute, one must understand, and attempt to find, to take note of the singular goal of this bill. However, the bill's singularity in this case is clear, its only aim is targeting union organizations, evident in its title, its summary, its content, and the current context and even statements concerning the bill. I would add to that Mr. McCauley's earlier comments. All these things tell us that this bill's sole objective is targeting union organizations and that has no relationship with any fiscal prescription whatsoever.
I arrived at the conclusion that this was backdoor legislation. The legislator is attempting to use an appropriate legal structure in order to increase the chances of obtaining a favourable decision, were there to be a constitutional challenge.
On pages 5 and 6 of Professor Elliot's legal opinion, which I believe you have not yet read, he raises the issue of form, the fact that an attempt is being made to amend the Income Tax Act. Clearly, courts attach no importance to the form of the regulatory bill. Its true objective will be at issue.
The definition will also be of interest. The bill certainly adds a definition of the words ``workers' organization'' which did not previously exist. In my own opinion, I drew attention to the fact that the Department of Revenue's internal jurisprudence did not emphasize the lack of definition; the words ``workers' organization'' had not created a problem. Essentially, the definition being proposed here complies with the revenue department's own jurisprudence.
Professor Elliot also notes that there is no link between the content of the bill and the tax exemption for the union and the deductions for Canadian taxpayers. He notes that the bill does not even seek to establish any type of relationship between these various elements.
Given that this bill deals with labour organizations, unions, we must classify them within a category of subjects. Like Professor Ryder, Professor Brun and Professor Elliot, I have written that it clearly falls under section 92.13 of the Constitution Act, 1867, and the establishment of a labour organization falls under private law, or relationships between individuals. Professor Elliot specifically refers to Professor Hogue's definition about section 92.13.
[English]
The Chair: Mr. Barré, allow me to interrupt to ask you to wrap up, because I know we want to get to questions.
[Translation]
Mr. Barré: So it is clearly established that it is under section 92.13, insofar as this section essentially refers to the issue of private law. Private law falls under provincial jurisdiction, except for what is provided in section 91 of the Constitution Act, 1867. Perhaps in response to questions, I can further specify my thoughts on the matter. As to whether it is applicable to federally certified unions, the answer is a clear no.
Senator Maltais: Welcome, Professor Barré. Can you tell us why it does not apply to labour relations under federal jurisdiction?
Mr. Barré: This bill does not address labour relations. It deals with labour organizations. If you read the opinions of Professor Brun and Professor Elliot carefully, you will see that Professor Brun clearly explains that labour relations are downstream from the creation of a union. So there are industrial relations, labour relations in the context of some sectors of activity falling under federal legislative jurisdiction, but the problem is that this bill is not concerned with labour relations, it is only concerned with union organizations. On that point, there may not be much jurisprudence.
Professor Elliot mentions this in his legal opinion, but he quotes a decision from the Quebec Court of Appeal that held that the legal relationship between a union and its own employees falls under provincial legislative jurisdiction. Why? Because a union that is certified under federal law does not operate a federal organization, is not a federal organization. Yet Parliament's jurisdiction in the area of labour relations is essentially limited to entities that fall under federal legislative jurisdiction as well as, of course, the federal public service.
There is an important distinction to be made between unions as institutions, unions themselves and their role as labour relations agents. Unions as labour relations agents are effectively already regulated by Parliament, pursuant to the Canada Labour Code.
In my legal opinion, I provide several examples where Parliament has intervened to regulate the activities of unions, but this was in its capacity as a labour relations agent.
[English]
Senator Massicotte: Mr. Lee, I want pursue your argument that transparency is good for society and can only be positive points. Would you agree there is a limit and that organizations have a right to keep certain information private, or is it ``the more, the merrier,'' no limits, provide everything in public? I am talking about, let us say, individuals, private corporations, public corporations and unions. Is there a framework that you see that is fair and respectable?
Mr. Lee: Let us separate individuals from corporate bodies, whether they are unions or non-profits. I am trying to separate individuals from corporate bodies.
The documents I am most familiar with, because I use them in my courses every spring and fall, are the so-called corporate disclosures. My students are required to go read the 10-Ks, which are extensive documents. There is an enormous amount of information, and it is not just the salaries; they have to disclose major product lines and what countries they are doing business in. They have to disclose future expansion plans.
Using that as the template or the model for disclosure, I am not dealing with the constitutionality; I am not a law professor. I am just dealing with the substance to address your question.
From my point of view, I think the ideal disclosure is the disclosure framework developed by the SEC in the United States and by the Ontario Securities Commission in Canada that is imposed on publicly traded corporations. There is nothing in there that is ``secret''; they are revealing information that should be known about an entity.
Senator Massicotte: In other words, you say the frame of reference they should use relative to this proposed act is the U.S. disclosure for public companies?
Mr. Lee: As an example. I am using that as a template.
Senator Massicotte: The witnesses before you from the Canada Revenue Agency testified that they would interpret the word ``statement'' to be ``a list of.'' Those are not provided by public corporations in the United States, because they are looking for a listing of all receivables and all payables. Given their interpretation, that is not consistent with corporate disclosure for public companies. Is that too far, in your mind, too much disclosure?
Mr. Lee: I will answer on a personal level. I am a member of a faculty union and I have had my own disputes with the faculty union. It is a very public dispute and not a secret. It was over one of your former colleagues, Senator Landon Pearson. She was a very distinguished senator, and she was asked by the president of my university to present a report on how we should do a better job of dealing with our minorities at Carleton University.
She wrote a very fine report, and then the executive of the union used union resources to try to squash, suppress or kill that report. I went to the union executive and demanded information, and I could not get it. I am someone who has been paying dues for 25 years. I thought it was bizarre that, as an owner of the union, if I can use that word — I am not an owner, because it is a non-profit entity, so there are no shares — but I have been paying and I could not get information from my own union about what they were doing. I thought these were certainly people who have gone too far. We need more regulatory disclosure concerning activities.
Senator Massicotte: What about a list of accounts receivable? Should that be part of public disclosure by unions? Certainly, it would not be the case with public companies, but would that be going too far in your mind?
Mr. Lee: Personally, I do not think so. First, I understand it is over $5,000.
Senator Massicotte: No, the $5,000 is separate. It is a listing of every disclosure at $5,000. Besides that, they want a statement of accounts receivable and payable, and a statement of loans payable, and the interpretation of the Canada Revenue Agency was that it was a detailed list.
Mr. Lee: First, there is no commercial secrecy involved, because it is a union; that is to say, it is not competing in the marketplace with customers for proprietary information. It should be fully transparent, certainly not only to the members but to larger Canadian society.
As I said in my op-ed, unions occupy a privileged position in society because my right to self-representation has been taken away from me by law, and I am not challenging the collective bargaining legislation. I do not support right-to- work. I am just saying that my right to defend myself has been preempted, and I think there should be a quid pro quo: They should be required to disclose a lot more information.
Senator Massicotte: In that circumstance, do you agree that such a list is beyond the public disclosure of large public companies in the United States?
Mr. Lee: I have not looked at the regulations pertaining to disclosure; it may be. I have not looked. I use the 10-K reports, but I do not study the latest changes to regulations under the SEC that require or compel disclosure, so I cannot agree or otherwise speak to it.
[Translation]
Senator Bellemare: My question is for Professor Ryder and Professor Barré. We have been told that similar legislation exists in several other countries including the United States and France. When we look at this legislation, we also see that it includes the employer's side. Employers' associations are therefore often covered, and so are the employers themselves, in the United States as well as in France.
If, under Bill C-377, there had been an attempt to cover the other side as well, not only the unions, but the employer's side with respect to labour relations, would it have made this bill more acceptable from a constitutional standpoint, namely through the ancillary powers doctrine? Could a more comprehensive bill have been considered constitutionally compliant?
Mr. Barré: I do not believe so. I had not addressed the issue of ancillary powers in detail in my brief. However, having read Professor Elliot's legal opinion last week, I wrote a few notes and I am rather satisfied to say that they are exactly in keeping with what Professor Ryder said earlier, regarding the issue of knowing whether Bill C-377 is in pursuance of the objectives under our tax law.
The answer is a clear no; and I concluded that Bill C-377 cannot be saved through the application of the ancillary powers doctrine. Were there to be a change to include employers as well, I do not believe it would fundamentally change this conclusion.
I would like to raise one point; in my legal opinion, I did note that in the U.S., this disclosure obligation falls under labour law.
[English]
Mr. Ryder: I do not think it would make a difference from my point of view, because the fundamental problem, senator, is with the failure to respect the division of jurisdiction over labour relations and labour organizations, as I see it. To broaden the legislation and make it applicable — again, still to all management organizations and all labour organizations — would, in a sense, just compound the difficulty.
From another point of view, you might be able to argue that the connection to a legitimate income tax objective is a little more apparent with a broader piece of legislation, because whatever the income tax rationale is for focusing on and requiring disclosure from unions, it is a rationale that would apply to a whole host of other organizations, including management organizations.
I think one of the problems in trying to justify this as income tax legislation is that I have not heard any explanation for why the bill focuses on labour organizations, specifically why there is an income tax problem. I understand the argument for more disclosure. I think there are powerful arguments. The question is: What is the constitutionally appropriate way to go about regulating disclosure? This bill is fundamentally flawed in that regard.
Senator Ringuette: Yesterday, the promoter of this legislation, MP Russ Hiebert, was in front of us. I asked many times what his consultation was with regard to the jurisdiction in this bill. Unfortunately, it seems that it was a committee of MPs. I do not think there were any constitutional lawyers in that group, so I am happy that you are here.
Mr. Ryder, I do not know if you were here earlier to listen to officials from the Canada Revenue Agency, but they said that this bill is just disclosure and not for tax purposes, and that is on the record. That is very telling, shall I say.
I listened to Senator Bellemare's question. Is there any way that this bill can be amended to survive a constitutional challenge that will, again, probably cost taxpayers millions and millions of dollars?
Mr. Ryder: Senator Ringuette, as I have suggested, I think the way to solve the division of powers problem is to have any change to disclosure obligations of unions enacted pursuant to the Canada Labour Code and have it applicable only to unions within the federally regulated sectors of the economy, or to do the same for federal legislation dealing with public-sector unions. That is the orthodox way of dividing jurisdiction over labour relations in this country.
That would deal with the division of powers problem, but there may be a series of other issues pursuant to the Charter because of the unprecedented degree or the onerous nature and scope of the disclosure obligations. There is an argument under the Charter that it ends up interfering with the activities of unions and their ability to fulfill their role, and it therefore interferes with freedom of association. The disclosure obligations in relation to political activities also may have a negative impact on other fundamental Charter freedoms, such as freedom of expression.
Therefore, I think there will be challenges based on the Charter, as well. To me, those arguments are more difficult and more uncertain as to their outcome. However, the way to solve what I think is a very obvious and serious problem with the division of powers is to do so along the lines that I suggested.
Senator Ringuette: Mr. Barré?
[Translation]
Mr. Barré: When I was given this mandate, it had been suggested to me that I address the issue of the violation of certain rights, as defined by the Canadian Charter of Rights and Freedoms, and I responded that I preferred not to deal with that. Because if we address the issue of the application of the Canadian Charter of Rights and Freedoms, we automatically have to ask whether any infringement or restriction of certain rights can be considered reasonable in the context of a free and democratic society. In assessing what is reasonable in limits imposed by law, I believe that two reasonable individuals may have differing opinions on many subject matters. Even Supreme Court justices have varied opinions on these types of matters.
I therefore preferred to limit my comments to the issue of jurisdiction, because when it comes to the division of jurisdiction, there are very objective rules. Open any constitutional law manual and you will find rules as to the nature and substance of a law and the assignment to one area of jurisdiction of a particular subject matter.
[English]
Senator Campbell: Professor Lee, I certainly agree with your comments on transparency, but does transparency trump the Constitution?
Mr. Lee: I cannot answer that because I do not consider myself qualified to speak on the Constitution in the sense of the division of powers.
Senator Campbell: No, I am not asking you to speak about the Constitution. I am in the same boat as you are. All I am saying is: Do you think transparency should trump the Constitution? We have already heard that this is unconstitutional — that it will be. Does that trump the Constitution?
Mr. Lee: We are all roughly the same age. From what I have witnessed over the last 30 to 40 years, we are moving irrevocably toward a more transparent world from a much less transparent world. Transparency is increasingly trumping other issues. I see it in the university, with students and their demands for information.
Senator Campbell: But we have a Constitution. This is way bigger than a students' union or any other union. This is the Constitution of Canada, and all I want to know is if transparency trumps that.
Mr. Lee: If you are asking me how the court will rule if it is challenged, I do not know, because that will be determined by a superior court. The law is evolving, and we do see laws that have been overturned much later in time.
Senator Campbell: For once we have had someone say outright that it will be unconstitutional. The person who says it comes with very high qualifications. I just do not think this dog will hunt.
Mr. Lee: That is the role of the courts and not law professors.
Senator Campbell: It also is our role to ensure that we do not pass laws that are unconstitutional. That is the difficulty that we are having here.
I just believe that we are in this problem. I am with you on transparency. God knows the Senate could use it; I am not arguing with that position —
Mr. Lee: And that was not meant as a cheap shot. I am a strong supporter of the Senate.
Senator Campbell: No, no. We do not consider anything cheap shots anymore in the Senate; we just accept them as our due.
Senator Segal: I have a question for Dr. Lee and then a brief one for the legal members of the panel. I want to point out that while the committee goes back to 1867, the members do not. We are a slightly more recent vintage.
The Chair: Speak for yourself!
Senator Segal: Might I also say — and I hope that my colleagues of different political affiliations will indulge me — that I consider standing for the Progressive Conservative Party in 1993 an act of raw courage and loyalty, and I want to thank you for having done that.
Mr. Lee: I am told it was an act of stupidity on my part.
Senator Campbell: Suicidal.
Senator Segal: I will always typify it in the constructive way.
[Translation]
If I understand the report from our constitutional experts, if we want to make sure this legislation maintains its capacity to be constitutionally compliant, we have to start by aligning the Income Tax Act with the Canada Labour Code, and limiting the unions involved to those that are currently under federal jurisdiction, and second, perhaps use the notwithstanding clause.
[English]
That this law goes forward, notwithstanding the Charter of Rights and Freedoms. If we did those two things, there is a shot that the bill might be constitutional.
[Translation]
Have I understood your comments?
Mr. Barré: Yes, but I think we will not be completely impervious to a constitutional challenge, even if this regulation falls within the Canada Labour Code. But if, within the Canada Labour Code, you seek to regulate unions as unions and not as labour relations agents, you may not be able to withstand a constitutional challenge. Clearly the notwithstanding clause does not address the issue of the division of legislative jurisdiction.
[English]
Senator Segal: Do you want to add to that, counsel?
Mr. Ryder: I am in agreement. Senator Segal, I hope that you are not proposing the use of the notwithstanding clause.
Senator Segal: No, I am opposed to the legislation, but I want to understand what would have to be done to make it appropriate.
Mr. Ryder: Of course, if it were used it would foreclose the possibility of challenging the legislation based on the fundamental freedoms in section 2, including freedom of association and freedom of expression.
The other change that you mentioned — moving the disclosure obligation to the Canada Labour Code and restricting its application to unions in the federally regulated workplaces — I think would remove the objection based on the division of powers.
Senator Segal: My question for Professor Lee related to the issue of transparency and the issue of what I would call fairness and transparency together.
I am aware of what corporate disclosures are, and the fact that you use those as teaching aids is an inspired thing to do; I think it is an outstanding thing to do. Senator Massicotte touched on this in his question in that I do not believe that expenditures of $5,000, which is what this bill calls for making public, are required by the SCC or the OSC. With respect to categories, they have the NEO category, the named executive officers. Most of those numbers these days, for better for worse, tend to be in the seven-figure context.
From the point of view of balance, fairness and transparency, because they are all values that I think we share, how would you feel about a trade union that will be involved in a major negotiation with one of the big car or mining companies having to make a level of disclosure about its level of activities and expenditures that is not required, by any law, of the people in the car or mining companies who are doing a great job protecting their stakeholders and want to come to a fair labour agreement? Would you be at all troubled by a level of disclosure in one place in terms of a bargaining process that is not parallel in the other place?
Mr. Lee: Thank you for that question. I understand what you are arguing, but we are really discussing differences in scale. No union in Canada has the scale of a Fortune 100 corporation. Fortune 100 or 500 corporations have assets in the range of hundreds of billions of dollars, so necessarily they will not be commensurate. We are dealing with two incomparable institutions: a publicly traded corporation worth billions of dollars and a union that might have several millions in revenue. The aggregate of total annual revenues of unions in Canada is approximately $4 billion. That is for all unions in Canada. That does not even come close.
It is not the quanta. I am using my own personal experience with unions. It has been very frustrating that I cannot get information from them; they stonewall. They say, ``Okay, make an appointment. In three weeks' time, if we are here, if the clock strikes at the right time, and you are standing outside the door . . . .'' There are barriers put in front.
I realize this is not dealing with the constitutional issues — I am not a law professor — but I am talking about the practical problems. Unfortunately, the provinces are not dealing with this or responding to these abuses, and I believe they are serious abuses. I am referring to the attempts to suppress and to attack Jewish people in Canada. I am talking CUPE and the anti-Israel campaign. I have been involved in the ``anti-anti'' side at Carleton, meaning I am against the anti-Israel side. It has been very frustrating when a union becomes hijacked — hijacked — by people who are abusing their authority. I have said this publicly and I will say it again. I am looking for levers. My interest is not ideological; I am looking for levers to achieve greater justice and transparency in unions.
The Chair: We have now concluded round one. Our time for this segment has expired. I do have two people who would like to ask a question in round two.
Since the time has expired, could you ask quick questions and perhaps we could get quick answers.
Senator Ringuette: I have made access to information requests of the PMO, the PCO and the Minister of Justice with regard to a legal opinion on the constitutionality of this bill, and I got no answer.
The Senate, as a body of sober second thought, must take into consideration the constitutionality of the bill. We do not have the means to refer this bill to the Supreme Court of Canada to see if it is constitutionally correct, but the Government of Canada can do so before we enact such a mistake. How would you suggest we proceed?
Mr. Ryder: A couple of possibilities come to mind. One would be to urge the government to consider initiating a reference to the Supreme Court of Canada if they are committed to this bill in its current form. There will be, I believe, a six-month delay after Royal Assent before its obligations come into effect. However, that is not long enough to enable the completion of a legal proceeding that would lead to a definitive constitutional opinion, so there is a great deal to be said for the wisdom and fairness of initiating a reference if the government is committed to the bill.
[Translation]
Mr. Barré: On the same issue, I agree with Professor Ryder. It is very likely that, should this bill be adopted, legal discussions will ensue and we will therefore have to wait for the expiry of the six-month wait time provided in clause 3. The legal process is relatively long at the trial level, at the Court of Appeal and at the Supreme Court. Should this bill be adopted as is, we will need to give serious thought to the Government of Canada referring the matter to the Supreme Court.
[English]
Senator Nancy Ruth: Professor Lee, I hear your frustration. In your last comments you did say that the provincial labour legislation or groups are not doing enough, and therefore you would support this bill. If the provincial labour organizations were doing enough would you withdraw?
Mr. Lee: You are probably right. I should disclose that after my op-ed was published, I wrote to the Ontario labour minister. In the op-ed I criticized her comments to the Senate and about two weeks later I received a long letter basically attacking me personally for the position I took, and I said, ``You, the province of Ontario, are not doing enough to regulate unions.'' I am not saying that they are out of control. I am saying that the minoritairian members in a union do not have any rights to challenge or get information from the cabal that is in charge, and this is a very frequent problem with so-called union politics.
Senator Nancy Ruth: Would it be fair to say that this legislation in some sense holds out hope for you?
Mr. Lee: For me it holds out enormous hope, because I think that Justice Brandeis hit the nail on the head when he said that sunshine is the most powerful disinfectant of all. That is absolutely apropos. I believe profoundly in disclosure of information.
The Chair: On behalf of all senators, I would like to express our great appreciation to each of our panel members for your appearance today. It has been very helpful and stimulating, as I think you can tell from the questions.
In our third hour today we are pleased to welcome Pierre Brun representing the Canadian Association of Labour Lawyers, and Tom Stamatakis, President of the Canadian Police Association. Joining us by video conference is Don Todd, currently Research Director at Americans for Limited Government. Each will make an opening statement and I would ask each to give a brief thumbnail sketch of their background in their opening remarks.
Pierre Brun, Representative, Canadian Association of Labour Lawyers: Good afternoon. Thank you for having us. I will discuss a number of things and deal more briefly with a few items such as the question of constitutionality regarding division of powers. I will be happy to answer questions later.
[Translation]
My name is Pierre Brun. I have been a labour relations lawyer for nearly 25 years, specializing primarily in constitutional issues and the protection of the fundamental freedoms. I have been a member of the Canadian Association of Labour Lawyers for nearly 15 years. I'm accompanied by my colleague, James Harnum of Koskie Minsky, in Toronto, and he is specialized in the area of pension plans and benefits.
As its name would indicate, our organization represents nearly 300 lawyers in Canada and concentrates on professionals working in labour relations, both from the private sector, such as James and myself, or lawyers who are directly employed by these unions.
I would like to point out that CALL is not a lobby group. We are here to provide information and to educate our members and to promote the digest of certain rights and interests. I would also like to point out that we all work on a volunteer basis within this organization. We do not have an agenda. We are not paid by specific clients. We simply represent our organization.
As far as our position is concerned, we provided the Senate with a brief summary of the issues related to Bill C-377, which I will summarize quickly.
The first and most fundamental issue is of course the purpose and objective of this bill which must be spelled out with respect to the constitutional aspects of the division of powers. I would then also like have a discussion with you about the matter of a breach of lawyer-client privilege.
We feel that, despite certain amendments made recently prior to adoption, this bill still poses some serious problems in this area. We will also be raising a few questions regarding freedom of association, freedom of expression and the protection of privacy.
I would like to begin with the issue of lawyer-client privilege: we know that this legislation is now requiring the disclosure of a significant amount of data and information which is described in a specific and non-specific manner. The legislation states specifically that everything has to be disclosed as soon as the $5,000 threshold is exceeded, and the following subparagraphs 1, 2 and 3. The legislation lists the accounts receivable, debts, et cetera which will of course which will of course be tied to all these aspects of the work done by the lawyers, so if, more specifically, there is at the very end of this list a request for the production of statements showing legal expenditures, which are subject to client-lawyer privilege, that will cause unavoidable ambiguity in the law for the following reason.
Further to our analysis, we concluded that this bill does one thing and its opposite. On the one hand, it has specific provisions requiring us to disclose all amounts. There are no exceptions. It is not until you get to the very end that you see, in addition, a request for legal expenditures. So you have to produce something. We have heard people from the Canada Revenue Agency this morning stating that this would no longer be a simple line. Details are required and that is what we think as well.
Since we are talking about more than just details, there is one small exception added at the very end, excluding information protected by lawyer-client privilege. The problem we had with this exception is that it only covers the last subsections of the bill that are located specifically at subparagraphs 3(b)(19) and (19.1). This exception only applies to subparagraphs 19 and 19.1. There are no exceptions for the rest. However, for the rest, as laid out in subparagraph (b), when we must produce statements for all transactions over $5,000 for example, does the exception apply? It would seem that it does not. It is the same thing in subparagraph (i) where it calls for a statement of accounts receivable, there is no exception there and the list goes on, whether it be for collective bargaining or other things.
Our recommendation on this is that near the end of the bill, in subsections 6 and 7, there be general exceptions to cover all of the requests. In these last subsections there should have been an exception to protect lawyer-client privilege. I do not think that I need to remind you that this question of lawyer-client privilege, in Canadian law in our society, is important enough that it deserves to be respected.
On the question of the payees, people tend to forget that professional privilege does not only benefit the unions, but the members as well.
That is to say that when a defence file is taken on, it is not only the union who is defended but also individuals. Information is circulated, including information from a person's medical files among others. If we have to start detailing how much each file cost for each individual, not only will information about the union have to be disclosed, but also that of individual workers.
As for the impact of this bill on freedom of association, I agree with Professors Ryder and Barré, when they said earlier that it is not necessarily that evident that this bill is unconstitutional because it would infringe upon freedom of association. Nonetheless, some very important questions have been raised and addressed in different ways, particularly the creation of an imbalance between the existing forces and the fact that the bill, and we discussed this at length, seems to indeed only target one party. That being the case, if this bill is adopted, its constitutionality could be challenged, something that good lawyers would be able to do. I am not saying that I would go that far. They could simply say that the goal of the legislation is to weaken the ability to associate, since in terms of taxation, one cannot determine the real objective of the bill nor what amount would be attached to it.
Since it is not clear how this legislation will help taxation, there is a problem of freedom of association. The same goes for freedom of expression. I refer you to the definition of ``labour relations activities'' that can be found in the legislation. These activities are extremely limited, and they are limited to the collective bargaining process.
In other words, what is being requested is disclosure of information in order to limit these organizations' ability to express themselves on a political level. There are more things that could be said on this subject.
Lastly, on the question of privacy, I would refer you to section 8 of the Canadian Charter of Rights and Freedoms which deals with search and seizure. We know that when the government forces disclosure of documents there can be problems. This type of incident has already come before the Supreme Court in the Thompson Newspapers case and others. You can be sure that such cases will be evoked, particularly here because this legislation is not serving any other purposes, and on top of that the information is to be made public.
[English]
Don Todd, as an individual: My name is Don Todd. Between 2001 and 2009, I was Deputy Assistant Secretary of Labor in charge of union management labour services of the Department of Labor. The bureau enforced the Labor- Management Reporting and Disclosure Act of 1959. That act was passed after 270 days of hearings and 1,500 witnesses. It was widely televised. Of course, television was new in those days, and everyone watched the hearings.
The act does basically three things: It requires fiscal transparency — in other words, union members have a right to know how their money is being spent; it provides for fiscal integrity; and it allows the Office of Labor-Management Standards to audit the books to see if the reports that the union is turning in are accurate. During my tenure at the labour department, we indicted and convicted close to 1,000 union employees and officers who were stealing their brothers' and sisters' money from the union and putting it to their own purposes.
Also, the act was intended to guarantee union democracy. If a person running for union office felt that the election was unfair after they went through the union bylaws as to how to contest an election, they could appeal to us. If we felt after an investigation that their complaints were valid, we would supervise a rerun of the election.
During my tenure, we revised the reporting rules for the first time in 50 years such that they required much more accurate reporting similar, I understand, to what is required in this proposed legislation. Under our act, detailed reporting applied only to unions who had gross receipts of $250,000 or over; salaries were reported on anyone making over $10,000 a year; and expenditures of $5,000 or more to a particular vendor had to be reported.
One problem we had was that while it was a crime not to report, we had to show that the violation was willful in order to get a conviction, which was difficult to do. We had no penalties, so many of our reports were late and we wasted much time.
When we put out the regulations to revise the standards for reporting, we got over 36,000 comments, mostly from labour unions. While it is difficult to argue in the public arena against disclosure, they came up with many other reasons why this was unfair and would be hugely costly.
The Airline Pilots Association said that if these regulations were in effect, their report would be 15,863 pages long. As it turned out, the regulations did take effect and their report was 239 pages long. The American Federation of Labor and Congress of Industrial Organizations, the largest labour federation in America, claimed it would cost the average international $1.2 million in order to file these reports. As it turned out, it cost the AFLCIO, which is the largest in the country, something over $50,000. Their estimates were not correct.
I see my time is up, so I would be glad to answer any questions.
Tom Stamatakis, President, Canadian Police Association: Mr. Chair and honourable senators, thank you for the invitation to appear here this afternoon regarding Bill C-377 as you continue your study on the proposed legislation. As this is my first time appearing before your committee, I want to take a moment to explain exactly what the Canadian Police Association is to give a bit of context to the following remarks.
The Canadian Police Association is a national voice for over 52,000 police personnel across Canada. Membership includes sworn and civilian personnel serving in 160 police services across Canada, from Canada's smallest towns and villages to our largest municipal and provincial police services, including some members of the RCMP, the CP railway police and First Nations police services.
By way of a personal introduction, I am a police officer in the city of Vancouver. I am seconded from the police department to the Vancouver Police Union as its president. I am also the President of the British Columbia Police Association, which is an association of all the municipal police unions in the province of British Columbia. I am the President of the Canadian Police Association. I am seconded to these positions while I am elected in the capacity as president. If I were no longer in that capacity, I would go back to my policing career in Vancouver.
With the exception of our RCMP colleagues, each and every one of those sworn and civilian members that I represent is also a member of a union, which is why Bill C-377 is a serious concern to our members and to front-line police personnel in this country.
Before getting into the details around my concerns, I should note that while police associations serve as bargaining units, represent members during grievance processes and provide additional legal protections for members when necessary, among our many roles we are quite different from most of our organized labour colleagues. We have no formal political affiliations with any of the national parties. We are proud of our work with all parliamentarians when it comes to pursuing our ultimate goal of safer communities for Canadians and our members.
With respect to Bill C-377, I cannot help but note that this proposed legislation seems like a solution in search of a non-existent problem and a costly solution at that. While I have no doubt that supporters of this bill can dig up examples of union officials misappropriating their own members' funds, the simple fact is that the Criminal Code already addresses those circumstances within a number of provisions. Fortunately, those instances are exceedingly rare in a broader context.
As much as I hate to raise the issue, I suppose I could draw a parallel between this bill and the oft-debated gun registry, which is why I am often quite surprised when I hear that Conservative parliamentarians are pushing for Bill C-377.
As police officers, we were told that the gun registry was expensive to set up, expensive to maintain and was of little value since criminals would not be the ones to register their firearms. Bill C-377 will create a registry that will be expensive to set up. According to Canada Revenue Agency, it could cost many millions of dollars, be expensive to maintain and would likely be of little value since people committing fraud are unlikely to report on their own criminal behaviour.
I have spent years working with my local association, the Vancouver police union; with my provincial association, the British Columbia Police Association; and with our national organization, the CPA. I can assure you that the overwhelming number of union executives are honest and hard-working people who put their own policing careers on hold in order to work for the benefit of their members, often balancing both their policing duties and their obligations as elected union officials. Suggesting that onerous legislation is required to stop the extremely small minority from committing criminal acts is almost ridiculous in my view.
I would like to take this opportunity to touch on the members of our associations, since the sponsors of this legislation often like to suggest that they are proposing these measures on their behalf. I have attended hundreds of annual general meetings of police unions across this country. In each and every one of those unions, financial statements are open to the members and detailed explanations of each were offered. Often, the results of third party audits were provided to ensure that the members' money was being spent effectively and in the members' interest. I have been grilled by my members and have seen it happen on a number of occasions to other presidents and financial committees.
Our books are always open to our members. The idea that they would need an ineffective registry to protect them from their own association is absurd, in particular when you consider that the vast majority of the members I represent are trained police investigators who are very capable of asking appropriate or probing questions on those matters they are concerned about.
Another area of concern for our association regarding this proposed legislation is privacy and the breaches that would be caused by this bill if it were to pass. I should note in this regard that the sponsor of the bill in the House of Commons, Mr. Hiebert, reached out to our organization to try to address some of our most pressing concerns. Amendments that were adopted in the house have gone some way towards fixing these issues. The bill in its current form would still represent a serious breach of privacy for our members and for companies that are engaged in a business relationship with our associations.
Police personnel who take an active role with their local associations do not immediately stop being police officers. Requirements that their names or other identifying and personal details be compiled and reported on in a nationally searchable online database could present long-term security risks for our members and potentially their families.
It is impossible to predict what roles an officer might play over the course of his or her career before they choose to become involved with their association or after as they resume their policing career. The same can be said for companies that work with our associations. While many are justifiably proud of their support for local law enforcement personnel, others may not wish to have that information made public. It is impossible for us to know which criminals might search this proposed database and what uses they may have for the information they will be able to obtain from a database like the one proposed in the bill.
Honourable senators, it is difficult for me to present all of our concerns in a brief five minutes. I want to leave as much time as possible for questions, so I will provide a quick summary.
Bill C-377 may be extremely well-intentioned and I have no reason to doubt that is the case. However, as I mentioned, this is a solution in search of a problem, an unnecessary drain on taxpayer and employee resources and a serious breach of privacy for union members, including the sworn and civilian members that I represent.
I hope that this committee and Senate colleagues will decline to pass this legislation because the alternative, in my perspective, seems likely to be years of costly litigation that will likely see the courts overturn most of the key components of this bill.
I appreciate having the time today to make this presentation. I look forward to your questions.
Senator Bellemare: Mr. Todd, I am interested in the constitutional aspects of Bill C-377. In that respect, I want to have your opinion. When the American law was adopted in 1959, was there discussion as to whether it would be a labour law or a fiscal law? Was it evident that it was labour relations business or that it was an income tax problem? I would like to have your comment, please, on this issue.
Mr. Todd: Of course, it was discussed as a labour law. It was the Labor-Management Reporting and Disclosure Act of 1959. I might mention that after we revised the reporting regulations, there were a number of lawsuits. Issues were raised by gentlemen from the police association, and the Department of Labor prevailed on all points. Of course, our laws are different, so I do not know where that is relevant to Canada.
Senator Bellemare: It was discussed in the U.S Department of Labor.
Mr. Todd: That is correct.
Senator Ringuette: The logic is that this is a labour issue. In Canada, almost 90 per cent of our labour movements and relations are dealt with on a provincial basis. Provinces have disclosure provisions in place for both employers and employees. In the U.S, do you have the same balanced approach with regard to requiring employer and employee disclosure under your labour legislation?
Mr. Todd: Under the federal law, no union that employs only employees of the state or state subdivision is required to report under this act. Only unions that have private employees — people working in the private sector — are required to report. For instance, my wife is the business agent for a local teachers' union. There was no conflict because they had no private employees in the union. However, if that union decided that it would represent bus drivers employed by a private company, then they would only have to have one member from the private sector and they would have to report under the federal law.
Senator Ringuette: With regard to the U.S. Department of Labor and labour legislation, do you have a balanced approach in terms of the requirements for labour organizations and employer organizations such that their main purpose is the regulation of labour relations?
Mr. Todd: That would come under the National Labour Relations Act, which is kind of the unions' own court system where unfair labour practices are adjudicated. It would not come under the OLMS.
Senator Ringuette: I am told that you have the same requirement for employer disclosure if they deal with collective bargaining.
Mr. Todd: I believe you are talking about the Department of Labor persuader rule.
Senator Ringuette: There is a requirement on both entities with regard to labour relations.
Mr. Todd: In my interpretation, if a union or an employer hires someone to persuade someone to join or not to join a union, then they are required to report that expenditure and the persuader is required to file reports with the Office of Labour-Management Standards.
Senator Ringuette: Mr. Stamatakis, I suppose that within your membership, employees of small municipalities would be a local union. There might be two, three, or four people in that local union. Is that possible?
Mr. Stamatakis: I would say the vast majority of our 160 member associations in the Canadian Police Association are quite small. We have members who might represent as few as 24 police officers in a local municipality. Those police officers who are elected as their union representatives would have a regular police assignment and would undertake their union responsibilities balanced against their regular police assignments. That is very common. No employees deal with their union obligations off the corner of their desk.
Senator Ringuette: They are very small.
Mr. Stamatakis: Yes.
Senator Ringuette: Of your 52,000 police personnel, how many distinct union locals are there?
Mr. Stamatakis: There are 160 member associations.
Senator Ringuette: With regard to the Canada Revenue Agency, we are looking at 160 times $2,000 to process the data.
I appreciate that you raised the issue of privacy and your concern for security.
Mr. Stamatakis: I will give you one good example. A person on my executive board in Vancouver is a sergeant in the Combined Forces Special Enforcement Unit in British Columbia. The sole function of that unit is to target organized crime groups, outlaw motorcycle gangs, and identify gangs engaged in serious criminal activity. Their main function is to surveil gang members and their activities with a view to successfully prosecuting them. Bill C-377 would put this individual in a situation where at the very least his name would be published. In this day and age with technology the way it is, it probably would not take much for someone to do something.
There are well-documented cases across the country of crime institutions that have infiltrated government institutions and other institutions with a view to gathering mining databases and gathering information. There is a significant risk for our members to having even their names published because it would not take too much then to obtain a photo, et cetera. There is a significant risk.
Senator Massicotte: Mr. Todd, you are the expert on disclosure in U.S. practices, which I want to focus on because I am not sure that we understand fully.
The proponent of the bill made a reference to the American practice as a good reason for us to do the same. I want to delve into that. You are a proponent for disclosure and the more transparency there is the better. I think a lot of us would agree with that, but a lot of us would agree there is probably a limit to the extent that we should disclose certain information.
The debate in your country when the labour law was proposed was between Kennedy and Goldwater at the time. There is a general reference frequently in your country when these laws came into effect to create a balance between disclosure of unions and disclosure by public companies in the United States. Is that reference point still relevant? Is it relevant to discuss what corporations have to disclose versus what unions have to disclose?
Mr. Todd: A public corporation has to disclose. The Mercatus Center here at George Mason University did a study and found that corporations have to disclose about 23 times as much as unions have to disclose. Of course, private corporations would not figure in.
When you talk about the cost, a union with 24 members would have a very small report. There would not be a lot of $5,000 expenditures or a lot of employees making more than $10,000 a year, so it would be a very small report.
Also, when you talk about the expense, you would hope that these unions are keeping books as it is so that their reporting would be fairly simple. During our discussion, we compared it to using Quicken and TurboTax. That is essentially how it ended up. If the union through the year kept their books in such a way, it would translate to the report electronically and cause very little expense and not many problems.
Senator Massicotte: I am not so much worried about the expense. I am worried disclosure and the consequence of disclosure. Are you aware of the bill? Have you read the bill we are talking about?
Mr. Todd: It has been a while, but yes, I have.
Senator Massicotte: You are probably not aware, but this morning we heard from a witness from Revenue Canada who gave their interpretation of what certain words in the bill would mean. For instance, the bill talks about ``a statement of accounts payable'' and ``accounts receivable.'' The discussion was about what ``a statement'' means? It is a very broad word. The proponent of the bill says you have to refer to generally accepted accounting principles, but that does not help because nowhere does it define ``statement.'' The interpretation by the Canada Revenue Agency would be that ``statement'' means ``list.'' Under the proposed legislation, it would be required from all unions.
In your country, you have two different categories; but we would lump them together. They would have to provide a list by item of all accounts receivable and payable. In the U.S., they have to provide only the totals. For example, you do not provide a list, by creditor, of your suppliers. Do you agree with my comprehension of your legislation?
Mr. Todd: No, I do not. Again, there is a $5,000 level.
Senator Massicotte: I appreciate that.
Mr. Todd: You have to list not only the accounts but also whether they are up to date or 60 days past due or over 90 days past due.
Senator Massicotte: You are referring to the $5,000 list of disbursements.
Mr. Todd: Right.
Senator Massicotte: In this bill, we have that provision. In addition, there is a significant list of other information that has to be provided, including a list of accounts payable and receivable far beyond the $5,000 — whether it is $100 or $200. My understanding is that in your country that is not required. The predominant reporting information is disbursements in excess of $5,000. Is that accurate?
Mr. Todd: Yes it is, but they have to report the accounts in aggregate below $5,000.
Senator Massicotte: I agree. Your legislation always refers to it as aggregate. The point I am making is that in this case it is not. They are asking for a listing — period. In your case, it is always aggregates. Is that right?
Mr. Todd: Unless it is $5,000 or over, then it has to be specific.
Senator Massicotte: That answers my question.
Senator Segal: Mr. Todd, thank you for being available to us. I want to pay tribute to your long service to the American government in what, I am sure, was a challenging and difficult area on occasion.
I realize this is a bit of a hypothetical, but as someone who is no longer in the service, you might be prepared to help us with a hypothetical. Based on that long service, how would you have felt if you had been asked to administer this same law but it was a law actually of the Treasury Department and the Internal Revenue Service? Would it have struck you as an appropriate place for this law to be in the U.S., not where it was under your distinguished leadership and management? If for some reason the legislators in 1959 had decided to put this into the apparatus of the IRS, do you think that would have been helpful to the task you tried to undertake? Would it have been constructive? Do you think it would have been perhaps a bit of a legislative mistake?
Mr. Todd: At the time the bill was passed, there was quite a controversy over where it should be. It only had like three votes against it in the Senate. Those were all Conservative votes because they felt it was a phony reform and that it ought to be put in the Department of Justice rather than in the Department of Labor. As to where it is now, I work for a 501(c)(3), and we have reporting requirements to the IRS. As a non-profit, we report to the IRS, which is part of our tax system.
Senator Segal: You were kind enough in your testimony to make reference to some successful prosecutions of over 1,000 individuals, I believe, for the misuse of union funds that should have been used more properly for their brothers and sisters. Can you help me to understand how your reporting system, which you managed, would have contributed constructively to those prosecutorial undertakings?
Mr. Todd: We had the authority, and the office still has it, to look behind the report and see whether the report was accurate. In so doing, we learned of theft. Money was reported as spent on one thing when it actually went into a union employee's pocket. Some of the amounts were quite large. It is difficult in the United States to get a U.S. attorney to prosecute under a certain level.
It was over 900, not over 1,000; I do not want to overstate.
For some of the smaller ones you can get the prosecutor to decline, but with larger international ones, we once had a president of an international who was spending over $100,000 a year on liquor and whores, and he put it down as an educational activity on the part of the union.
Senator Segal: I appreciate your frankness; I will not go there, however.
Mr. Todd, I have one final question. Does that mean you had a backup audit process by which you could look at a report from an international or a union or a local, something that would strike you and your colleagues in the service as odd or could not add up, and you could dispatch, under a statutory capacity, an auditor to look at whether what had been declared was actually the truth?
Mr. Todd: That is correct. I would say that we had a way to profile the reports to see where the likely problems were, but well over half of the cases that we prosecuted actually came from union members tipping us off that something was going on in that union.
Senator Ringuette: Mr. Todd, I would like to pursue what you were just explaining to us in that most of the prosecutions that you mentioned, between 900 and 1,000, have come to attention from union members; am I correct? Did I hear you right?
Mr. Todd: That is correct. Of course, they were confidential tips that came in that would indicate we needed to investigate because money was being misappropriated.
Senator Ringuette: We have the same system in Canada if someone believes there is some wrongdoing. The legislation is not needed for a union member, if they find that there is some wrongdoing, to make an anonymous complaint. Also, in the provincial and federal labour codes we have provisions for any member of a union to complain directly to the minister responsible for the legislation with regard to disclosure. We have all these mechanisms in Canada that are probably different from the ones you have in the U.S. I will certainly not forget that you have indicated to us that most of the prosecutions you had under your act came from anonymous disclosure by union members and not necessarily from the disclosure in your act.
Mr. Todd: I would not say ``most,'' but I would say a large number of them. It was not a majority, but a large number of them came that way.
Senator Nancy Ruth: Mr. Todd, I want to ask whether, in your experience, the concerns Mr. Stamatakis has made about police officers ever materialized with reporting from the police unions?
Mr. Todd: No. I cannot imagine an undercover police officer being an officer in a police union, which is where their name would appear.
Mr. Stamatakis: I just gave you an example.
Senator Ringuette: We have that in Canada.
The Chair: Thank you very much.
To our witnesses, I would like to say that this has been very helpful in our deliberations. On behalf of all of the members Standing Senate Committee on Banking, Trade and Commerce, I would like to express our appreciation to you. Thank you kindly.
(The committee adjourned.)