Proceedings of the Standing Senate Committee on
National Finance
Issue 32 - Evidence - May 28, 2015
OTTAWA, Thursday, May 28, 2015
The Standing Senate Committee on National Finance met this day at 1:47 p.m. to study the subject matter of Bill C-59, An Act to implement certain provisions of the budget tabled in Parliament on April 21, 2015 and other measures.
Senator Joseph A. Day (Chair) in the chair.
[Translation]
The Chair: This afternoon, we are continuing our study of the subject matter of Bill C-59, An Act to implement certain provisions of the budget tabled in Parliament on April 21, 2015 and other measures.
[English]
We've moved along quite nicely, but we didn't do Division 6. We did Division 7 of Part 3, so we will do Division 6 at this time. Division 6 can be found at page 67 of the bill. It comprises not too many clauses, all dealing with the Export Development Act.
I will ask one or both of our two witnesses who are here from Foreign Affairs, Trade and Development Canada, DFATD, Marc-Yves Bertin, Director General, International Assistance Envelope Management, Strategic Policy; and from Finance Canada, Steven Kuhn, Chief, International Finance, International Trade and Finance Branch.
Welcome, each of you. Will you both have introductory remarks or just Mr. Bertin?
Marc-Yves Bertin, Director General, International Assistance Envelope Management, Strategic Policy, Foreign Affairs, Trade and Development Canada: Just myself.
The Chair: Are you familiar with the way we have been handling matters here?
Mr. Bertin: I think the expectation is that I say basically a focused intervention based on explaining the clauses. In this case we're talking about two clauses, so I will be rather efficient or economical.
Basically, Division 6 of Part 3 amends the Export Development Act, as you noted, to add a development financing initiative to EDC's current trade-related mandate. With the first amendment at paragraph 10(1)(c), EDC will be able to provide development finance and other types of development support in accordance with Canada's international development priorities.
As an explanatory note, this will enable EDC to provide financing to projects in high-impact sectors in developing countries that normally face challenges securing financing. This will enable more effective partnerships and partnering with the private sector in developing countries on projects that support development results, therefore complementing our official development assistance.
The second amendment adds a new section, section 26, and amends the Export Development Act to provide for the responsible minister for EDC, the Minister of International Trade, that he or she consult with the Minister of International Development on all matters relating to EDC's development financing initiative.
Basically, the last clause, the third clause, is on entering into force, and that will be done through order-in-council.
The Chair: Is this a fundamental policy shift or just a minor adjustment to what has been going on up till now?
Mr. Bertin: It depends from where you're asking the question. It's clear that in international affairs and in terms of development in developing countries, official development assistance has a role to play, but we also know that the private sector is the main engine of economic growth and prosperity in Canada and other countries. Within that context, you have situations where private sources of finance may not want to go into these markets insofar as they perceive risks and where the development funding, which by and large is meant to support governance, economic development and so forth, is not necessarily there to contribute to these types of profit-making enterprises.
This is creating new space. It's new space for Canada but by no means new space internationally. We are the only G7 country that does not have such an instrument at this time, and there are a number of Scandinavian countries in addition to the G7 that have these types of instruments.
We are new to the game, but based on our consultations with other institutions, we know we will be a valued and welcomed partner to the game.
The Chair: This will be in the form of loans as opposed to grants to these private-sector enterprises in different countries?
Mr. Bertin: That's right. We are talking about the current powers of EDC, but used within this space, which is basically the development-results space. That's loans, guarantees, equity stakes and what-have-you, but not grants.
The Chair: In the past, there have been quite a few grants and contributions from organizations like DFAIT previously that went to the Red Cross and international NGOs. Are we likely to see a transfer of that activity to Export Development Canada in the forms of loans as opposed to grants and contributions?
Mr. Bertin: No. Our official development assistance will continue to focus on alleviating poverty, pursuing development priorities and therefore continuing to issue grants — using grants and contributions as the main mechanism for that.
The ODA budget, insofar as its activities and orientation, remains the same. It will continue to build good governance in various countries. This entity will basically be able to partner up with any private-sector entity that is pursuing a business venture that has a development outcome but is also viable. That will basically be the space in which it operates. They will complement one another, but they will be separate. They'll be able to work together, but they will be separate.
The Chair: The same high standards we have come to expect of EDC will continue to be applied in relation to loans being made?
Mr. Bertin: Absolutely.
The Chair: Mr. Kuhn, did you have anything to add?
Steven Kuhn, Chief, International Finance, International Trade and Finance Branch, Finance Canada: No. I think my colleague has covered it, but if there are questions, I would be happy to answer.
Senator Wallace: Mr. Bertin, the funding you would provide is only to private-sector entities, not to governmental agencies or governments?
Mr. Bertin: That's basically correct; it's basically enterprises, which are private enterprises, arguably state-owned enterprises. But we are not talking about providing money to governments.
Senator Wallace: So they would or would not be state-owned enterprises?
Mr. Bertin: No, we are talking about commercial entities.
Senator Wallace: What types of tests would you apply to those entities to determine worthiness of financial assistance?
Mr. Bertin: If this bill passes, the entity will need to be stood up and it will need to develop a robust set of policies to guide its actions, both in terms of the investment decisions it makes and the sectors in which it operates and so forth. From that perspective, it will be able to inspire itself from the experiences and best practices internationally, but also from Canadian rules, regulations and norms.
Whenever an entity of this nature tries to enter a space and considers a project proposal, it will look at a range of considerations. First and foremost, is there a development result? It will need to define those based on a priority set out in part by the government.
It will also then need to take a look at the viability of the initiative. So it will take a look at the risks and sustainability associated with that in looking at a range of things, including the credit-worthiness of the proponents, its backing and partners, the sector, the country within which it's operating, the various political and marketplace risks, and so on. It will need to balance those things out.
Senator Wallace: When you are looking at the objectives of that private-sector entity, would you look at the social benefits they are attempting to provide countries, or is it only on a business economic basis — jobs, trade and so on?
Mr. Bertin: As I mentioned, the entity will need to define these things. It will need to define its investment decision framework and the development results it will be looking to support and promote.
By way of example, if you look at other DFIs, whether the Netherlands or other multilateral DFIs such as the IFC, they actually set out clear objectives in terms of social outcomes, environmental outcomes and so on.
The entity will be able to emulate its decision-making framework based on all these best practices.
Senator Wallace: And these entities are in high-impact sectors in developing countries, and they would be entities that normally face challenges in securing financing. Does that mean you would require them to provide — if there was an application for funding — that they have attempted to get it through conventional sources and were unable to do so and they are then turning to you as a possibility?
Mr. Bertin: How the entity determines its decision-making framework, it will want to make sure, whatever it's doing, that it is not crowding out potential sources of funds — private enterprises and so forth. This is not meant to occupy the space that a bank could or what-have-you. So it won't be looking to do that.
To the contrary, private-sector proponents, when trying to get into some of these markets and are facing various risks, whether perceived risks, lack of knowledge or what-have-you, working with a DFI to enable the DFI to, for example, be a more patient lender and, therefore, be the one who will lend money over an extended period of time. That might attract and crowd-in private-sector sources of funds that otherwise would not have been there, because they figure, "You'd have to be too patient for us, thank you." It should have a crowding-in effect.
Senator L. Smith: To follow up on Senator Wallace's inquiry, will you have an established yearly budget, or will this be done on an ad-hoc basis with demands that come in?
Mr. Bertin: The budget plan lays out a capitalization target of $300 million over five years. I'd specify that the capitalization will not be sourced from the Official Development Assistance envelope, so this is complementary and additional to our ODA. The profile of the $300 million will be set out. The specific profile, however, I'm not in a position to speak to.
Senator L. Smith: If I understand correctly, it is $300 million of over and above new money.
Mr. Bertin: It's $300 million quite separate from and aside from our ODA budget.
Senator L. Smith: Is it new money or just reallocated money from other budgets, just so I can understand exactly what it is?
Mr. Kuhn: If you'd indulge me, I'll just say two things and answer your question as a second step and talk a bit about the process for establishing budgets and capitalization as a first step.
Mr. Bertin has laid out some of the steps that the government will go through over the coming months should Parliament choose to grant EDC this broadened mandate. The next step, in order to articulate some of the frameworks for how the development finance function would operate — including what its budget would look like and the size and scope of its work — would be established in Export Development Canada's corporate plan. Every Crown corporation has to submit a corporate plan for approval at Treasury Board, then to be tabled in Parliament before the end of their fiscal year each year.
Export Development Canada would be articulating a lot these issues, including budgets, through their corporate planning process in the fall of 2015, to be tabled in Parliament before December 31, 2015, for implementation in 2016. That corporate plan would detail what the profile of capitalization would look like in detail, because the corporate plan is a five-year document.
To your specific question of whether or not the capitalization is a new budgetary expense or is being taken from somewhere else, it's a bit of technical accounting nuance. Capitalization itself does not have a fiscal impact because the entity Export Development Canada as an enterprise is consolidated onto the books of the Government of Canada. The act of transferring $300 million of capital to the balance sheet of Export Development Canada or the development financing function itself does not have a fiscal cost, and the intention of the entity would be that it is self-sustaining. Its operating expenses would be covered by revenues that it generates from its activity.
Senator L. Smith: Have you folks targeted specific developing countries that you would focus on?
Mr. Bertin: At this stage, the development priorities, that is, the strategic guidance that will be provided to the initiative through the regular accountability instruments such as letters, the SPA letter, or Statement of Priorities and Accountabilities. Basically, this will be something that will be issued and will inform the preparation of a corporate plan. That hasn't been done yet. We'll have to wait for this bill to become law and, at that point, we will turn our attention to. . .
The Chair: Thank you very much, Finance Canada and Foreign Affairs, Trade and Development. We appreciate you being here with us. We'll be watching this new initiative closely.
Colleagues, we will now proceed. We are still in Part 3. In fact, we will be for the rest of the day. Division 8 of Part 3, Members of Parliament Retiring Allowances Act, clauses 94 to 96, beginning on page 72.
We welcome, from Treasury Board of Canada Secretariat, a group with which we work quite regularly: Ms. Kim Gowing, Senior Director, Pension Policy and Stakeholder Relations; and Bayla Kolk, Assistant Deputy Minister, Pensions and Benefits Sector.
Bayla Kolk, Assistant Deputy Minister, Pensions and Benefits Sector, Treasury Board of Canada Secretariat: I will begin with a short overview and then turn to our senior director Kimberly Gowing to take you through clause by clause.
The Pension Reform Act enacted in November 2012 included a provision that, effective January 1, 2016, the Chief Actuary of Canada will have the authority to set member contribution rates under the Members of Parliament Pension Act. The amendments also gave the Chief Actuary the discretion to set different contribution rates for members of the Senate and members of the House of Commons, which was not the original intent. Prior to January 1, 2016, member contributions rates for all members of Parliament were set in legislation through the Members of Parliament Retiring Allowances Act and set as a fixed percentage of their remuneration for each calendar year.
The proposed legislation is to amend that act to specify that the Chief Actuary is not permitted to distinguish between members of the Senate and members of the House of Commons when fixing contribution rates under that act. These proposed amendments would ensure that the same contribution rate is fixed for all members of the Parliament, irrespective of their membership in either the House of Commons or the Senate.
Kimberly Gowing will you give you further explanation by taking you through the proposed clauses.
Kim Gowing, Senior Director, Pension Policy and Stakeholder Relations, Treasury Board of Canada Secretariat: Clause 94: This clause amends section 2.7(2) of the Members of Parliament Retiring Allowances Act and specifically says that the Chief Actuary shall not distinguish between the members of Senate and members of the House of Commons when fixing contribution rates for any purpose of the act.
In addition, subsection 2.7(3) is repealed, as it's not necessary for the Chief Actuary to establish any classes beyond those that are already determined within the act itself.
Clause 95: This clause clarifies that members' contributions under the Members of Parliament Pension Plan will meet 50 per cent of the current service cost on January 2017 and going forward.
Finally, Clause 96: This clause is amended to remove the reference to 2.7(3), as the subsection has been repealed as well.
That's the summary of the legislative changes.
The Chair: This is removing something that the actuary had the discretion to do in the legislation of 2012. What has happened? He or she couldn't do anything until January of 2016, so what has happened in the interim that led to this change in the legislation?
Ms. Gowing: What is being proposed in this particular change is to remove any ambiguity with respect to the ability of the Chief Actuary to set contribution rates to ensure that he sets one contribution to treat the plan and all members as being part of one plan.
The Chair: We know that senators are paid $25,000 less per year than the House of Commons, and we know that statistically senators tend to be older and therefor would draw pensions for a lot shorter period of time and therefore be less of a burden on the pension plan than would members of the House of Commons. The actuary has already spoken on both of those things and said that, right now, senators are subsidizing retired members of the House of Commons. That's a matter of public record. Is that what triggered this change in the legislation?
Ms. Gowing: As I said, it was to ensure that all members are treated exactly the same in the plan. I understand that senators may serve until age 75. We wanted to ensure that everyone is being treated as a member of one plan. This is one plan for all members. All members pay exactly the same. All members receive the exact same benefits.
Having one group subsidizing another is not uncommon in a pension plan. You could use the example of males versus females in a pension plan. Women tend to live longer and, therefore, you could essentially say they are subsidizing a particular population of the plan, so it's not uncommon to have this.
The Chair: So, we are all admitting that there is a subsidization going on, but it's decided that it's in the best interests of this one big family in Parliament that senators should be subsidizing the House of Commons.
Senator L. Smith: Ms. Gowing, just to follow up on our chair's initial point, it appears that the contribution rate is an issue, amongst the other issue of us having to support MPs' pensions, and the amount that we will be paying based on the contribution rate, which is the interest rate, is an issue. Some of the other public pension programs have a contribution rate which could be anywhere from 5 to 5.8 or 5.9 per cent. Our understanding from doing research is that the contribution rate for the Senate would be around 3.3 per cent, or 3.5 per cent. When you have a lower interest rate, it means that you pay more into it. That would infer that members of the Senate could end up paying anywhere from $26,000 to $29,000 in contributions a year whereas right now we pay probably around $10,000 to $12,000.
The issue of paying more and being fair is not the issue. As I see it, the issue is the contribution rate and making sure we're treated fairly. Because if you plan out at 3.3 per cent over the next X number of years, versus another public pension fund which is at 5.0 or 5.8 per cent, it would in my mind create a tremendous unfair discrepancy that is unacceptable.
Sorry for the dissertation, but we need some help here. You folks are in that particular area. How can that problem be fixed?
Ms. Gowing: What you're referring to is the discount rate used to cost the plan, which in turn leads to what the current service cost is of the plan and therefore determines the contribution rates.
I'm here to talk about the change in how the Chief Actuary authority is to set the contribution rates.
Senator L. Smith: Do you folks have access to the Chief Actuary? What would you recommend we do to put our case forward?
Ms. Kolk: This is an area that is still being worked on, but it is not part of this legislation. We have access to the Chief Actuary, so do you. Discussion can be ongoing on this.
Senator L. Smith: I guess we will have to figure that one out.
[Translation]
Senator Chaput: My question is about access to the pension plan. What the bill is trying to do is ensure that members of both houses of Parliament, MPs and senators, are treated exactly the same way. But I know that senators currently have to serve for six years before they are entitled to a pension. Is it the same for MPs? I thought it used to be three years for MPs. Has that changed?
[English]
Ms. Gowing: There has been no change in that. A member of Parliament must serve for at least six years to have entitlement to a pension, whether from the House of Commons or Senate.
[Translation]
Senator Chaput: So there's been no change, and the six years of service applies to both MPs and senators. Is that correct?
Ms. Gowing: Yes.
Senator Chaput: Has the accrual rate changed? What's the rate for MPs after six years? That hasn't changed either?
[English]
Ms. Gowing: No, there is no change. The accrual rate is still 3 per cent for both.
[Translation]
Senator Rivard: I want to make sure I understand the answer you just gave. You said the annual accrual rate is 3 per cent for both houses. In the Senate, when 3 per cent of your salary accrues in order to establish the amount of your pension benefit, it's 3 per cent. It seems to me that the annual rate for the House of Commons is 4 per cent. Am I mistaken?
[English]
Ms. Gowing: I believe every year since 2001 it has been the same accrual rate for the Senate and the House of Commons, which is 3 per cent.
[Translation]
Senator Rivard: Did you say that the accrual rate has been 3 per cent for both houses since 2001?
Ms. Gowing: Yes.
Senator Rivard: Thank you.
[English]
The Chair: Thank you very much for explaining it to us. I think we understand what is happening here, what the government intends with these two clauses.
The next division is 10, and that is going to Internal Economy. We won't be looking at that one.
[Translation]
My apologies, we are actually at Division 9, and after that, we will move on to Division 11. Division 9 deals with the National Energy Board Act, clause 97 in the bill.
[English]
It can be found at page 73 of the English version. Natural Resources Canada is represented by Mr. Terence Hubbard, who is the Director General, Petroleum Resources Branch, Energy Sector; and Jean-François Roman, Legal Counsel.
Now we're rolling. Who would like to start?
Terence Hubbard, Director General, Petroleum Resources Branch, Energy Sector, Natural Resources Canada: I'll go ahead and introduce this item. First, thank you very much for the opportunity to be here today to provide an overview of Part 3, Division 9 of the bill, which deals with amendments to the National Energy Board Act to extend the maximum term of natural gas export licences from 25 to 40 years.
Canada has a unique opportunity to become a major player in the global LNG industry. Currently, over half of Canada's natural gas production is exported to the U.S. This market is quickly disappearing. The U.S. Energy Information Administration has indicated that U.S. natural gas imports are at their lowest levels since 1987 and predicts that the U.S. will become a net exporter of natural gas as soon as 2017.
To maintain and grow Canada's natural gas markets and realize the benefits associated with natural gas production highlights the need for market access for our natural gas production. Canadian projects are competing with other jurisdictions, such as the U.S. and Australia, however Canada is operating from a position of strength, namely in the abundance of our natural gas resources. We currently have over 300 years of production at current rates. Extending the maximum term length of natural gas export licences will provide greater certainty to investors that natural gas supplies will be available for the lifespan of these facilities.
That concludes my statement. It's fairly straightforward in the sense that it's a simple amendment that essentially changes the licence length from 25 to 40 years.
The Chair: It will help us in long-term licensing.
[Translation]
Senator Hervieux-Payette: How will things change? You said it was to help the industry, but how will the situation change once the new rule comes into force? How will the situation be different once the term is extended?
[English]
Mr. Hubbard: Currently, there are about 23 projects in Canada that have proposed to move forward. None of these projects has reached a final investment decision yet. We've heard from stakeholders that the extension of licences will provide greater longer term certainty that these investments will be around long term. They will have investments to natural gas supplies long term, which will provide greater certainty in terms of their financial forecast going forward. They will have supplies available, which will help facilitate investment decisions going forward.
We haven't had a final investment decision yet in Canada and we're hopeful that this change, accompanied with other changes that have been moved forward by the Government of Canada and other provincial partners, will support the development of an LNG industry in Canada.
Senator Hervieux-Payette: When do you start to count when they make the request, but they start the exploration or even the selling five years later? When does the countdown start? With the 23 that you said that are now planning, will it be the time that they have had access to that permit of exploitation, and the time they will be building and operating? Where do you start the countdown for these companies?
Mr. Hubbard: Typically the NEB will consider the length of a licence on a case-by-case basis, so it is a maximum term length. For each application they will set out the terms of that licence in their decision. It can be anywhere up to the maximum term length. In terms of when the clock starts, that is also laid out by the NEB in the licence, and typically when it is issued. The NEB also includes a sunset provision, so if a project doesn't end up moving forward, the licences will sunset or terminate, if inactive for a period of time, which is typically 10 years.
Senator Hervieux-Payette: The NEB can say one thing to one company and a different thing to another one? I thought normally it would be a level playing field for all the companies, no?
Mr. Hubbard: It essentially is a level playing field. There is one criterion under the legislation that companies must demonstrate in applying for an export licence. That is that supplies are surplus to current and forecast domestic needs. Obviously different parts of the country have different circumstances, different infrastructure and different supplies available, which would have unique considerations where companies must demonstrate that their applications won't hamper domestic needs.
[Translation]
Senator Rivard: I have an idea as to the answer, but I'm going to ask the question anyway. Given that we export natural gas to the U.S. and Mexico, changing the length of the term from 25 to 40 years won't have impact on NAFTA, will it?
[English]
Mr. Hubbard: Canada does have obligations under NAFTA, but in terms of the change, in terms of export length, they will have no impact on our trade obligations going forward.
[Translation]
Senator Rivard: That's what I thought, but I just wanted confirmation.
[English]
Senator Wallace: Mr. Hubbard, extending the licences, the maximum term, from 25 to 40, is that something that was sought by industry? Is 40 a satisfactory extension to industry or was the request from the private sector greater than that?
Mr. Hubbard: We've heard from various stakeholders that longer term certainty will provide greater chances for successful final investment decisions going forward. In terms of why is it 40 years? We don't have a long track record of an LNG industry in Canada. We do two small-scale facilities though — one in Montreal and one in Vancouver. Both of those facilities have now been in operation for approximately 40 years, so it provides us a point of reference, if you will, in terms of the projected lifespan for a facility.
Senator Wallace: Investments in this industry are really international in scope, aren't they? Many of them who may be interested in investing in Canada are international companies. So how would a 40-year export licence compare to what would be available to them in other countries? There's nothing special about Canada. It has a product that can be sold on the market. The money will go where the returns would be the greatest, would it not be?
Mr. Hubbard: You're right; it's a very competitive industry. Canada is in direct competition with other jurisdictions. The U.S. and Australia are a couple of key examples. One of Canada's strengths is the abundance of low-cost natural gas.
In terms of practices in Australia and the U.S., Australia doesn't typically issue export authorizations. There are no limits, if you will. Some of the state governments have reservation clauses in terms of licences that are issued and a certain percentage of production must be maintained for domestic use. But there is no end point, if you will, in terms of their authorizations.
The U.S. typically doesn't issue authorizations for longer than 20 years.
Senator Wallace: Once an export licence has been issued to a company, are there any controls over the transfer of that licence? If the company decides to sell its interest in the licence to another company, would they have to come back to your department for approval?
Mr. Hubbard: They would need to apply to the NEB for changes. Those criteria are typically laid out in the licence itself. Amendments to the certificate or licence require a submission to the NEB and final approval by federal GIC as well.
Senator Wallace: If there was change in the ownership of the company that owns the licence, through transfer of shares or proposed transfer of shares, would that also have to come back to the NEB for approval before that could occur?
Mr. Hubbard: Changes in ownership come back to the NEB for approval, yes.
Senator Wallace: It could also be triggered under the Foreign Investment Review Act.
Mr. Hubbard: That's right, yes.
The Chair: Thank you, gentlemen. Mr. Hubbard, and Mr. Roman, I want to thank you very much. That does it for that particular section. We thank you for being here and explaining everything.
Division 10, as I said, has gone to Internal Economy. That's dealing with security in the parliamentary precinct. We're now going to Division 11, clauses 153 to 160. It's entitled Employment Insurance Act. Are you by yourself now, Ms. Bertrand?
Monika Bertrand, Executive Director, Employment Insurance Part II, Benefits and Measures, Employment and Social Development Canada: It's just me.
The Chair: Good for you. It's Monika Bertrand, Executive Director, Employment Insurance Part II, Benefits and Measures. Could you explain to us what this proposed amendment is all about?
Ms. Bertrand: It would be my pleasure. Clauses 153 to 160 of the bill amend Part II of the Employment Insurance Act and that's the part that deals with: active employment measures and training supports funded through the Employment Insurance Operating Account. Now the responsibility for training and the funding has been devolved to provinces and territories through the labour market development agreements. Those agreements are currently being renegotiated.
The bill will broaden the definition of "insured participant" under the act. That broadens the pool of eligible EI premium-payers that provinces and territories can select from for their LMDA-funded programs.
Currently provinces and territories can serve individuals that are in receipt of EI passive income benefits — so in receipt of EI — or those that have been in receipt of EI in the past three years.
This bill would make changes to that in two ways. First, the three years would be extended to five years. Any unemployed premium-payer who was in receipt of EI benefits in the past five years would be eligible for training under the LMDAs.
The second change is a little more complicated. We will allow training for premium-payers that have lost their job, but they have insufficient hours to qualify for EI benefits because they are new entrants or re-entrants to the labour market and they require a higher threshold to be eligible for EI passive income benefits.
Through the amendment, while the more stringent requirements will continue for the passive income support, these individuals, as long as they meet the Variable Entrance Requirement for their region like any other unemployed premium-payer does, they will be eligible for training. It only affects the Part II of the Employment Insurance Act.
That's the overview.
Unless you have questions, I can go to the clause-by-clause.
The Chair: When you go through the clause-by-clause, will it be obvious to us who might be caught up in the expanded definition of insured participant — in other words, people who have to pay into Employment Insurance who haven't in the past?
Ms. Bertrand: Yes. I'll do my best. If you have questions let me know.
Clause 153 is really the clause that does amend, modify the definition of "insured participant." You see proposed subsection 58(a) provides for that increase from 36 to 60 months — so from three to five years. An individual that has been in receipt of EI income benefits four years ago would be eligible for training. Right now it's three years.
Under (b), that is the modification to allow new entrants or re-entrants access to training.
As I said, currently Part 2 is tied to Part 1. Unless you qualify for Part 1, you cannot have access to training under Part 2. That pertains to the new entrants and re-entrants who require this higher threshold of hours to be eligible.
Regarding the amendment to subsection 58(b), as long as the premium-payer, the new entrant/re-entrant, meets the variable entrance requirement of their economic region, they will have access to training.
Clause 154 is a new subsection to section 63 that authorizes the EI Commission to enter into an agreement with a government and have the current definition apply. A government that would like to retain the current definition would be allowed to do so.
Clause 155 is a transitional provision which ensures that any government that has not signed an amended agreement, an amended LMDA, will not have access or will not be able to implement that expanded definition of an "insured participant" that we are introducing through that bill.
Clause 156 is a coordinating amendment that updates a cross-reference to the new subsection 63(1). It is the same with clause 157. It's a coordinating amendment to update a cross-reference to that subparagraph 63(1)(a).
Clause 158 is a transitional provision. It ensures that the modification is not retroactive. For an individual — and that pertains to the new entrance and re-entrants — it is only after the provision comes into force that the broader definition would apply.
Clause 159 is a consequential amendment. Given that a cross-reference has been removed with the new definition that has been introduced, we have to make an amendment to the Modernization of Benefits and Obligations Act and give it the new definition of an "insured participant," given that section 10 of the Budget Implementation Act 2000 can be repealed.
The Chair: Just for the record, the definition of "insured participant" is important only for the purpose of applying for training or additional subsidization?
Ms. Bertrand: The definition of an insured participant pertains to passive benefits and active benefits. An insured participant is the definition of an individual that is eligible for training supports funded through the LMDS out of the EI operating account.
The Chair: It doesn't mean what I had asked earlier, does it? For "insured participant," you said the base is bigger; there would be more EI premium-payers in there. However, it does not mean there will be more individuals, just more people eligible for training?
Ms. Bertrand: Correct.
For example, premium-payers are workers and premier-payers are employers. They all pay into the EI operating account. Right now we have about 1.3 million new Employment Insurance claims on average per year. Out of the 1.3 million, provinces and territories serve approximately 700,000 individuals. They are all premium-payers. So the pool of premium-payers does not expand, no.
The Chair: Okay; thank you. We think this initiative is well explained to us and we thank you very much for being here.
Colleagues, we will now move on to Part 3, Division 12. Division 12 is clauses 161 to 163, page 99 of the English version. To help us out, from Industry Canada, is Chris Padfield, Director General, Small Business Branch; and Derek Gowan, Manager, Canada Small Business Financing Program.
Chris Padfield, Director General, Small Business Branch, Industry Canada: I will do a brief overview. We are talking about the Canada Small Business Loans program which has been in place since 1961 in various forms. It's a loan loss sharing program where we work directly with banks. Banks do the lending and we share the loss with them. Basically, 85 percent of the risk comes back to the federal government.
We're making two relatively minor changes to the program. We are increasing the size of the firm that will be eligible. Changes have not been made to the size of firms eligible since 1993. This is just bringing the program up to snuff. It is moving from $5 million revenue to $10 million revenue. We are also increasing the size of the loans eligible for real property buildings and that sort of thing.
The Chair: Your voice is dropping off. It is a big room here. I heard $5 million.
Mr. Padfield: To be an eligible firm now, you must have revenue of $5 million or less. We are bumping it from $5 million to $10 million to increase the number of firms eligible for the program.
Through a series of roundtables last fall, it was found that the size of loans for land or buildings was small at half a million, so we are bumping that to $1 million in the proposal to make it more eligible for small firms. Most firms that participate in this program are small start-up firms at the beginning stage.
The Chair: Is the $5 million to $10 million total revenue, total assets?
Mr. Padfield: That's your gross revenue.
The Chair: Gross revenue annually. Thank you.
[Translation]
Senator Chaput: Changing the level of gross revenue from $5 million or less to $5 million or more is significant. How many businesses will it affect? Businesses currently below the $5-million threshold will no longer qualify for the program, isn't that right?
[English]
Mr. Padfield: No, it's $5 million and under and now it will go to $10 million and under.
[Translation]
Senator Chaput: So they will still be eligible.
Mr. Padfield: Yes, absolutely.
Senator Chaput: Thank you. That's fine.
[English]
Senator Wallace: Mr. Padfield, regarding the impact of increasing the companies that would be eligible, there is the increase in the gross revenues for the eligible companies and you're increasing the size of the value of real property that could be purchased or built upon. I guess the $350,000 could be applied to leasehold improvements.
When you did your analysis, what would it indicate in terms of the size of your loan portfolio going forward? What impact do you suspect these changes will have on that? How much more money will be out in the private sector as a result of this?
Mr. Padfield: In 2013-14 we did about $850 million in loans and this would be another $100 million, in the order of 100 to 150 new companies.
Senator Wallace: Okay. Again, when you did your analysis was there any sense of how this may be impacted across the country, which regions of the country might benefit most from this change?
Mr. Padfield: If you think of the real property aspect, some of the large companies in larger centres, where you see the higher cost of real property, buildings and those kinds of things, may see a bigger take up in those reserves. Across the board, over time it is inflation and the cost of real property. This helps to catch up to inflation generally across the board.
[Translation]
Senator Rivard: Picking up on Senator Wallace's question, I gather that the government is sharing the risk and co-signing the loan. So doubling the size of the loan means that we can anticipate double the losses, in the case of defaults. What were the loss estimates for the last year you have figures for?
[English]
Mr. Padfield: We don't see that there will be any increase in losses. The Prime Minister announced his intention to make these two changes in January. He also announced the intention to make a third change that will come through in regulatory authority, which is to actually increase the duration of the loans from 10 years to 15 years, which should go far to diminishing the default rate. Overall, we think there will be less loss as a result of the longer loan period. The last year for which we had figures, we had $50 million in losses overall.
The Chair: Could that change from 10 to 15 years duration be done by regulation?
Mr. Padfield: Yes, that would be the intention.
The Chair: We don't see it in the act here.
I see no other senators wishing to intervene. Thank you very much; we appreciate you explaining this to us. I hope it works.
Mr. Padfield: I think you get me for clause 13 as well.
The Chair: This is excellent. We're moving right along, here. Clause 13, colleagues can be found on page 101 of the bill, and it's the Personal Information Protection Electronic Documents Act. That's an interesting marriage with extended loans for small business.
Mr. Padfield: I recently changed hats. I have been brought out of retirement on this one. I was formerly the Director General for Digital Policy within Industry Canada.
The Chair: Oh, excellent; we're fortunate to have you here for both then. Thank you.
Mr. Padfield: On the Personal Information Protection Electronics Documents Act, which we refer to as PIPEDA, generally that act covers collection and use of personal information in the commercial context in Canada. It's regulating and treating commerce power. Wherever there is commercial activity, PIPEDA lays out the framework for how personal information is collected, shared or used and to whom it's disclosed and sets out all of the rules for those activities.
The World Anti-Doping Agency approached the government seeking the addition of their body and their use of information to the list of activities that are covered by PIPEDA. The World Anti-Doping Agency, as you know, coordinates all doping information around the world. They go and collect laboratory samples and what have you.
The reason they have come to the federal government seeking inclusion under PIPEDA is because the EU directive on privacy has specific rules saying that you can't share information with another jurisdiction that doesn't have an adequacy finding within the EU's privacy rules. Canada has such an adequacy finding. Quebec, where WADA is currently located, does not have that adequacy finding and is currently in the process, and has been for some time, of trying to get an adequacy finding with the EU.
The WADA has been hearing from some of the players internationally, particularly the EU, saying that they are concerned about the privacy aspect of being subject to Quebec rule only here, and they want certainty with the EU to make sure that they are going to be found to be covered by adequate privacy rules, which PIPEDA, in the eyes of the EU, has.
There is a slight change here to the Privacy Act, where we are adding a new schedule. Because WADA's activities don't fall within the trade and commerce powers, we are adding a new schedule to add the anti-doping agency specifically in the context of their trade, interprovincial movements of information and the international movements of information. So it's a very straightforward amendment in that we're just bringing in this single organization. We have created a schedule at the back of the act where we will now add a new organization. We say, very specifically, that its information exchanges that happen interprovincially or internationally — things that wouldn't have been covered by the Quebec law — are fully covered by the federal privacy law in this respect, which will bring them under the adequacy finding with the EU and should stop any concerns there are.
The Chair: They had to get adequacy by circumventing Quebec and going to the federal legislation?
Mr. Padfield: We are not circumventing Quebec, because Quebec's law will apply in Quebec, so any activities of WADA that are contained within Quebec are covered entirely by Quebec privacy law, which, federally, has been seen to be substantially similar to the federal law.
We're in a situation where, federally, we have looked at the Quebec law and seen it to be substantially similar to the federal law. The EU has looked at the federal law here and said that it's adequate for the purposes of them, but they are doing their own assessment of the Quebec law. There has been some concern that it's ongoing and WADA would just like greater certainty. We thought that made perfect sense.
The Chair: Any questions from honourable senators? Seeing none, I guess you've explained it well. We appreciate that very much. Thank you.
That was Division 13, and we'll now skip to Division 18. I can tell you that 14 is going to Banking; 15 to Social Affairs, 16 to Agriculture; and 17 to Vets. So we are into 18. There are only three divisions left with us, 18, 19, 20. Nineteen is with somebody else? This is good. I will scratch out Finance here and put in Banking. We have the Banking chair here.
An Hon. Senator: He'll have to get to work.
An Hon. Senator: He's excited.
The Chair: This is good news. That's even fewer than I thought, so we're moving right along. It's nice to have other committees, and we will talk about that in due course. We are now at Division 18.
[Translation]
Is that right, Senator Chaput?
Senator Chaput: Yes, Mr. Chair.
[English]
The Chair: This is the Ending the Long-gun Registry Act, clauses 230 and 231. You should go to page 135 in your bill, and join me in welcoming Mark Potter and Caroline Fobes. Fobes?
Caroline Fobes, Deputy Executive Director and General Counsel, Legal Services, Public Safety Canada: That's right. Thank you.
The Chair: Looks like you missed an R in there.
Ms. Fobes: We did. My ancestors came from Scotland about 500 years ago. They dropped it when they hit Holland.
The Chair: Who will be the spokesperson in giving us the overview and then helping us with a clause-by-clause? We only have two clauses.
Mark Potter, Director General, Policing Policy, Public Safety Canada: Good afternoon, senators. It's a pleasure to be here. I'll just make some very brief opening remarks and then turn it over to you for your questions.
Many of you will recall that, in October 2011, the ending the long-gun registry bill was introduced in the House of Commons. That bill came into force in early April 2012. That act had two main objectives. The first was to end the registration of long guns in Canada. The second was to destroy the long-gun registry data. That second objective of destroying the data is primarily intended to respect the privacy rights of Canadians who had registered their long guns.
These amendments in the budget implementation act are intended to comprehensively address that second objective of destroying the long-gun registry data by ensuring that no other act of Parliament, including the Access to Information Act, undermines the objective of that destroying the data provision. Put simply, these amendments are intended to address a gap that was revealed over time in the original Ending the Long-gun Registry Act.
With that, I'd be happy to answer any questions you may have.
The Chair: Perhaps we should look at the two clauses. Ms. Fobes, are you going to look at the clauses for us? Can you just tell us which ones are doing what?
Ms. Fobes: Sure. Maybe I can start with the Ending the Long-gun Registry Act that came into force a couple of years ago, section 29. In that section, it said that the Commissioner of Firearms and the CFOs — so the chief firearms officers — must destroy, as soon as feasible, records relating to the long-gun registry under their control, including in the long-gun registry itself.
We took that provision, section 29, and we added a proposed subsection 29(3). You can see that the current subsection 29(3) says that sections 12 and 13 of the Library and Archives of Canada Act and the subsections 6(1) and (3) of the Privacy Act do not apply. We took out the first part of that, the Library and Archives of Canada reference. We kept that in. That's the proposed subsection (3).
We added proposed subsection (4), saying the Access to Information Act does not apply, and we set out specific sections. Just note that we say the whole act does not apply, and we note certain sections just for clarification.
We also say in subsection (5) that the Privacy Act doesn't apply.
We go into subsection (6) and say that, for greater certainty, any process that had already begun under the Access to Information Act or the Privacy Act — any request, complaint, investigation, application judicial review, appeal or other proceeding — is to be determined in accordance with the section above, meaning that it does not apply.
In subsection (7), to be really clear, we said, in the event of an inconsistency between subsections (1) and (2) and any other act of Parliament, that the subsections in this act prevail.
That's section 29. Now I can draw your attention to section 30.
We added a new section, proposed section 30, and said there would be no liability for the destruction of the data in the long-gun registry or any related records. We also said there would be no liability under the Access to Information Act and Privacy Act.
Those are those two sections.
As Mr. Potter has said, it really is an extension of what we had started under Ending the Long-gun Registry Act, Bill C-19 at the time. We discovered there was a gap and we needed to cure the gap so there were no unintended consequences.
The Chair: The gap was how soon parties could move on destroying the information?
Mr. Potter: I think the gap was essentially ensuring that no other act of Parliament — and in the original act, we tried to be comprehensive as we thought was necessary, but hindsight is always 20/20, and it came to the fore that the Access to Information Act, which was not specifically referenced in the original act, provided a means by which an individual could access to the long-gun registry data.
[Translation]
Senator Chaput: I'd just like a clarification. In Division 18, in proposed subsections 29(4) and 29(5), it says "does not apply, as of October 25, 2011. . . ." Does that make the provision retroactive? Are we going back in time as of that date? So how will it work when it comes to requests made in 2011? I'll give you an example. Manitoba wants access to the records, but once the amendments are passed, any outstanding requests will be invalidated. Is that correct?
Ms. Fobes: Are you referring to proposed subsection 29(6)? Is that the one, senator?
Senator Chaput: I'm not sure. What I'm trying to figure out is the October 25, 2011 date. Does it mean that any active access to information requests will no longer matter, will no longer be valid and, therefore, won't be addressed?
Ms. Fobes: Under the provision, any existing requests on or after October 25 will be dealt with as per the amendments being discussed today.
Senator Chaput: Which makes them invalid. If they are going to be dealt with in accordance with the amendments, requesters will not be given access to the information.
Ms. Fobes: Any requests made after October 25, 2011 will be dealt with in accordance with the amendments before you. If you don't mind, I'm going to explain it in English just to make sure it's clear.
[English]
You have the amendments in front of you. It says in proposed subsection (6):
For greater certainty, any request, complaint, investigation, application, judicial review, appeal or other proceeding —
So, any request.
Under the Access to Information Act or the Privacy Act that is in existence on or after October 26, 2011, is to be determined in accordance with subsections (4) and (5), and (4) and (5) say they do not apply. So, yes, on or after October 25, 2011.
The Chair: What is this date of October 2011? The bill didn't come into force until 2012, you told us.
Ms. Fobes: It was the first date on which the intent of Parliament became known, because it was the date on which the bill was tabled in the house. Because it was to destroy records — that's the intent of Parliament — we had to make sure that that intent couldn't be frustrated through previous notice, notice prior to the actual enactment.
The Chair: With respect, it's the intent of executive. The intent of Parliament is when the bill is passed.
Ms. Fobes: Exactly. You're right.
The Chair: You're retroactive on this, and it is important to highlight that.
Ms. Fobes: It is retroactive, yes.
[Translation]
Senator Chaput: I don't have any other questions. I'm not so sure that a retroactive measure is the way to go, but it's in the bill.
[English]
The Chair: To be clear, the bill came into force in 2012?
Mr. Potter: April 2012.
The Chair: Now you are saying there can be no action taken for any destruction of documents back into the year before. You're saying that was the intent of the executive. Therefore, people could go out and destroy the documents and records, even though Parliament had not spoken?
Ms. Fobes: There are nuances. The destruction element is actually from April 5, 2012. That's the day that the old act, Bill C-19, came into force. This talks about any request application, any request for access under the ATIA.
[Translation]
Senator Chaput: Had I submitted a request for information that was dealt with on October 25, 2011, I was entitled to the information prior to that date. But I'm no longer entitled to it because you are taking away my right retroactively.
Ms. Fobes: Do you mean had it been submitted on October 25, 2011?
Senator Chaput: Yes.
Ms. Fobes: That's correct.
Senator Chaput: Thank you. I wanted to make sure I was clear on that.
[English]
The Chair: Seeing no other questions, I guess we understand what you've told us. Thank you for highlighting that retroactivity. Sometimes we don't notice those things, so it's helpful.
Colleagues, we will now go on to Division 20, sick leave and disability, clauses 253 to 273. This can be found at page 147 and following.
We're pleased to welcome from Treasury Board Secretariat, Ms. Bayla Kolk, Assistant Deputy Minister, Pensions and Benefits Sector; Carl Trottier, Associate Assistant Deputy Minister, Compensation and Labour Relations Sector; and Jennifer Champagne, Counsel.
Ms. Kolk.
Ms. Kolk: Good afternoon, again. I will start with a brief overview and then turn to Carl Trottier to provide the clause-by-clause.
As stated in Budget 2015, the government is making every effort to reach agreement with bargaining agents within a reasonable time frame on necessary reforms to disability and sick-leave management.
A new round of collective bargaining began in 2014. The negotiations held to date reflect the government's commitment to good faith collective bargaining. The government's priority is to provide for a disability- and sick-leave management system that is modern, comprehensive and responsive to employees' needs.
The outdated existing system of bankable sick days is failing both employees and taxpayers. For example, over 60 per cent of our employees do not have enough banked sick leave to cover a full period of short-term disability; 25 per cent of our employees have fewer than 10 days of banked sick leave; and many new and younger employees have no banked sick days at all. In contrast, long-tenured individuals have far more banked sick days than they will ever reasonably need. A new disability- and sick-leave management system would seamlessly connect the sick leave days with disability benefits and supports. It would focus on early and active case management, including rehabilitation and return-to-work supports.
In the negotiations with the bargaining agents, the government is prepared to consider reasonable improvements to its tabled proposals. If agreement cannot be reached, the government will take the steps required to implement a modernized system within a reasonable time frame.
Under the Financial Administration Act, the Treasury Board may establish terms and conditions of employment for public service employees, including those respecting sick leave, and establish or modify any group, insurance or other benefits programs for employees.
Under the proposed legislation before you, the government may, on the recommendation of the President of the Treasury Board, specify the date by which Treasury Board can establish a new short-term disability program. If this occurs, the proposed legislation would allow Treasury Board, within the four-year application period, to modify the short-term disability program based on joint recommendations made by committee, composed of bargaining agent and employee representatives which Treasury Board must also establish.
I'll turn it over to Mr. Trottier now to provide the clause-by-clause overview.
Carl Trottier, Associate Assistant Deputy Minister, Compensation and Labour Relations Sector, Treasury Board of Canada Secretariat: Thank you, senators, for having us today. We have several clauses. Is it your intention that we go through them one by one?
The Chair: Yes.
Mr. Trottier: We can do that.
The first clause, subclause 253(1), is a definitional clause. There are two definitions that I would like to bring to your attention because we will be addressing them later on throughout the other clauses. "Application period" is a four-year period. That starts on the effective date. I'll define "effective date" for you. The "effective date" is specified in the order made by Treasury Board. Therefore, a date shall be chosen by Treasury Board at which implementation will be take place. That will be the effective date. Those are the two definitions that are pertinent for the rest of the bill.
Subclause 253(2) is the clause which specifies that the meaning of the Public Service Labour Relations Act apply unless there is express intention otherwise. That's a standard clause that goes in the bill.
It's followed by subclause 254(1), which says that despite any provision of the Public Service Labour Relations Act, the Treasury Board may establish and modify sick leave terms and conditions employment, but restricts the period. That is between the establishment date and the effective date. That's the period at which modifications and changes can be made.
Clause 254(2) specifies the terms and conditions of employment for sick leave that may be established or modified may include hours of entitlement, so number of sick days; hours of carryover, the carryover of those sick days, if unused; and the disposition of earned, unused hours. That is the banked leave that currently exists, the banks that exist. Those three elements may form part of the decision that the Treasury Board will take.
The Chair: The existing legislation provides for how many sick days that an employee is entitled to?
Mr. Trottier: The legislation doesn't provide for it; it's in the collective agreements that we find the sick leave. It's 15 days a year, accumulated over one-and-a-quarter day a month. That is how they accumulate sick leave.
The Chair: And it can be carried forward?
Mr. Trottier: Those can be carried forward to a certain cap. I can't remember the cap, senator.
The Chair: Okay. Just to put it into perspective.
Mr. Trottier: It is an accumulating system is the way we look at it.
The Chair: Yes, collectively bargained for.
Mr. Trottier: Collectively bargained and 27 collective agreements are affected by this in the core public administration. They all have the sick-leave provision.
These first clauses that we're looking at are, in fact, the clauses that address the collective agreements and the provisions in the collective agreements.
Subclauses 254(3) and 254(4) permit the Governor-in-Council, on the recommendation of the President of the Treasury Board, to specify, by order, the date and terms and conditions of employment related to sick leave and are established and provide for a declaration in the Canada Gazette. This gives them the authority to do that.
Clause 255, stipulates that the terms and conditions must be drafted in a manner that it can be incorporated into a collective agreement or an arbitral award. So, it just has to be written in such language so that it can be a provision in a collective agreement or an arbitrated award.
Clause 256 specifies that the terms and conditions established under sections 254 and 255 that we read before are incorporated without restriction into collective agreements and arbitral awards as of the effective date. The date at which the short-term disability plan takes effect is the date at which those amendments take effect.
We have to understand that the short-term disability plan will exist outside of the collective agreement and the changes within the collective agreement would have to happen at the same moment so that it would be seamless and the employee would benefit from the new regime, which is a short-term disability plan. This is what this does.
Clause 257 specifies that the established terms and conditions apply and replace those that might be maintained upon expiry of collective agreements. In a situation where we have a collective agreement that has expired, the Public Service Labour Relations Act, under section 107, says that your terms and conditions are frozen and, therefore, you maintain your benefits for as long as we sign a new collective agreement. In those instances, this clause says that we'll be able to change those terms and conditions although you are under section 107. It's just making sure that there is no contradiction in terms and conditions, and that nobody shows up with two terms and conditions that they are entitled to at the same time that are contradictory.
The Chair: Does that have anything to do with accumulated days that you didn't use in the collective agreement?
Mr. Trottier: The two regimes are different. One is an accumulated regime; the other one is a short-term disability plan that —
The Chair: I understand. This particular clause —
Mr. Trottier: This particular clause pertains to the collective agreements for which notice to bargain has been provided. The day notice to bargain is provided for, section 107 kicks in and says, "All the terms and conditions that are in this collective agreement are frozen. You cannot change them, employer, until you have a new collective agreement signed and negotiated with the bargaining agent."
The Chair: Including accumulated over two or three years?
Mr. Trottier: Including accumulated sick leave, correct. We have to do this to be able to implement all of the short-term disability at the same time and on the same day.
The Chair: As soon as this is passed, that freezing of those rights of accumulated sick days that were not used disappears as well. You said that section no longer applies.
Mr. Trottier: This section only covers the collective agreements that are expired. It will catch all the collective agreements. In clause-by-clause, you will see that we are doing every scenario. This scenario is the one where a collective agreement has expired and, therefore, the terms and conditions are frozen. If we implement the plan, we have to be able to exchange the terms and conditions that they currently have, the accumulating system, with a new system, which is a short-term disability plan.
Some collective agreements will not be frozen — we will see them later — and we will have to amend them. There will be arbitral awards, for example, that we will also have to amend. Every clause goes in and amends it, all with the purpose of changing it on one day, at one time, so there is no duplication or two systems in place at the same time.
The Chair: If this passes and the new short-term disability regime comes into play, any accumulated sick leave is gone?
Mr. Trottier: We're negotiating that, senator. We are currently at the bargaining table with all 27 unions. We're trying to get some good discussions going with them — and we have been for a year now — on what to do with the banks, how to transition and all that. I must admit it is a struggle, but we are at table, we haven't stopped and will not stop. The objective is to get a settlement.
The Chair: I suspect there are many people who think of these accumulated sick days as something more than sick days — as wellness days.
Mr. Trottier: They absolutely do, yes. It is challenging. It's an insurance policy, but they see it as more than an insurance policy; they see it as an entitlement. They see themselves as having ownership of it.
We are replacing it by a plan that is going to guarantee everybody the same coverage, even the new employee who has just arrived who doesn't have a bank, or someone who has been ill already and utilized all their bank. This new system will give them coverage no matter what.
It's a hard sell to make, but that's why we're at the table.
The Chair: Where are we?
Mr. Trottier: I believe we just finished clause 257.
Subclause 258(1) specifies that provisions of any arbitral award made during the application period that are inconsistent with those established or modified are of no effect. So bargaining will continue, and we get an arbitral award that is different than what this bill says, we're saying it's of no effect.
Subclause 258(2) specifies that only the provisions that are of no effect are those that would be inconsistent with the terms and conditions pursuant to 254. In an arbitral award, there are always multiple clauses covered, and we are saying the ones that are inconsistent will be the only ones that will be of no effect; the others will apply as determined.
Subclause 259(1) specifies that arbitral awards cannot retroactively change terms and conditions related to sick leave that were established or modified. So, we could get a decision from an arbitral award later, looking backward and saying, "I would like to change the short-term disability plan back to something else." We're saying, "No, we are going to allow the short-term disability plan to exist without interference from arbitral award decisions retroactively."
With subclause 259(2), we're saying the clause specifies the arbitral awards provisions that are of no effect are only those that would be inconsistent with the terms and conditions modified by 254. Again, it's just to have the one system apply at all times.
What we just looked at were the clauses that are going to apply to the collective agreements and the arbitral awards, and how they need to be changed, modified or put to no effect so that one plan can take place. We're still negotiating that plan, as I mentioned; we do not have the concrete, final plan.
The next clauses deal with the short-term disability plan itself and what needs to happen in order to put in place that short-term disability plan.
Subclause 260(1) specifies that despite the Public Service Labour Relations Act, the Treasury Board may, further to its existing powers under section 7.1 of the FAA, establish a short-term disability program. The Treasury Board already has the power to establish a short-term disability program; they're just saying they may exercise that.
For employees in specified bargaining units — by that, it means that they will determine which bargaining unit will be provided the short-term disability plan. They may decide them at a different date, but the implementation is all going to happen at the same time. The objective is to have one plan in place at the same time.
Subclause 260(2) permits the Treasury Board to specify bargaining units for the purpose of subclause (1) at the time of the establishment of the short-term disability plan. When it is advertised and announced that a short-term disability plan will be put in effect, that is the establishment date. At that date, they can also say to which bargaining units it will apply.
Subclause 260(3) ensures that all bargaining units are deemed to have been specified and subject to the program as of the effective date. It's just saying that if all have not been named throughout this sphere, at the effective date, all are deemed to have been named. It applies to all the bargaining units, so it's just catching everybody at the end of the day.
Subclause 261(1) specifies that a short-term disability program must provide for or include specific elements that are typically essential to any such program; namely, the rates of benefits — and that is the percentage of salary, for example — to be provided and the period — which would the number of days or weeks — during which the rates apply. That would be 100 per cent coverage or 70 per cent coverage for; X number of weeks; so 100 per cent coverage for a certain number of weeks and, for the remainder, it could be 70 per cent. Those are currently being negotiated at the bargaining table.
What we say is that there needs to be a coverage portion and a duration portion included, whatever that they may be. We're hoping that the negotiations with the bargaining agents will inform us on that.
Also, the maximum period — so the duration of the benefit — needs to be mentioned as well. That's also something that we're at the table and negotiating.
Finally, provisions regarding case management services provided by the program administrator must also be in there. Case management is a key element of a short-term disability plan and it's one component that must be part of it.
Subclause 261(2) specifies that a short-term disability program may, but does not have to, provide for a period during which benefits are not to be paid, also known as a waiting period. This is also being negotiated. The waiting period would be at the front end of your duration. If we look at the market, we see some employers have a five-day waiting period, a three-day waiting period, et cetera — a waiting period where there is no coverage and then coverage is provided after that. Others have no waiting period.
We're not firm and sure as to what the design will be on that front. We have put it in this way where we or could not put a waiting period in. Currently, we're discussing the possibility of having a waiting period with the bargaining agents. I will not break any secrecy by telling you they're not crazy about it. So, we're still negotiating on that front.
Subclause 262(1) specifies a short-term disability program applies to employees of bargaining units specified under subclause 261(1) during the application period, despite or regardless of any contrary collective agreement or arbitral award. What we did with the collective agreements and arbitral awards earlier we are doing again with the short-term disability plan. We're saying it will apply, regardless of whether there is any mention in any other collective agreement arbitral award, it must apply.
Subclause 262(2) specifies that any collective agreement provision entered into or arbitral award made on or after the effective date that is binding on employees of bargaining units specified in clause 261 and that is inconsistent with the short-term disability plan is of no effect. We're saying that if it already existed before, it's of no effect, and, if it happens after the effective date and there is a decision that is contrary or inconsistent with the short-term disability plan, it is also of no effect.
Subclause 262(3) specifies and makes clear that the short-term disability program continues to apply to employees of bargaining units specified under subclause 260(1) after the application period ends until a program is abolished or replaced. It says it continues to live. There is an application period of four years; after that it doesn't end, but there is the plan is a short-term disability plan that keeps on going. We'll talk about how amendments can take place in the future.
Clause 263 specifies that no modification of the short-term disability program made by Treasury Board after the end of the application may, in relation to any part of the application period, be retroactively applied. So, after the four-year period, there is no retroactive application or change to the plan.
Regarding clause 264, departmental salaries are currently subject to the FAA control regime and are going to remain so, even if paid in the form of short-term disability program. As a result, this clause specifies that subsection 7.1(2) of the FAA does not apply to the short-term disability program, so FAA financial controls will apply in this case. In the current system, the departments pay for the sick leave and the controls are applied. In this instance, nothing will change in that regard.
Subclauses 265(1) and 265(2): These clauses specify that the Treasury Board must, on the effective date, establish a committee composed of representatives of the employer and bargaining agent representing employees. In addition, they specify that the purpose of this committee is to make joint recommendations regarding modifications to the short-term disability program established by Treasury Board, including modifications to the program membership, who it will apply to; matters enumerated under clause 261 that we've already seen; conditions for continuing to receive the benefits and for claim approval; and exclusions and limitations under the program.
This says that a committee of bargaining agents and employer representatives will be created, which will look at the plan and see if it operates well, if it's being administered well, whether it need changes and, if so, recommendations made. Changes will be made based on those recommendations. There is to be an evergreen review of the program.
Clause 266: The process of procuring the services of short-term disability program administrators cannot be completed until sometime after the Treasury Board establishes the program, if it does so. Consequently, the program will become effective when the procurement process has been successfully completed and the administrator is ready to receive and adjudicate claims, as well as provide case management and return-to-work services. The declaration must be made publicly to ensure program stakeholders are clear on the effective date. Therefore this clause permits Treasury Board, by order, to specify the date the program becomes effective and requires the order to be published in the Canada Gazette, Part 2. That is in fact what it does.
Clause 267: This clause specifies that, despite the Public Service Labour Relations Act, the Treasury Board may from the date it establishes the short-term disability program to the expiry of the application period, further to its existing powers under the FAA, Financial Administration Act, modify any long-term disability program in respect to the period during which an employee applies.
There is a reference to a long-term disability program because in the discussions we're having the plan we're looking at is a 26-week plan, whereas the long-term disability begins at 13 weeks and will be seamless. You will move from a short-term disability plan into a long-term disability plan. The end period or duration of one has to coincide with the beginning of the other one. If it is 26 weeks that we land on with the bargaining agent, we will have to also say that we will need to amend the long-term disability plan so it begins at 26 weeks. Currently it's at 13.
The Chair: The individual will move back to work instead of moving on from short-term to long-term.
Mr. Trottier: The objective is that with the case management this will help employees and give them the tools necessary to return to work healthy sooner. With a huge bank of leave often what happens is an employee will utilize the whole leave bank because they don't have the support, guidance and help to bring them back. The bank is there and they can just keep on drawing on it.
The Chair: What we're saying is we don't want to create a disincentive to return to work.
Mr. Trottier: No; that's correct, senator.
The Chair: Moving on to 268; top of page 153.
Mr. Trottier: This clause specifies that any collective agreement provision entered into or arbitral award on or after the effective date that is inconsistent with the modifications made by Treasury Board to the existing long-term disability plan are of no effect. Again, this is back to what we were doing before and making sure we don't have two long-term disability systems that conflict with each other.
Subclause 268(3) specifies and makes clear the modifications made by Treasury Board to the existing long-term disability plan continue to apply to employees after the application period ends until the modifications are struck out or replaced, as does the short-term disability plan.
Clause 269 specifies that no modification to the long-term disability program made by the Treasury Board after the end of the application period may, in relation to any part application period, apply retroactively, just as it was for the short-term disability plan.
Clause 270: This clause specifies that the right to bargain collectively is maintained; and clause 271 specifies that there is no effect on the right to strike.
Clause 272 specifies that the parties may agree to amend any provisions of a collective agreement or arbitral award as long as it is consistent with the provisions of Division 20.
Finally, clause 273, the Statutory Instruments Act does not apply to orders made under sections 254, 260 and 266; however, each of those orders must be published in the Canada Gazette.
The Chair: Well done. Thank you. We understand it better now; if not thoroughly, we certainly understand it better.
[Translation]
Senator Rivard: I don't plan to ask a question about every single provision, since we'd be here for days. Am I to understand that these changes would take effect, as a result of either the bargaining process or an order-in-council, solely after the collective agreements had expired? In order for the sick leave and other changes to take effect for unionized employees, once the collective agreement has run out, the bargaining process will take place, but the changes will come into force by law whether or not an agreement is reached. Nothing is changing under collective agreements that are currently active. Does that more or less sum it up, or have I misunderstood?
Mr. Trottier: The amendments will be implemented regardless of whether an agreement is reached or not if the government chooses to implement them. That's one thing. The other thing that's very important to understand is that we are making every effort to come to an agreement with the bargaining agents. We believe that will result in a better product at the end of the day, one that meets employees' needs and that they will have had an opportunity to shape.
Senator Rivard: They will take effect once the bill is passed?
Mr. Trottier: The order-in-council will determine when the changes will take effect. At that point, we'll know when they will be implemented, the effective date.
Senator Rivard: We hope the negotiations are successful, but the provisions will come into effect by order-in-council whether or not an agreement is reached. In the case of a collective agreement that was still valid for a year after the order-in-council, the provisions would apply as of the date of the order-in-council. The term of the collective agreement wouldn't run its course.
Mr. Trottier: With 27 collective agreements, it's nearly impossible to set an effective date that would work for all of them. Because their terms overlap, they would never all expire on the same date. A single date has to be chosen. Some collective agreements will have expired and negotiations will be under way, but we will press on, even without an agreement, in order to have a reasonable amount of notice and lead time to prepare.
Senator Rivard: The reforms encompass a number of provisions, but the real meat, if you will, of the changes revolves around the excessive number of unused bankable sick days that, under the current regime, would be payable at the end. Everyone saw the newspaper articles describing cases where sick leave was being abused, such as employees who would take nearly a year's worth of sick leave before retiring because they had built up that much time in the bank. I saw earlier that all of these changes, whether as a result of negotiations or order-in-council, will end up saving the government somewhere in the neighbourhood of $900 million. Is that correct?
Mr. Trottier: That's correct.
Senator Rivard: I have one last question. We may be blazing a trail here. Are you aware of any provinces, for instance those with the largest populations — Ontario, Quebec or British Columbia — with similar regimes in their collective agreements, models that we are following, but not quite? Have any provinces or big employers, such as Canadian banks or major manufacturing companies, already taken steps to correct regimes that allow for an excessive number of bankable sick days? Are we the trailblazers here?
Mr. Trottier: We definitely aren't blazing any trails. In fact, we're 40 to 60 years behind the times in some cases. Big companies introduced these kinds of reforms a very long time ago. We are overdue. We haven't kept up with the times in terms of sick-leave management.
Senator Chaput: Thank you for explaining everything, Mr. Trottier. You did a good job despite the complex subject matter.
I realize that the two issues, sick leave and the disability program, are part of your negotiations with the many unions. This will serve as a guide, and you will try to reach an agreement through the bargaining process. If, however, an agreement isn't reached, the reforms will take effect on the date ordered by the minister.
Mr. Trottier: The government will have to decide whether it wants to adopt the approach or not. If so, a date will be set by order-in-council.
Senator Chaput: I understand what you're trying to do with sick leave. In my view, the program is now at a point that is no longer consistent with its original intent. I'm not against the reforms because we do have to set things right, after all.
In your opinion, do all of the changes provided for in Division 20, when taken as a whole, make the short-term and long-term disability programs more or less flexible? And you don't have to go into detail. Are benefits being added or taken away? Disability, as I see it, is an entirely different matter. Would you mind giving us an overview?
Mr. Trottier: I'll begin answering that, and then, I'll ask my colleague to take over.
It's hard to say because sick leave is based on years of service. An imbalance already exists, given that some people have a lot of time in the bank, with 30 years of service under their belt, and others have none, such as new employees.
Senator Chaput: I'm not talking about sick leave but, rather, disability.
Mr. Trottier: The disability regime will be fair. It will apply to everyone equally, regardless of years of service. I'm trying to understand what you're asking.
Senator Chaput: Will the sick leave changes have a negative impact, in terms of the length of the disability leave and the needs of individuals who become disabled? Is that what you mean? Surely, there will be an impact. Do you know what I mean?
[English]
Ms. Kolk: We believe that the system we want to put in place is one of making improvements. Employees will have a set number of sick-leave days for the normal things that happen in the course of a year — flu, whatever — and then have access to a short-term disability plan. Now, once you have access to that plan, unlike now where if you don't have sick leave banked up, as happens with younger employees, you might experience quite a significant income loss. You might apply for EI benefits, have to wait for that and then get 55 per cent. You then may have to wait for whether you have access to long-term disability, which is 13 weeks, and then that's at 70 per cent.
Under this regime, after you have depleted your sick leave days — however that might be negotiated — you have access to a short-term plan. What that short-term plan means is that for a set number of weeks you are guaranteed your 100 per cent salary from your department, and we are negotiating how many weeks that would be and at what point you go to a reduced percentage. Right now on the table is 70 per cent.
What is most important there that we don't have now is that during that period we have a third-party service provider providing active case management. Immediately the employee is phoned by an objective third-party adjudicator, the medical practitioner is called as well, the employer, and an adjudication diagnosis is made of what kind of illness it is, what period of time does the employee need to be away, and what kind of accommodation could be offered by the employer to bring that employee back to work.
We're talking not only about physical illness, but mental health issues. Sometimes the issue under the current regime is an issue of depression, but with no active case management the employee becomes isolated, estranged from the workplace environment. In this one, the employee will have an objective, neutral, third-party adjudicator who can say what kind of accommodation. Perhaps you need to work in a different place or have flexible work hours.
With this, we are also, as you might have heard, starting to address mental health issues more robustly in the workplace. It comes with the education of everyone in the workplace to understand better those issues.
Let's say the employee has whatever kind of issue that goes beyond the 26 weeks now on the table for the short-term plan and they go to the long-term plan. Our current long-term plans have not been changed for 40 years. They also do not have that active case management that is featured in provincial plans or what I look at internationally. The same philosophy of active case management, supporting the employee, having that dialogue, goes through the short term into the long term.
Right now we have many employees who, after maybe two years of long-term disability, are basically lost to us. They have the benefits until they are 65, but they are not returning to work. I hope you can understand that it's this active case management.
We call it prevention, accommodation, return to work. The prevention side is education awareness, better emphasis on wellness programs. Accommodation is things like flexible work hours or perhaps a change of job. And then the return to work is being fair to the employee; if it's a serious illness that requires a set number of weeks, they deserve those weeks. And then, if a bit of assistance can bring them back to a good situation in the workplace, we have found from the research, and medical doctors tell us this, is that work is healthy for you. As an adult, being engaged, socialized, having peer support, and so those are the policy objectives of what we're trying to put in place.
The Chair: Medical practitioners will tell you the sooner you get people back to work, the better it is for them as well.
Ms. Kolk: I agree. That's what we're hearing.
The Chair: It is important for the record to be clear on this that, through negotiation, this legislation will introduce short-term disability, but will not preclude, in addition to that, a few sick days to be negotiated.
Ms. Kolk: That's right.
The Chair: I think that's important to be clear. Can that be cumulative as well, say get three, four, five sick days a year and they didn't use them?
Mr. Trottier: We're talking with the bargaining agents about that now. We've put a proposal forward to have a proportion of that rolled over to the following year up to a certain cap, so there is an element of carryover.
The Chair: Any questions coming from those questions, colleagues?
Seeing none, I thank Treasury Board of Canada Secretariat for being here and helping us. We get lots of help from Treasury Board and we very much appreciate it.
Ms. Kolk: Thank you for the opportunity.
The Chair: Thank you.
Colleagues, we've had a good week and we've moved through it. Part of the reason this week went so well is thanks to Heather Hickling, who has been with us for a good number of years now. She's with Finance Canada, but helps coordinate all the different civil servants, and she has been assisted by Angèle St-Jean.
Thank you very much. It's gone very well. We're learning how to do this.
We have a number of things happening, but the next step — because we have been through all of this — is to wait for reports from the various committees who have studied portions of this. When we get two or three reports, we will have a meeting to invite the chair and the deputy chair in to explain their reports to us.
In the meantime, we will have some time to talk to and bring in as witnesses anyone impacted by any of this legislation. We have heard from the government and what they are trying to achieve. If you have any ideas of anyone you would like to hear from, let us know. The Library of Parliament has prepared a list of potentials. Thank you very much for doing that. Steering will work on that.
We won't have any meetings Monday. Tuesday we normally have our meeting in the morning, so we will let you know about that. We are also waiting for two reports. As soon as they have been translated, we will have a meeting to go over those reports. If we can get those reports adopted by the committee and in, then we will be ready for the two supply bills.
[Translation]
Senator Chaput: How will it work? It's a preliminary study. Once we get the bill, we'll put everything together. When will the Senate debate Bill C-59?
The Chair: It can start any time, because a study is on the agenda and it pertains to the budget. You can discuss it if you wish, but once the bill is referred to us, we'll need two days, second reading and referral to committee, probably for a day prior to third reading. Once we get the bill, the process normally takes about a week.
Senator Chaput: We don't have many weeks left.
Senator Rivard: My understanding is that we can discuss it again after each of the committees has had a look at the bill. It should come to us in the next few days, likely next week, because the Standing Committee on Internal Economy, Budgets and Administration is currently studying it and will submit its comments to us. We are agreeing to it in principle, because the House of Commons sent us the bill after third reading, and we're working on our report. The process is similar to that of previous years. Each of the committees is doing its study and will report on it, and we'll be able to ask questions as needed.
The Chair: It's scheduled for next Thursday for the other committees. But prior to that, on Tuesday or Wednesday, we may have two or three reports to discuss.
Senator Rivard: In the meantime, we'll come back to our other bills. Is it too early to know the schedule for Tuesday, Wednesday or Thursday?
The Chair: We don't have the schedule yet. We have to wait for the reports and the translations, as well as the other witnesses affected by the bill. We'll have plenty to keep us busy.
If there are no further questions, the meeting is adjourned.
(The committee adjourned)