Proceedings of the Standing Senate Committee on
Issue 29 - Evidence - November 20, 2012
OTTAWA, Tuesday, November 20, 2012
The Standing Senate Committee on National Finance met this day at 9:30
a.m. to examine the subject matter of all of Bill C-45, A second Act to
implement certain provisions of the budget tabled in Parliament on March 29,
2012 and other measures introduced in the House of Commons on October 18,
Senator Joseph A. Day (Chair) in the chair.
The Chair: I call this meeting of the Standing Senate Committee on
National Finance to order.
Honourable senators, this morning we are going to continue our study on
the subject-matter of Bill C-45, A second Act to implement certain
provisions of the budget tabled in Parliament on March 29, 2012 and other
Honourable senators, this is our fourth meeting on the subject matter of
Bill C-45. This morning we will proceed to those divisions of Part 4 that
will be referred to our committee. To remind honourable senators, this bill
comprises four parts with several divisions in each of the parts. We have
now concluded our preliminary work on Parts 1, 2 and 3, and we are into Part
4, which begins at page 175 of your bill. There are about 25 divisions. We
are dealing with 13 of them initially. As a committee, we will be
responsible for doing clause by clause of the entire bill, and therefore all
of the divisions, but other committees with more specific expertise will be
looking into certain of the divisions initially. We will ask them to come
and brief us on their findings, and that will probably be in about two
In the meantime, we will go through the divisions that have been referred
to us for more in-depth study. You will see that Part 4, Division 1 begins
at page 175, and moving right along, we will not be dealing with that
division. That division is going to the Banking Committee, and so we will
begin with Division 2 entitled "Shipping." That begins at page 193 of the
We are very pleased to welcome two officials from Transport Canada to
help us through those sections of Bill C-45, which is the second budget
implementation bill. I am pleased to welcome Sylvain Lachance, Executive
Director, Regulatory Services and Quality Assurance. He is accompanied by
Julie Gascon, Director, Design, Equipment & Boating Safety.
As we did in our previous meetings, after there has been an explanation
of the division, what is hoped to be achieved, in this particular case of
Division 2, shipping, then a quick run through of the various sections that
appear here, if you could explain to us what is being achieved by that
section so we have it in our mind. We do have the briefing note, so we have
read those and we understand generally, but we are looking to ensure that
there are no unintended consequences and that we understand the general
tenor of the particular legislative initiative.
Who would like to be the spokesman?
Sylvain Lachance, Executive Director, Regulatory Services and Quality
Assurance, Transport Canada: Mr. Chair, if you allow me, I can give you
an overview of the amendments, and my colleague, Ms. Gascon, can give you
answers to specific questions about the amendments themselves.
The Chair: That would be perfect. Thank you. You have the floor,
Mr. Lachance: Thank you, Mr. Chair and senators.
Transport Canada made two sets of amendments to the Canada Shipping Act,
2001, to support the implementation of alternate service delivery plan for
certification of vessels. Under the alternate service delivery plan, vessels
of 24 metres in length and above will obtain their certificates from third
parties that are authorized to perform inspection and certification
functions on behalf of the Minister of Transport. The first set of
amendments is in response to significant negative feedback from stakeholders
regarding the complexity of the marine regulatory framework.
The amendments to the incorporation by reference powers in the Canada
Shipping Act, 2001, clarify the regulatory regime and will allow Transport
Canada to consolidate the vast majority of modifications to an international
or industry standard into a single internally produced document that would
then be incorporated by reference into a regulation.
These amendments will provide a more streamlined and harmonized
regulatory structure under which stakeholders will refer to fewer documents
for the majority of the requirements that apply to them. Transport Canada
will also be able to harmonize the style and structure of its regulatory
framework with international documents that stakeholders are already
The second set of amendments pertains to the fees set by third parties
that are authorized to perform certain functions on behalf of the Minister
The Chair: Do you want to take us to the first set first so we do
not have to go over the same ground a second time?
Mr. Lachance: I only have a very small text left for the overview,
and they are interlinked, Mr. Chair.
The Chair: I do not mean to take you off text.
Mr. Lachance: That is no problem. They are linked with each other.
It is difficult to separate them. Thank you.
The set of amendments allows authorized third parties to set their own
fees and collect the money for the functions they perform on behalf of the
minister. Authorized third parties already set their own fees and collect
fees. This is consistent with the intent of the Canada Shipping Act, 2001,
which was to allow Transport Canada to transfer certain services to the
private sector. This is also consistent with current practices in the
These amendments support the implementation of the alternate service
delivery plan by making it easier for the authorized third parties to
administer Canadian requirements and clarify the process through which these
third parties set their fees. Thank you for allowing me this overview, and I
will be pleased to answer your questions.
The Chair: As we have done in the past, we would like you to take
us to the sections of the act that are being amended and then tell us that
is to achieve this initiative that I have just told you about. Sometimes you
can do that in your initial text and then we will not have to go back to it,
but now we will go back to it. Ms. Gascon, could you help us with that?
Julie Gascon, Director, Design, Equipment & Boating Safety, Transport
Canada: Thank you, Mr. Chair. You would like me to go clause by clause
within the act?
The Chair: We do not want you to get into any more detail than is
necessary for us to understand generally what is happening. If you can group
two or three clauses together and say this is to allow for the private
sector to set fees to achieve the outsourcing that is being provided by this
legislation, if I am interpreting Mr. Lachance's comments correctly, that
would be helpful for us to understand.
Ms. Gascon: Thank you, Mr. Chair. As a point of clarification, I
would not use the word "outsourcing" in this particular case. It is a very
common international practice. We are just behind the eight ball on it.
The Chair: What term would you use to generally describe that the
government was doing it, and now you are letting third-party, non-government
people do it?
Ms. Gascon: It is an authorization to third parties that are
specialized in the building of rules, technical standards, such as the whole
framework to build a vessel. It is machinery, the hull, the structure and
the electrical components of the vessel. They are international bodies that
do that on behalf of most of the administrations of the world and do
enormous amounts of research and development to ensure that the technology
for ships always continues to evolve. This way of doing business,
particularly for the scantling and the vessel structures, is done everywhere
in the world except here because we still had very old rules to build our
vessels in Canada, so we are joining the rest of the world.
The Chair: Good. That is helpful.
Ms. Gascon: Thank you.
The Chair: You go ahead and show us the sections that have needed
changing since 2001, but you are getting around to it now.
Ms. Gascon: First, with regard to the fees, we are amending
clauses 156 and 157. Clause 156 amends the provision to include third-party
services and related fees and extends refusal to issue documents if the
related fees are not paid. This is similar to what we have in our act with
regard to our inspectors. If an owner is not paying its fees, then it would
not receive its certification. A vessel in Canada cannot transit without its
certificate, so without the certificate they cannot proceed. This clause
extends the same ability for these third parties so that if the fees are not
paid, they do not have to issue the certificate. It is a refusal to issue a
Canadian maritime document.
The second clause is clause 158, which introduces a new provision that —
my apologies. Clause 157 is to amend —
The Chair: Clauses 156 and 157 were the fees that you indicated.
Ms. Gascon: Yes. Clause 157 amends the provision to include
refusal to renew documents if the related fees are not paid. It is a refusal
to issue, and then refusal to issue when the fees are not paid. These are
the two amendments with regard to the fees.
The Chair: Are we talking about the fees that would be paid by the
Ms. Gascon: By the shipowners, yes.
The Chair: That has not been paid to the third-party certifier?
Ms. Gascon: Yes.
The Chair: The third-party certifier can then refuse to issue the
Ms. Gascon: Yes.
The Chair: That is the leverage?
Ms. Gascon: Yes, sir. They are kind of interrelated.
We then move into clause 158, which introduces a new provision that
extends the incorporation by reference authorities to include Canadian
variation to externally produced materials and clarify the static nature of
such materials incorporated by reference and regulation.
If I may explain, for example, when the International Maritime
Organization produces an important document, such as the International
Convention for the Safety of Life at Sea, we can incorporate this convention
in our act; we already have that power. However, when it comes time to make
the regulation, only the technical detail of these documents can be an
incorporated document. Anything else has to be made in regulation.
Principally, what has happened in the past is that we are kind of rewriting
the whole international document and weaving it into the regulatory
framework, the regulation body, if you wish. This makes it extremely complex
because stakeholders or international builders everywhere in the world
cannot recognize the international standard when it has been rewritten
within the regulatory text. This amendment allows us to incorporate the
internationally produced document into a regulatory framework and then
incorporate by reference a document that provides all the Canadian
clarification, Canadian additions and Canadian modifications within the
regulation. Then the owners can refer to that document and they have all
they need to follow the regulatory requirements to build their vessels,
certify their vessel or modify their vessel.
In order for us to ensure that regulation is thoroughly consulted and
goes through the GIC process, the incorporation by reference is a static
incorporation by reference. It is a Canadian supplement or incorporation by
reference at a specific date so that is the incorporation by reference
power. It allows us to better incorporate by reference ISO standards, which
you may be familiar with, or international documents, and to include in the
incorporated by documents reference document all the necessary modifications
for the specific Canadian content.
The Chair: Is that wording more precise than it was previously?
You had "incorporated" previously, but you are now making it at a specific
date so that the people can find out just what is in fact being
Ms. Gascon: The incorporation by reference power that we had
previously only allowed us to incorporate by reference very technical,
detailed documents that did not have any rules of conduct or any Canadian
content. Anything that had a rule of conduct or where, in a convention or in
a standard, we had to say "to the satisfaction of the administration" or "the administration shall provide guidance on certain provision" had to
all be weaved into the regulation, which made the Canadian regulations for
ships a very large document that did not necessarily follow the standard —
that is, where it originally came from — making it extremely difficult for
stakeholders or for anyone around the world to understand what the Canadian
content was or what the Canadian regulations were.
Our stakeholders are ecstatic about this new power because it will really
allow them to have a framework that is similar to anywhere in the marine
world, so they will be able to refer to a document and truly understand how
to build their ship to meet the Canadian requirement. It is a power and an
approach in the marine sector that is similar to pretty much all maritime
administration all over the world.
The Chair: Thank you. That is helpful. You just keep going there.
Ms. Gascon: The incorporation by reference power is in clause 158.
We then come back with the fees in clause 159, which provide
regulation-making authority relating to service for which third parties may
set their fees. The clauses are not separated by incorporation by reference;
it follows through. It is kind of a story in the act, if you wish.
We move to clause 161, introducing new provisions relating to services
provided by third parties and the fees that are set by third parties.
Regarding clause 161, subsection 36.1(2), this new provision specifies that
the fees referred to in subsection 1 are not public money under the
Financial Administration Act and that the User Fees Act does not apply to
them. We are going from incorporation by reference to fees, so the sections
are not kind of separated in two different portions.
The Chair: Yes; we understand that.
Ms. Gascon: Clause 162 gives the authority for classification
societies previously authorized to provide services to set fees for their
services from the date of entry into force of the Canada Shipping Act.
We had to do this because the Minister of Transport has had an agreement
with the authorized third parties since 1999 whereby these third parties
have been charging their own fees. This is just the way that it works. The
third parties that we have authorized in Canada are also the same third
parties in 90 other countries. Everywhere in the world, these third parties
set their fees through contract. We had to go back to ensure that the way
they were charging their fees was correct. It was just an administrative
change to ensure that we were not going to go all the way back to 1999, the
first time that we had the agreements with those third parties. Is that
okay, Mr. Chair?
The Chair: Yes. If there are any other questions, I am sure that
honourable senators will be asking you. That is a good beginning, thank you.
Ms. Gascon: Thank you, sir.
There are two more. Clause 164 clarifies that some of the services
provided by classification societies — these are our third parties — were
not subject to certain regulations made under the Canada Shipping Act.
Again, not going back to 1999 when we first set our agreements with them.
Clause 165 provides for the retroactive coming into force of the
amendments specified for the same reasons.
The Chair: That brings us to Division 3.
Ms. Gascon: Yes, that is it.
The Chair: That also brings us to senators who would like to ask
for some points of clarification. I will begin with Senator Buth from
Senator Buth: Thank you very much for your presentation and for
being here this morning. Can you tell me what type of consultation you did
with the shipping industry and what their position is on these changes?
Ms. Gascon: With regard to the marine industry, as I mentioned,
these agreements have been in place since 1999. In our larger fleet —
vessels that are 24 metres and above — there are approximately 960 vessels
of that size. Of those, 307 are already receiving services voluntarily from
these third parties and are very pleased to receive those services. They are
worldwide organizations that can provide a whole suite of services.
Actually I just came back from Quebec. I was in Quebec yesterday with the
Canadian Passenger Vessel Association where I presented on this, and my
presentation was very well received. We have been talking about this through
the Canadian Marine Advisory Council for the last two to three years, and
the third parties have built up capacity even though they are in a voluntary
state now with the program. They have been building capacity and providing
those services. The customers and the stakeholders who have switched over
with these third parties do not come back with us. They are very happy with
Once they have switched, this allows us then to move truly to where we
are supposed to be in accordance with the act in compliance and enforcement
and providing inspection services outside of the period of certification of
the vessel intervals.
Senator Buth: Who are these certifiers? Would we recognize any of
Ms. Gascon: Yes, senator. Five of them right now are authorized in
Canada. We have Lloyd's Register of London; we have the Germanischer Lloyd,
which is the German classification society; we have Det Norske Veritas from
Norway; Bureau Veritas from France; and the American Bureau of Shipping from
the United States.
Senator Buth: Are these typically companies that have been
established in other countries and are now setting up operations to do this
in Canada? How does that work?
Ms. Gascon: Classification societies are international bodies, and
most of them have their head office in Europe. However, the American Bureau
of Shipping has its head office in the United States. They have been in
Canada for as long as shipping has existed. As an owner and operator, we
have many marine vessels that come into Canada that are not flagged in
Canada. They are flagged in the Bahamas or Liberia.
Classification societies have to be able to provide services to any
vessels that come in to any port in any country, so they have offices
everywhere in the world. In addition to that, they are also providing
classification services to some of our Canadian owners. They were already
established here, and they are now also providing certification services
since 1999 to our Canadian owners.
This is good for Canadian owners who are travelling abroad with their
vessel. When classed with an RO from Canada, Canadian owners have access to
services in any port of call in the world. They have been with us for a long
Senator Buth: Why did you choose the vessels over 24 metres?
Ms. Gascon: Typically, 24 metres is the load line length that is
known internationally. It is a length where a vessel has to have a load
line. The construction regulation, standards and requirements start pretty
much at that length. It is a common length for larger vessels and for a
larger fleet. When operating within the marine world, you do not want to
choose a length or a tonnage that will go away from the international
standards and practices. You want to have a common ground, common rules for
shipowners to provide a lot of stability in their regime because these
organizations are worldwide. Ships are built and bought worldwide, so you
want to have a lot of stability.
Senator Buth: Is it consistent with international practices then?
Ms. Gascon: Yes, absolutely.
Senator Buth: Can you tell me what impact this will have on your
budget and also efficiencies in terms of the certification system or
providing services to the marine industry?
Ms. Gascon: We have a certain number of inspectors. By allowing
the certification and the inspections of our larger fleet to be done by the
classification societies, and for these vessels to be classed, it will
redistribute our inspectorate to our highest-risk vessels. The highest
number of deaths and injury incidents in the Canadian fleet is with small
vessels. Unfortunately, we do not pay enough attention to them because the
inspection and the certification of the large vessel take the majority of
our inspectors' hours. It takes a really long time to do all the
certification. A vessel may carry over 50 certificates, so it is a lot of
inspection that goes into that.
This will allow our inspectors to really focus on our smaller fleet,
which is our larger risk, but also focus on our large fleet on a target and
risk-based approach. We call that "flag state inspection." The inspector
goes on board, does the inspection, focuses on safety, on fire protection,
on the crew, and then if everything is good he moves out. It is a lot more
streamlined in terms of inspection.
If a lot of deficiencies are found, the inspector then goes in depth.
This allows a lot of efficiency with our inspectors to see many more vessels
in Canada and address risk in a much more efficient way.
Senator Buth: Do you see a reduction in the number of inspectors?
Ms. Gascon: This initiative is proposing to eliminate nine
positions. These positions are already vacant, and they are very specific
positions. They are positions that relate to plan approvals of vessels. Plan
approvals require significant infrastructure to do, and this is typically
something at which those classification societies excel. They are very well
equipped and very well suited to do that, so we had already departed from
that. Those positions were already vacant. We made a decision with this
initiative to eliminate those positions, as they will be done by competent
individuals with regard to plan approval.
Senator Finley: You talk about inspections, certificates and
standards. Is this for new build only or is it for operations as well?
Ms. Gascon: With regard to this alternate service delivery, the
way that it will work when we put the policy in place is that any newcomer
to the Canadian registry, so a new build, importation of vessel, will be
coming into this scheme. They are already doing it with our five ROs.
With regard to our existing vessels, these third parties are very
specific in terms of what they can and cannot do according to their charter.
Depending on the age of the vessel, they will make an assessment and they
will see if it is worth it for the vessel to be brought into class and
receiving their inspection certification from class. Alternatively, they
will keep the vessel as it is, take the Canadian file, if you wish, and look
at the vessel with the existing regulatory requirement and take on the
certification and inspection portion.
We are expecting that approximately 170 to 200 vessels, which we call our
"historic vessels," will never be able to go into that scheme and will
remain with us. However, we can see we have the Bluenose II, which
was just rebuilt and is now certified and inspected by ABS, the American
Bureau of Shipping. A certain number of our older vessels will be able to do
Senator Finley: Will they be covered under the 1999 act or the
2001 act? How does that work? In effect, we have two jurisdictions here
operating parallel to each other. We have the older vessels under one act,
either the 1999 act or the 2001 act, and we have vessels that are going to
this new jurisdiction, if you like. Will that not cause a problem or is that
not the fact?
Ms. Gascon: All vessels are under Canada Shipping Act, 2001. There
is no two-tier system. Everyone has to meet the Canadian requirements.
Senator Finley: However, there is still a much beefed-up process
under the new changes to a different jurisdiction. You still have 2001. I
accept that. Everybody is operating under that, but they are operating under
it differently, are they not?
Ms. Gascon: No, senator. Just for clarification, it is a bit
difficult to explain. This is very technical.
A vessel is built and the regulatory regime that applies to that vessel
applies the day her keel was laid. When a vessel is built in 1970, she meets
the requirements of 1970. If she was built in 1928, the vessel will meet the
requirements of 1928. It is a little bit like the building code, sir. We do
not bring the buildings up to the building codes of 2012.
There are certain provisions on a ship that will be retroactive. For
example, the international community made a decision that on life jackets,
you have to have light; so a vessel would have a certain amount of time to
fit all life jackets with light. Certain provisions are retroactive, but not
all of them. The regime that applies to a vessel is the one in place when
the keel of the vessel was laid, plus any retroactive provisions that could
apply. In all effect, it is the same for any vessel anywhere in the world.
Senator Finley: I am still not sure that I fully understand it,
but ships have a longer life span than most things, I guess.
You mentioned in your statement that some 300 ships or Canadian companies
— I was not sure if it was ships or companies — voluntarily operate under
the new scheme and would not come back. Does that mean it is a voluntary
scheme whereby you can either do it or not do it? Does a shipbuilder have a
choice to go with this new scheme or with the old one?
Ms. Gascon: At this time, the program is voluntary. We have what
we call the "delegated statutory inspection program," so a shipowner may
decide to receive inspection and certification from third parties with whom
our minister has an agreement.
Over the next year and a half, we will be developing a policy whereby all
vessels will have to fall under that scheme and the process will no longer
be voluntary, in particular for any new vessels or newcomers to our
registry. Depending on the age of the vessel, we will transition our older
Senator Finley: What is the transition period to achieve this? You
mentioned the retroactive coming into force of these amendments. I would
like to know what retroactivity is and what a transition period is.
Ms. Gascon: The retroactivity is only with regard to the fees. All
vessels that have been receiving services from classification societies over
the last 12 years have been setting their fees by contract with third
parties; and we will not go back on those fees. It is an administrative
amendment only. That is the only retroactivity.
You are talking about, and please correct me if I am wrong, the
implementation period of this alternate service delivery. To facilitate this
for the industry and to allow a good assessment of the vessel, we will go to
the dry dock schedules of the ship. The policy will come into force in
January 2014, and every time a vessel is due for dry dock, there will be a
handover between Transport Canada and the third party. The vessel will
continue to receive certification from the third party. A vessel goes into
dry dock once every four or five years, depending on its type and age.
The Chair: As a point of clarification, clause 165 contains the
various dates of the deeming to have come into force; and that is the
retroactivity aspect. You said it was merely administrative, but it must be
more than merely administrative. It must be there because from a legal point
of view you felt that it was desirable or necessary. Can we agree on that?
Ms. Gascon: I can explain the rationale.
The Chair: Absolutely; that is why you are here.
Ms. Gascon: Clause 165 establishes that clauses 160 and 162 are
deemed to have come into force on the date that the Canada Shipping Act,
2001 came into force on July 1, 2007. Clauses 163(1) and (2) and 164 are
deemed to have come into force on January 1, 1999; and clause 163(3) is
deemed to have come into force on March 31, 2004. This pertains to the fee.
The Chair: They were being charged, and you want to make it legal.
Ms. Gascon: The agreements have been made with the classification
societies since 1999, and they had been setting their fees through contract
with their clients since that time because that is the way it has worked
Senator Callbeck: Most of my questions have been answered, but I
want to clarify two or three things. Transport Canada will still be
responsible for vessels under 24 metres. Roughly how many would there be per
year in that category?
Ms. Gascon: In the Canadian registry, we have approximately 41,000
vessels: 1,000 over 24 metres; approximately 10,000 between 15 gross tonnes
and 24 metres; and 30,000 to 31,000 below 15 gross tonnes.
To clarify, we are still responsible for all ships pursuant to the Canada
Shipping Act, 2001. The portion pertaining to inspection and certification
of a vessel is done by authorized third parties. The oversight of the
Canadian fleet remains with Transport Canada. Does that answer your
Senator Callbeck: Okay. Roughly how many inspections would there
be per year on vessels under 24 metres?
Ms. Gascon: For vessels between 15 gross tonnes and 24 metres,
certification comes due every four years. However, many inspections take
place during those four years because they require various certificates,
which are valid for four years. Other inspections need to be carried out by
our inspectors. For example, a fire pump is a continuous survey item. If it
is serviced, an inspector must verify that service so that the vessel may
continue. We visit those vessels often.
Senator Callbeck: You said that nine inspector positions would be
eliminated. How many inspectors do you have overall?
Ms. Gascon: We have just over 300 in the field.
Senator Callbeck: Regarding the part you are putting out to third
party, will there be any savings, or did the revenues that you have been
collecting from the owners of the vessels offset the cost? Was there a cost
to the department?
Ms. Gascon: Yes, there is a big cost attached to the inspection
and certification of vessels. We will be losing some of those revenues. My
colleague is responsible for the revenue generation.
Mr. Lachance: We will be losing some revenues for the big ships,
but we will also be gaining efficiencies with regard to the smaller fleet.
Also, our fees have not been revised since 1995. We are in the process of
reviewing our fees to bring them up to international and classification
society practices. We would offset those revenues when those fees are
reviewed and accepted.
Senator Callbeck: There will be some savings. Roughly how much?
Mr. Lachance: We anticipate reducing our workforce by about nine
inspectors. As my colleague said, those positions are vacant. They were
supposed to do planned approvals, mainly. We will no longer be doing that as
they will be done by the classification society, which is much better
equipped than we are to do this.
Ms. Gascon: The total saving will be $1.331 million.
Senator Callbeck: The notes we have said that a third of the
vessels already use a third party. Are the fees that they pay to the third
party much higher than what you currently charge at Transport Canada?
Ms. Gascon: It depends. It is difficult to answer this question,
and I will explain why that is. Third parties offer a huge suite of
services. In addition to providing all the statutory services, they provide
a whole bunch of additional services, such as software design for the bridge
team or the engine room team, which we do not offer. The fees are for an
all-encompassing service that we do not provide to those stakeholders.
Our current scale of fees is not that far off and only a bit lower with
regard to statutory services. They take a more holistic approach, if you
wish, as they provide many more services than we can provide or are
authorized to provide.
Senator Bellemare: I have a somewhat technical question about the
incorporation by reference, which seems very important when it comes to the
regulations. We have other Senate files that deal with this issue. In terms
of the incorporation by reference in the regulation, could you tell me
whether you are asking for a static or dynamic incorporation?
Ms. Gascon: It is a static incorporation.
Senator Bellemare: Great, thank you.
Senator McInnis: Thank you for your presentation. I have a very
simple question, actually more of a clarification. You have certification
inspections and compliance inspections. I understand the compliance
inspections are done because of operations at a higher risk. Does higher
risk mean operating in the Arctic? What does that imply?
Ms. Gascon: Certification inspections, as you said, are very
technical, very detailed. They go in-depth on each part of the vessel.
Compliance inspections are done based on risk. What is risk? It is the
age of the vessel, the material the vessel was built with, the competencies
of the crew, the area of operation. For example, a passenger vessel to us is
a higher risk than a cargo vessel. A vessel trading in the Arctic in the
winter is a higher risk than a vessel trading down south. There are all
kinds of components, such as the history of compliance of that vessel, the
history of compliance of the fleet of an owner. These are all criteria we
look at in terms of the risk.
In addition to that, we are looking at the classification societies and
how they perform. These classification societies and third parties are rated
worldwide and there are reports every year that come out of the
International Maritime Organization on how well they perform. If one of our
third parties is not performing very well, we may target more of their ships
that have been delegated and carry out more compliance inspections. There
are a whole bunch of criteria being looked at with regard to risk.
The delegation will also allow us to do concentration inspection
campaigns. For example, if there are a lot of deficiencies that are seen
worldwide in particular safety equipment, we can concentrate and target our
Canadian vessel to verify that they do not have those issues. There are many
components that go into the evaluations of risk with regard to targeting a
ship. Does that answer your question, senator?
Senator McInnis: Yes, it does. Mr. Chair, if you will permit me,
as a Nova Scotia senator, I have to ask: The Bluenose was taken down
to the keel. Was it built exactly the same? Is there high-tech equipment on
there? You would not tell me there are computers on the Bluenose,
Ms. Gascon: There are computers on the Bluenose. I am so
sorry. She has a GPS and a radar.
Senator McInnis: I hope this is being televised. This is terrible.
Ms. Gascon: She is built in accordance to rules of traditional
sailmaking in addition to intact stability and damage stability because she
is carrying personnel. Can I get into this, Mr. Chair?
The Chair: Absolutely.
Ms. Gascon: I do not know if you have seen Master and Commander,
but you can see in the hull in a traditional ship where they have hammocks
and it is all open so everyone can see. Damage stability compartments the
vessel a bit more so you do not have this openness any longer. In the
Bluenose there are some elements to ensure if a compartment is breached
it does not breach the whole vessel and she does not go down. Although she
is built traditionally in some instances, there are new components that I
was talking about that retroactively apply to certain vessels that are being
incorporated in her rebuild to make her as safe as she can be.
Senator Finley: The holistic approach to the services offered by
these international organizations does not extend to insurance, I assume?
Ms. Gascon: No sir. That is a very good question. Back in the
days, 300 years ago we would say, they were one and the same, but when
people were tired of their ship they would sink it and collect the
insurance. That was 275 years ago and it was completely diverted.
A lot of the organizations we were talking about, for a point of clarity,
are not-for-profit — not all of them but most of them. If you are trading
internationally and your vessel is not classed, you will not be able to
carry cargo or it will be very difficult to carry cargo. You will absolutely
not get insurance or be registered with the P&I Club. Classification
societies are providing the rules and guidance for scantling, building,
hull, machinery and the latest technologies for ship construction, but it is
Senator Finley: Thank you.
The Chair: Most of your points were covered?
Senator Finley: A lot of the questions were covered.
The Chair: I failed to mention with my introductory remarks that
as we are going through the various sections, if there is a particular area
where you think it would be helpful to have someone who is impacted by this
legislation come and be a witness, let us know. The steering committee tries
to guess who would be good to come and help us. I hope you agree with the
steering committee that Lloyd's Register would be a helpful outside witness
because this legislation will impact them. We have them lined up as a
witness later on. I wanted to let you know that. If there are any others,
let us know and we will line them up so we can understand how this
legislation will impact the industry.
At this time I would like to thank Ms. Gascon and Mr. Lachance. Thank you
very much for helping us with Division 2 of Part 4 of Bill C-45.
We will go on to the next division.
Colleagues, we are juggling a lot of paper here. We have just dealt with
Part 4, Division 2 on shipping. My records indicate that Division 3 will be
dealt with initially by the Banking Committee. We can skip that one.
Division 4 will be going to the Energy Committee. Division 5 will be dealt
with initially by the Transport Committee and Division 6 by the Banking
We will hear back from those various committees of the Senate in due
course, but we will be dealing now with Division 7, which begins at page
221. I am getting a new list of witnesses, but these are the ones before us
Thank you very much for being here. From Human Resources and Skills
Development Canada we have Marianna Giordano, Director, CPP Policy and
Legislation and Cassandra Iwankow, Director, Policy, and Michel
Montambeault, Director, Canada Pension Plan/Old Age Security from the Office
of the Superintendent of Financial Institutions. The witnesses are all here
to help us through the Canada Pension Plan. Who would like to take the lead?
Marianna Giordano, Director, CPP Policy and Legislation, Human
Resources and Skills Development Canada: I will. I will give you a brief
overview of these amendments, which are extremely technical. Division 7,
Part 4 really provides for technical amendments to the Canada Pension Plan
flowing from the 2010 and 2012 triennial review. These amendments relate to
the amendments made in the 2007 and 2009 triennial review to correct a
number of unintended gaps in the CPP, ensuring consistency in the
legislation and implementing a recommendation of a panel of independent
actuaries. These amendments will not change the level of CPP amendments nor
have any impact on the contribution rate.
As I have seen before, maybe we can go clause by clause and give you a
general overview of each clause.
The Chair: Thank you. That would be helpful.
Ms. Giordano: Clause 193 amends the definition of "contributor."
The proposed amendment updates the amendment to subparagraph 53(b)(i)
in the definition of "contributor." This section was renumbered in the
last triennial review, and therefore the subsection is subparagraph 53(1)(b)(i).
It is very technical and ensures that we are referring to the right
As for clause 194, Ms. Iwankow will provide you an overview on that one
since it is a disability amendment.
Cassandra Iwankow, Director, Policy, Human Resources and Skills
Development Canada: Clause 194 refers to the definition of
"substantially gainful" in the legislation. In order to qualify for Canada
Pension Plan disability benefits, applicants must meet eligibility criteria,
which include having a severe and prolonged disability that renders them
incapable regularly of pursuing any substantially gainful occupation.
Prescribing a dollar amount as a reference in determining "substantially
gainful" will improve both equity consistency and sustainability of
decisions and will be used by the department, appeals bodies and courts. As
well, the amendment will increase transparency, providing clarity for
applicants and beneficiaries.
Ms. Giordano: If we go back to clause 195(1) and (3), these
proposed amendments bring a greater precision to the calculation of the
minimum qualifying period by clarifying that contributions must be made
before the end of the contributor's contributory period.
In Bill C-51, which was part of the last triennial review, the
post-retirement benefit was introduced to the CPP, allowing people to
contribute after the end of the contributory period to let them accumulate a
new post-retirement benefit. We want to clarify that contributions to the
new post-retirement benefit that were made after the contributory period was
ended by reason of retirement are intended just for the PRB. These are just
I will leave clause 195(2) to Ms. Iwankow.
Ms. Iwankow: Clause 195 refers to the family allowance and the
interaction between the family allowance and the child rearing dropout
By way of explanation, the late applicant provision provides a measure of
protection for contributors to apply late to Canada Pension Plan Disability
Pension. This means that contributors who apply late still have an
opportunity to have their application considered. There is an interaction
with something called the child rearing provision. That allows periods of
zero or reduced earnings while caring for children under the age of 7 to be
dropped out of the CPP contributory period. This clause is proposing to be
amended to ensure consistent treatment in applying for the CRP between those
who apply late for their disability pension and those who apply on time.
Without this amendment, late applicants are not able to fully use the child
rearing provision. This amendment aligns with the original intent of the
late applicant provision by putting applicants back in a position they would
have been had they applied and time. That is its purpose.
Ms. Giordano: If we go to clause 196, which are the general
dropout provisions and the over 65 dropout provisions, these provisions are
intended to minimize the adverse effect of periods of zero or low earnings
within your contributory period. This can be due to unemployment, illness or
schooling. The proposed amendment clarifies how the deductions of earnings
are determined for those over 65 and the general dropout provision. The
dropout provisions are amended to clarify how certain deductions are to be
determined where a single lowest period cannot be specified. The intention
is really to more accurately reflect the intent of the over 65 and the
general dropout provisions.
The next ones, which are clauses 197, 198, 199 and 200, are what we call
the division of adjustable pensionable earnings, also known to a lot of
people as credit splitting. The policy intent of the division of adjustable
pensionable earnings was to recognize all divorces, Canadian and foreign. We
are only deleting references to the Divorce Act and Decree of Absolute
Divorce to ensure that the intent is to recognize all divorces. They do not
need to be Canadian divorces.
Clause 201 is, again, just a change to a reference, as we previously
mentioned, in clause 193. We are just reassuring that the right numbering is
there. Subparagraph 53(b)(i) now becomes 53(1)(b)(i) and it is
the same for subparagraph (b)(ii).
As for clause 202, it is to ensure that the Review Tribunal and the
Pension Appeals Board have the authority to determine questions of law and
fact for penalties. Right now, an individual has the right to appeal the
imposition of an amount of a penalty. However, the Review Tribunal and the
Pension Appeals Board lack the authority to determine the questions of law
and fact related to these administrative monetary penalties. This amendment
will just provide them with the authority so that if someone appeals, at
least they can determine it. We are doing that same amendment to clause 204.
As you may know, the Review Tribunal and the Pension Appeals Boards will be
coming to an end and will be replaced by the social security tribunal, so
the same amendment is made to the HRSDC act to ensure that the social
security tribunal has the authority to determine questions of law and fact
with regard to monetary penalties.
The Chair: Why did you take a different drafting approach between
these two? If you look at clause 202, "whether a penalty should be imposed
under this part or," and then go down to another subparagraph, "the amount
of that penalty," the "or" is not one or the other, I would assume. That
is really a conjunctive. Then you go over to clause 204, as to whether a
penalty should be imposed under Part 1 or Part 2 of the Act, and then in
basically the same subsection you say "or its amount." You have separated
the "or its amount" in one. Usually if you draft something differently,
especially a page apart, it is because you want to achieve two different
Ms. Giordano: No; they are identical. I think they are drafted
slightly differently because all the legislations are drafted within. One is
within the CPP, so it probably keeps the model within the CPP; the other one
is within the HRSDC act. I think it is more of a drafter's convention. The
intention is identical.
The Chair: Two different drafters?
Ms. Giordano: The same drafters, but probably because of the
different structure of the two pieces of legislation.
The Chair: Thank you.
Ms. Giordano: If we go to our last clause, subsection 115(2) of
the CPP will be amended. The proposed amendment will allow the Chief
Actuary, when preparing supplementary actuarial reports, to use not only the
same actuarial assumptions used in the most recent triennial report but also
actuarial assumptions that more accurately reflect demographic or economic
changes that may have occurred since the most recent CPP triennial review.
This change is really to provide the Chief Actuary with more flexibility.
As you have seen in the last few years the economy has changed quite a bit
in a very short time, so it provides the Chief Actuary with the flexibility
to adapt his assumptions to today's realities to reflect a better picture of
These are all our amendments. We are open to any questions you might
The Chair: Before I go to the list of senators who have indicated
an interest in discussing this with you, are all of these amendments the
result of a normal review or the result of a court case? Sometimes a change
is made because there has been an interpretation that was not intended so
you make a change to bring it back to what was intended. I do not see that
Ms. Giordano: No, these were pretty much housekeeping amendments
that we thought needed to be done, and through the triennial process we
brought them over to the provinces and they have agreed unanimously to these
The Chair: You talked about Bill C-51, which was an earlier
stand-alone bill, was it?
Ms. Giordano: Bill C-51 was a budget bill with a component of the
CPP, which was the previous triennial review. The CPP is reviewed every
three years by the provincial and federal finance ministers to ensure that
the CPP responds and is sustainable. In the previous triennial review there
was a huge reform to the CPP by adding a new benefit. There were a number of
changes. One of them was the introduction of a new post-retirement benefit,
and another change was the removal of the cessation test. People do not have
to reduce or stop working to receive their CPP retirement pension. These
changes meant there were some touch-ups to make during this triennial, just
to ensure everything was aligned correctly.
The Chair: Human resources found this budget implementation bill a
convenient place to do these touch-ups; is that correct?
Ms. Giordano: Yes. This was done via the triennial review.
The Chair: The requirement was determined, but how was the place
to bring those before Parliament determined?
Ms. Giordano: That was determined by the Minister of Finance.
Senator Hervieux-Payette: I would like to have more clarifications
on the origin of these recommendations. You said that it was a matter of
technicalities or formulae, but you were talking about the provinces. Could
you tell me how many people other than the provinces were consulted about
these amendments and when those consultations took place?
Ms. Giordano: The provinces were consulted. The finance ministers
are responsible for the Canada Pension Plan triennial review. Consultations
were held with the ten provinces, as well as the territories. However, the
provinces are the ones that need to approve some of these amendments, which
require provincial authorization.
Senator Hervieux-Payette: And when was that done?
Ms. Giordano: During the 2010-2012 triennial review. A dialogue
took place between the provinces during those three years regarding the
changes that had to be made and the outcome of the proposed changes.
Senator Hervieux-Payette: Are those issues generally addressed in
budgets? If I go back five, 10 or 15 years, each time changes were made,
were any of those changes included in the budget or were they studied in
general? In section 263, you are saying that a bill is introduced in the
House of Commons for amendments. Right now, as I am sure you must know, you
are introducing one of the many acts that are in the budget. Has that always
been the same?
Ms. Giordano: I would not say that the changes have always been in
the budget since 1966, but a triennial review has been used over the past
few years to make the changes.
Senator Hervieux-Payette: What do you mean by triennial?
Ms. Giordano: The triennial review is done for the CPP, meaning
that, every three years, the legislation requires provinces and the federal
government to review the plan to ensure that it is sustainable and that it
meets the needs of Canadians.
Senator Hervieux-Payette: Are you saying that the last change was
made three years ago?
Ms. Giordano: Yes.
Senator Hervieux-Payette: Changes occur in consecutive three-year
Ms. Giordano: Yes. The last change was made through a budget
exercise for the first three years; the previous change had been made
through a memorandum to cabinet.
Senator Hervieux-Payette: Have there been other consultations?
Have there been consultations with other groups affected by these changes?
Have unions had a say in this?
Ms. Giordano: There have not really been many consultations about
these changes, but most of them have no impact on people. The changes do not
affect their benefits; they are merely technicalities to make sure that the
legislation is clear. The benefits or the contribution rates will not be
affected. There will be no changes to the way people apply for their
The current changes are simply ensuring that the legislation is clear,
leaving no room for interpretation. For example, if changes to the numbering
are made, we make sure that the numbering is correct.
Senator Hervieux-Payette: Was it not clear before?
Ms. Giordano: It is also because a new benefit has been
introduced. Some changes have been made to the contribution period since
1966, so we wanted to make sure that, for the first time since 1966, we had
a benefit that was outside the contribution period. We thought that it was a
good opportunity to make sure that everything is clear, to avoid confusion.
Senator Bellemare: Could you clarify the delegation of authority
in relation to the definition of a substantially gainful occupation and its
potential impact on disability applications, including for the
First, do you have an idea of what will be specified in the regulations?
What will the impact on disability applications be?
My second question has to do with the assumptions of the Chief Actuary.
The Chief Actuary is being granted power to do those actuarial calculations
in order to take into account the economy reality, which makes sense.
However, at the same time, are there guidelines to make sure that all the
specific criteria will be taken into account, since we know that the
contribution rates vary a great deal based on those assumptions? The
regulatory power may be granted in good faith, but the Chief Actuary can
decide otherwise if there are no guidelines. So have guidelines been set
Michel Montambeault, Director, Canada Pension Plan/Old Age Security,
Office of the Superintendent of Financial Institutions Canada: In terms
of the question about the proposed amendment to section 115(2) of the
legislation, which deals with the supplemental report that the Chief Actuary
has to prepare when there is a bill affecting the costs of the plan, the
current legislation tells us to use the same assumptions as the ones in the
previous triennial report.
That is what we did for 2008, when Bill C-51 was introduced. It was
during the economic crisis and we felt we needed to be a bit more realistic
about the projections we were going to present in the report amending the
act governing the plan. So we thought it was wise to believe that the
legislation would allow us to use alternative scenarios rather than the same
assumptions as the ones in the previous report; at that time, we might have
painted a less realistic picture of what the financial situation of the plan
In this report, we have shown the results based on the same assumptions
as in the previous report, but we also took the liberty of introducing what
we deemed to be a more realistic scenario in order to better inform the
provinces and the Minister of Finance so that they could make the best
That report was the 24th actuarial report on the Canada
Pension Plan and it was reviewed by a panel of independent actuaries that
thought it was a good idea to use this approach; the panel even recommended
that the legislation be amended so that we have the flexibility to use
assumptions other than the ones in the previous report.
The amendment before you today could give us the flexibility not only to
show the results based on previous actuarial calculations, although we may
agree with them, but also to use other assumptions to better inform the
provinces and the Minister of Finance and, since this report is public, to
better inform the Canadian public and paint the clearest picture possible of
the financial state of the plan.
Senator Bellemare: So does that mean that there will be several
Mr. Montambeault: Not necessarily several. We can just present
them based on the previous report, if we feel that there have not been
enough economic or demographic changes. If we feel there is more uncertainty
when we prepare the report, it would be important to show an alternative
scenario. We could show one or maybe two scenarios. It will depend on the
situation at that time.
Senator Bellemare: And will the assumptions used be clearly
Mr. Montambeault: Yes, they will be stated, documented and
reviewed by a panel of independent peers during the triennial review. That
does not prevent us from continuing to prepare reports every three years,
but the special reports that deal with bills give us the flexibility to be
more realistic in our projections.
Ms. Iwankow: Concerning your question about the definition of
"substantially gainful," in order to qualify for a disability benefit
under the CPP, a contributor must have made eligible contributions in three
out of the last six years if they have been contributing for 25 years or
more. As well, they must meet the definition of a disability that is both
severe and prolonged. The definition of "severe" includes that a person
must be regularly incapable of pursuing any substantially gainful
occupation. Currently, the CPP legislation does not define "substantially
gainful" in respect of an occupation. As a matter of policy, we have been
relying on CPP regulation 54.3 as an enabler for determining the monetary
level at which an individual is deemed to be pursuing a substantially
gainful occupation. The actual function of that regulation is to specify the
earnings level for cessation of work for retirement purposes. As my
colleague indicated, that provision is no longer in force as of January 1.
The amount was 25 per cent of the average year's maximum pensionable
earnings for the last five years. It is the equivalent of the maximum
monthly retirement pension multiplied by 12. In 2012, that number happens to
As a consequence of Bill C-51, regulation 54.3 has not been in force
since January 2012. Therefore, there is no legislative basis for
substantially gainful occupation for that amount currently used for
disability purposes. The measure that we are discussing today proposes to
introduce a regulation-making authority in the CPP in order to prescribe the
meaning of the term "substantially gainful" for disability purposes in
relation to an occupation. We are looking at international and domestic
practices with respect to this. For example, in Quebec, the Quebec Pension
Plan uses a formula of 12 times the maximum monthly disability amount. That
amount this year is $14,226.
We think that this measure will provide increased transparency and
national consistency for the program in terms of the application and will
not leave the disability program vulnerable to the court's interpretation of
"substantially gainful." In 2011, the Office of the Chief Actuary, using
the example of the Quebec Pension Plan, estimated that there would be a
small additional cost of approximately $1 million. That amount is slightly
higher than what we use currently. Between 70 and 100 people per year would
come into the plan.
Ms. Iwankow: As Ms. Giordano indicated, the provinces and
territories have been consulted as part of the triennial review process. I
hope that answers your question.
Senator Bellemare: Absolutely.
The Chair: Ms. Iwankow, you are speaking as if there will be a
regulation to define this. However, this clause says that we may or may not
tell you what it means. Clause 194 states:
"substantially gainful", in respect of an occupation, has the
meaning that may be prescribed;
It may not. Why did you use wording like that? The person who was out
there hoping to get his or her disability insurance would like to know what
the rules are.
Ms. Iwankow: Mr. Chair, it is my understanding that the intention
is to make this amount known — to make it transparent — so that the level is
widely available. In using the past number, it was providing an example of
what is being done in other jurisdictions, which we are reviewing as a
The Chair: Would you accept an amendment to this clause so that it
means shall or will be prescribed in regulation? If you would do that, then
everybody would feel good about this.
Ms. Iwankow: We would like to consider it.
Ms. Giordano: We will consider it.
The Chair: Good. Would you let us know after you have consulted on
Ms. Iwankow: We will do that.
Senator Callbeck: These proposed amendments have come from
recommendations made by the provincial finance ministers. Does what we are
dealing with this morning include all the recommendations?
Ms. Giordano: These were all the changes recommended by the
federal finance minister and the provincial finance ministers for the
conclusion of the triennial review as announced by the Minister of Finance
in the budget.
Senator Callbeck: They are all in the bill. On the matter of
"substantially gainful," what groups were consulted? Were any disability
Ms. Iwankow: The Canada Pension Plan disability program has a
client round table compromised of individuals from across Canada. I believe
that there are 12 members, who have tremendous experience working with
individuals who have applied for Canada Pension Plan Disability. We have
discussed this proposal with them. For the large part, it would be fair to
say that they were supportive of the appeal of the transparency, national
consistency and opportunity provided by this change, that they were
supportive of that.
Senator Callbeck: There are 12 members on the client round table.
Are they from all the provinces and territories?
Ms. Iwankow: I am sorry I do not have the list in front of me.
They represent jurisdictions across the country. Whether there is a member
for each and every jurisdiction, I am not sure, but I could get back to you
Senator Callbeck: After the regulation is formed, does the client
round table look at it?
Ms. Iwankow: No, I would not say that. We have brought forward the
idea of a definition of "substantially gainful" to seek their views. We
meet with them periodically to collect issues and to discuss issues of
relevance to the Canada Pension Plan Disability.
Senator Callbeck: Will they have input to that regulation?
Ms. Iwankow: They have had input to the process thus far.
Senator Callbeck: Right, but will they have input to the actual
regulation? The problem is what will be in that regulation.
Ms. Iwankow: I am sorry, but I am not in a position to confirm.
However, through this dialogue, we commit to them to discuss issues as they
arise. We will continue to update them, but I am not in a position to say
whether or not they would be consulted on the final definition of the
Senator Callbeck: I would think that it is pretty important that
they be consulted. These are people who have had experience working with
people with disabilities and trying to get pensions.
Ms. Iwankow: I can certainly commit to get back to you with an
Senator Callbeck: Thank you.
On the CPP retroactivity, there are many women out there who work for two
years of their lives and then get married, have children and never go back
into the workforce. They have forgotten that they ever paid into CPP. Let us
say at 78 the woman remembers that she paid into CPP. She applies. Her
retroactivity only goes back one year.
Ms. Giordano: That is correct.
Senator Callbeck: In Quebec it goes back to age 70; correct?
Ms. Giordano: It goes back up to a maximum of 12 months.
Senator Callbeck: That is here, but in Quebec it is different, is
Ms. Giordano: I believe the retroactivity is not one of the
amendments that we are here to discuss. I think Quebec has different
legislation. However, I think they are amending it to bring it in line with
the CPP at this time.
Senator Callbeck: Are they, for one year?
Ms. Giordano: I think they have a proposed amendment out there. I
do not know when it is effective exactly, but they do have a proposed
Senator Callbeck: I see. I am surprised at that.
Senator Finley: I do not know, chair, whether I have a question or
not. Following on Senator Bellemare's question on the Chief Actuary, while
it was a very eloquent presentation in French, my French is not good enough
with an earphone and the gentleman was speaking to my right here, and I
could not make out what was what. I did not really hear the answer.
On the Chief Actuary, presumably it is legislated that there is a
triennial review, yes, of the pension CPP? It is legislated every three
Mr. Montambeault: Yes, the Chief Actuary has to do a report every
three years according to legislation.
Senator Finley: Prior to this, he could use only, what, extant or
current conditions, not projections? Now he can use projections?
Mr. Montambeault: I will just clarify one thing. Every three years
we need to do what we call a triennial report. That report is used by the
provinces and the Minister of Finance as one of the elements to consider
when they review the financial status of the plan.
Every now and then there could be amendments that fall in between two
triennial reports, and when any of those amendments to the plan affects the
costs, we need to prepare a supplemental actuarial report. In between two
triennial reports, sometimes we need to prepare an additional report, which
we call a supplemental report, and in that supplemental report, the current
act was saying use the same assumptions as the previous triennial report.
The changes to the act that are proposed are to give us flexibility to
say, "Wait a minute, since the last report things have changed." In 2008,
when we prepared the report for Bill C-51, we asked whether we are really
giving the right picture to the Canadian public and the provinces if we use
the previous assumptions. We said maybe we should present on top of the
previous assumption another scenario that we thought is more realistic to
present and to help make better decisions. We used an alternative set of
assumptions that reflected more of what was currently happening in terms of
labour force, rates of return and things like that in the markets. The act
has been modified to really give us that additional flexibility.
Senator Finley: Is it your choice whether you use it or not?
Mr. Montambeault: Yes, it is in our judgment if we feel it is
Senator Finley: You are not mandated by the ministry of finance or
Mr. Montambeault: No.
Senator Finley: You either do or you do not include, and is that
supplementary report also made public?
Mr. Montambeault: Yes, it is tabled in the House of Commons.
Senator Finley: Are there any guidelines, either professionally
within the actuarial system or governmentally within our system, that would
indicate what kind of changes would be deemed relevant enough to generate a
supplementary report — for example, I do not know, stakeholders in the
system, rate of return, death, statistics shifting or what? Are there any
key fundamentals that are controlled by saying if such and such shifts then
a supplementary report must be written, or is this just entirely at your
Mr. Montambeault: Right now supplementary reports are only
required at the request of the Minister of Finance when a new bill changing
the CPP is introduced in the House of Commons.
Senator Finley: The mandate comes from the Minister of Finance.
Mr. Montambeault: It is through a new bill.
Senator Finley: That is as opposed to you doing it just because
you feel that a supplementary report may be required?
Mr. Montambeault: Because the triennial report is done every three
years, I think that is a good time frame.
Senator Finley: I am not arguing that. You said in between times
there could be a supplementary report because it is felt that things have
changed. I am trying to get to how that determination is made. Is it made by
the Minister of Finance asking the Chief Actuary to do a supplemental
report, or does the Chief Actuary have the mandate to determine that he
makes a supplemental report regardless of what the Minister of Finance may
Mr. Montambeault: This would come as a request from the Minister
of Finance. Besides the fact that it is not a new bill changing the CPP, it
would have to come from the provinces and the Minister of Finance, those who
are the stakeholders of the CPP. If they feel that we should look into
things and change the triennial report before the next triennial because
they want to have a better picture, it is at that point that we would have
to prepare a new report. Each time we do a report, every three years, we do
review all assumptions, reflecting whatever might have happened during the
last three years to be more on the money or where we think we should be at
Senator Chaput: Let me go back to the new term "substantially
You gave a definition of what that meant. You also mentioned that there
was a consultation with a client round table. Does this definition come from
a discussion with the client round table or does it simply come from the
Ms. Iwankow: Thank you very much for the question. The definition
of "substantially gainful," as we have discussed, is not currently in
legislation. In practice we have been using regulation 54.3 in order to use
an amount. That regulation is no longer in force.
The amount previously was $11,840. The example I provided earlier,
looking at what is currently done by the Quebec Pension Plan, is actually a
higher amount. We have been looking at other domestic and international
examples of other figures that are used to define and other ways to define
"substantially gainful," so we have discussed the concept of a further
definition of "substantially gainful" in principle.
As we have mentioned, it does provide the potential, regardless of the
level chosen — we use the example of the $14,226 used by Quebec. The
possibility of increased transparency for clients, that they would know
exactly what this amount was, was considered a very positive thing.
Consistency in treatment of all clients of the program the same way across
the country was considered to be very positive, as was the issue of having a
visible number that can be used by the department and does not leave the
definition open to interpretation by the courts.
Saying the amount is higher means there is a potential for 70 to 100 more
clients to come into the program. That number being higher means that we
will have a higher number of clients, and that is also perceived to be a
Senator Chaput: The definition that you just explained to me has
not been fully developed yet. It is not written; it is being discussed.
Ms. Iwankow: That is right.
Senator Chaput: Why not include the definition in the bill? Is
that normal? Is the definition of a new term in a bill usually part of the
regulations? Is it defined in the regulations later?
Ms. Iwankow: My understanding is that this is generally treated by
other jurisdictions in regulation.
Senator Chaput: Let us suppose that the bill is passed. The
regulation will be amended afterwards. How much time is required to amend
it? Do you consult with the stakeholders in question or does the process not
Ms. Giordano: Usually, the CPP regulatory process does not provide
for many consultations because it is very administrative in nature. However,
as Ms. Iwankow specified, there have already been discussions with client
groups, at a round table, dealing with disability issues and people who file
disability applications with the CPP. So some preliminary discussions have
already taken place. The consensus was transparency.
It is not written right now. Because of the policy, we are relying on a
regulation on the termination of employment that was based on retirement.
The regulation will no longer exist. We are exploring various methods.
I would also like to clarify what has been said. Let us say that you take
a higher amount than what was there. In the past, a person who reached
$12,000 was not eligible for a disability pension. If someone now reaches
$12,000, when the threshold is $14,000, we consider that $12,000 is not
substantially gainful. So the person might be eligible and receive benefits.
The disability program determined that 70 to 100 individuals could be added
to the program based on that alone.
It is really a question of transparency. Based on the system we were
using until 2012 for termination or retirement, if you retired, you had to
reduce your work activities. It was estimated that the amount was 12 times
the pension amount — we are talking about the maximum amount for a pension,
the threshold. This formula has always been used for disability
compensation, depending on whether you have been working full time or not,
since the pension is related to that.
However, given that the regulation was eliminated in January 2012, the
amendment asks that powers be granted to define what it is. It will be done
through the regulatory process and it will be submitted to cabinet, the
Treasury Board and in committee, including the time and place changes.
Senator Hervieux-Payette: We were asking how much time would be
Ms. Giordano: How much time before a regulation is made?
Senator Hervieux-Payette: Yes.
Ms. Giordano: The timeframe has not been set. We cannot make the
regulation if we do not have the authority. Once we have the authority, the
clock will start ticking to have the regulation as soon as possible.
Senator Chaput: If I understood correctly, you have to agree on
the specific definition. You are in talks, but the definition itself has not
been drawn up yet.
Ms. Giordano: No, it has not been drawn up yet.
Senator Chaput: So how can you analyze the impact?
Ms. Giordano: The impact on disability studied by my colleagues
was based on what Quebec did, which was a bit more generous than what we
were doing. That is how the impact was analyzed.
Senator De Bané: Following on the question by my colleague Senator
Callbeck, how many people in Canada are affected by that limit of one year
of maximum contributions that they can get if they have failed to apply on
time when they were eligible for the CPP? How many Canadians, on average,
are affected by that limit of 12 months maximum?
Ms. Giordano: I am sorry; I do not have those numbers. Since it
was not one of our amendments, we did not bring those numbers. I can tell
you that that retroactivity applies to all benefits across the CPP.
Senator De Bané: I know, but I wanted to know if you had a number
of how many are affected.
Could any of you give me the logic of why we say to someone, "Sure, we
owe you $20,000, but tough luck, you failed to apply, so we will pay for
only the last 12 months"? Is there logic for that kind of restriction?
Ms. Giordano: At this time, we are not here to discuss the
retroactivity as it is not a proposed amendment.
Senator De Bané: No, but you have been reflecting on those things
for a long time, and maybe you can tell me theoretically. I really do not
understand why we would tell someone who is entitled to that pension,
"Tough luck. You forgot to apply on time." I fail to understand that.
The Chair: They have already said they are not in a position to
answer. I understand your position.
Seeing no other questions, honourable senators, we will thank our
witnesses very much for having been here to help us out with this particular
We have just finished the division on Canada Pension Plan, which is
Division 7. Division 8 is being handled by the Aboriginal Committee, so we
will now go to Division 9, sections 212 to 218 on the Judges Act. We will
bring witnesses in that regard.
We are at page 228, Division 9, Part 4, Bill C-45. We are pleased to
welcome from Justice Canada Adair Crosby, Senior Counsel/Deputy Director,
Judicial Affairs, Courts and Tribunal Policy.
Could you give us a bit of a history with respect to this division, Ms.
Adair Crosby, Senior Counsel/Deputy Director, Judicial Affairs, Courts
and Tribunal Policy, Justice Canada: I would be happy to, Mr. Chair.
This division is devoted exclusively to implementation of the government's
response to the 2011 report of the federal Judicial Compensation and
Benefits Commission. That commission, which we call the quadrennial
commission, is established every four years with a mandate to inquire into
the adequacy of judicial compensation and benefits under section 26 of the
The current commission convened on September 1, 2011, to inquire into the
adequacy of judicial compensation for the period commencing April 1, 2012,
to March 31, 2016, and it reported on May 15, 2012. The government issued
its response on October 12, 2012, and any recommendations that the
government accepts must be implemented by way of Judges Act amendments
pursuant to the Constitution Act, 1867. You have before you the amendments
necessary to implement the government's response.
There are three main elements to the government's response. The first
relates to the key salary recommendation, which the government accepted.
There will be no increase to judicial salaries for the quadrennial period
other than maintaining current statutory indexation, which is provided under
section 25 of the Judges Act. The second aspect relates to the acceptance of
two minor benefits affecting a couple of individuals, which I will speak to
as I go through clause by clause. The third element is changes to the
commission process to improve timeliness and effectiveness.
If you permit me, I will take you through clause by clause and provide a
brief overview, knowing that you are running out of time and have a great
deal to accomplish.
As you know, because of section 101 of the Constitution Act, 1867,
sections 9 to 22 set out the salaries for each judge in each superior court
in each jurisdiction. Clause 210 amends those sections to set the salary
effective April 1, 2012, and that is the salary inclusive of statutory
indexation. This is essentially maintaining the status quo, updating the
figures to 2012.
Clause 211 is a related amendment to provide that the automatic statutory
indexing is based on the salary amount specified in clause 210.
I mentioned that there are a second and a third aspect going
sequentially. We come to clause 212, which relates to the process
improvements. These are non-compensation matters. The government's response
indicated that it would introduce amendments to improve the timeliness and
effectiveness of the commission process. Specifically, this clause would
shorten the government's time to respond to a commission report from six to
four months, and would provide that there would be a positive obligation on
the government to introduce any legislative amendments necessary to
implement that response in a timely manner.
The third aspect of these improvements is really a consequential
amendment, which would push back the start date of the commission process by
one month. This would ensure that the government at the other end is able to
comply with its obligation to respond in a timely manner. It would make the
effective response date for the government November 1 rather than October 1
of the following year.
The last aspect of the report is found in clauses 214 to 218, and this
relates to the minor benefits that the government has accepted. The first is
to provide for a representational allowance to the Ontario senior family law
judge consistent with that already provided to the Ontario regional senior
judges in the amount of $5,000. That is found in clause 213.
Clauses 214 to 218 are intended to implement the government's acceptance
of the recommendation that would align the retirement benefits of senior
judges with those of chief justices and associate chief justices. I am happy
to go through clauses 214 to 218 in detail, but essentially the northern
territorial superior courts have senior judges — who are paid an equivalent
salary and are entitled to a representational allowance — who essentially
perform the same functions of chief justices in the South. However, they do
not have the same option to step down from performing chief justice's duties
and resume the duties of a normal judge. If they perform the functions of a
chief justice for five years, a chief justice in the South can step down,
assume the functions of what we call a puisne judge, an ordinary judge, but
receive a retirement annuity equivalent to a chief justice. These provisions
would ensure that the senior judges in the northern territorial court have
the same retirement benefits.
That concludes my remarks, but I am here to answer any questions.
The Chair: Thank you very much, Ms. Crosby. I will go to my list
in a moment, but several places mention supernumerary judges and their
salaries. I am directed to 234 at the top. I think you are just excluding
senior judge in that instance. Could you explain to colleagues the role and
how a supernumerary judge is compensated? How does that happen?
Ms. Crosby: Essentially a supernumerary judge, upon obtaining
eligibility for a judicial annuity — which is ordinarily the rule of 80, 15
years of service with a minimum age requirement — can instead elect to
perform the role of a supernumerary judge. A supernumerary judge continues
to get a full-time salary, but it is understood would work half- time in the
court. They can do so until the mandatory age of retirement, which is 75.
The Chair: They are paid half time?
Ms. Crosby: Yes, sir. No —
The Chair: They receive a full pension?
Ms. Crosby: They are paid a full-time salary, and it is understood
that they would work half-time.
The Chair: Are they receiving a pension in addition to that?
Ms. Crosby: No, sir. They continue to be members of the court.
They receive their full-time salary during the period of election between
the election of the supernumerary and retirement. They receive a salary and
on retirement they get a regular pension.
Essentially, the idea is that a judge who is entitled to a pension at a
certain age based on the eligibility requirements in the act would be
entitled to his judicial annuity equal to two-thirds of his salary. He would
retire. He would leave. A supernumerary judge would stay on and get that
one-third salary difference but work half-time. Some would say it is
actually a benefit to the government to be able to retain senior experienced
judges on the court at a relatively modest incremental cost. That is the
policy behind it.
The Chair: Thank you. We have had lots of discussion of
supernumeraries and they are not all favourable, so it is important for us
to understand the role. I think you have explained it very clearly.
Senator Callbeck: Thank you. Ms. Crosby, you say that this
legislation is a response to the Judicial Compensation and Benefits
Commission. What is the makeup of that commission?
Ms. Crosby: The commission is constitutionally mandated based on a
decision in 1997 of the Supreme Court of Canada. It is intended to be
objective, effective and independent. The way it is constituted under
federal legislation is that there is a judicial nominee, a nominee by the
government and they together jointly nominate the chair. It is a
three-person commission with a four-year fixed mandate.
Senator Callbeck: Thank you.
Senator Nancy Ruth: On the supernumeraries, can they themselves
elect to stay on, or does it have to be with permission of the chief? Can
you get rid of people who apply for it but whom the court does not want?
That is really my question.
Ms. Crosby: The answer is probably outside the scope of the four
squares of this legislation. However, I can tell you that the legislation
provides that it is at the option of the judge that he or she elects
supernumerary status. The principles of judicial independence still apply;
the complete set of principles apply to supernumerary judges.
The Chair: Ms. Crosby, that exhausts my list of senators. You have
explained it extremely well and we appreciate your being here. We wish the
judges continued success in the good work they are all doing for us and for
Colleagues, we will now go to Division 10, clauses 210 to 218, the Canada
We are very pleased to welcome, to help us with Division 10, Canada
Labour Code, found at page 236 of the bill, Charles Philippe Rochon,
Manager, Labour Law Analysis at HRSDC.
Mr. Rochon, could you help us with this division of the bill?
Charles Philippe Rochon, Manager, Labour Law Analysis, Human Resources
and Skills Development Canada-Labour: Certainly, and thank you for
inviting me to join you this morning.
Division 10 makes amendments to Part 3 of the Canada Labour Code, the
legislation that sets minimum employment standards for employees under
federal jurisdiction. These are enterprises in banking, telecommunications,
cross-border transportation industries, et cetera. It does not cover the
federal public service, although it does cover Crown corporations.
The proposed amendments are aimed at making compliance with Part 3
requirements easier and less burdensome and also at reducing the cost of
administering the legislation. There are four broad categories of amendments
as well as some miscellaneous ones that I will go into as well.
Going in the order that they appear in the legislation, there is a minor
technical amendment on page 236. Clause 219 amends section 188 of Part 3,
which sets the timeline within which vacation pay must be paid to employees
after termination of employment. This will provide a set period of up to 30
days after termination of employment to pay vacation pay to employees. The
current provision is somewhat vague. It says it must be paid forthwith, but
it does not define "forthwith," and it creates a bit of an anomaly because
we have other provisions in the code that specify that termination pay,
severance pay and other wages have to be paid within 30 days of termination.
We are aligning this provision with another section of the code to ensure
that everyone is clear on when vacation pay must be paid. That is clause 219
on page 236 amending section 188.
I will now turn to clauses 220, 221 and 222, which deal with holiday pay
calculation and entitlement under the code. Currently, Part 3 provides
employees with up to nine general holidays per year, each of which must
normally be remunerated by the employer. However, there are some
difficulties with the current provisions in terms of the calculation of
holiday pay because the rules vary depending on whether the employee is paid
on a monthly, weekly, hourly or daily basis, whether the hours of work vary,
and whether the employee is paid on commission or a mileage basis, et
cetera. The rules are extremely complex and difficult to administer because
it is hard to know who is entitled to what formula for the calculation of
The second problem is that there are some eligibility requirements under
the code that tend to disadvantage certain groups of employees. Currently,
to qualify for holiday pay employees must have been employed for at least 30
days but they must also have earned wages for at least 15 days in the 30-day
period preceding the general holiday.
This amendment would simplify the calculation. The proposal is to use the
formula that currently exists under Quebec's act respecting labour
standards. This is found in clause 221 on page 237 explaining how holiday
pay is to be calculated. For most employees, the amount would be equivalent
to one-twentieth of wages earned in the four-week period preceding the week
in which the holiday occurs.
Because of the nature of their work, the earnings of commission-paid
employees tend to fluctuate over a period of time and they would be entitled
to one-sixtieth of the wages earned in the 12-week period preceding the week
of the holiday, to the extent that they have been employed for at least 12
weeks. If they have been employed for less than 12 weeks, they would be
covered by the general formula, that is, one-twentieth over a four-week
period. That is clause 221, amended section 196.
Eligibility requirements are explained a bit under section 196 as well as
in later sections. We propose to simplify those. The bill proposes to keep
the current requirement that employees have been employed for at least 30
days but would remove the obligation to have earned wages in the 30 days
preceding the holiday. The purpose of that is to extend holiday pay to
employees who were previously excluded.
The code as currently drafted provides some exceptions to that
eligibility requirement, which make it even more complicated to administer.
Some employees have not earned wages over a 15-day period but still qualify
for a prorated amount. We are changing that to make everyone entitled to the
same thing. Holiday pay will be prorated.
A key question is how that will advantage or disadvantage employees. The
changes will mean that more employees are entitled to holiday pay under the
code, but the prorating of the formula may have some impact on the actual
amount of pay that employees will receive. Employees who are employed full
time, five days per week on a regular schedule should see no changes.
Employees who were previously excluded from holiday pay will now be entitled
to a prorated amount, which is certainly a gain for them, but with the
prorating, certain employees who would have qualified for holiday pay under
the current system will get slightly less.
Further to that, in terms of holiday pay, section 196, as described,
provides these requirements. There are also some language changes. Usually
this is to make the language gender-neutral. There are no changes whatsoever
in terms of calculating the amount to which employees are entitled for
working on a general holiday. The amendments to section 197 are mainly meant
to ensure that everything is lined up properly with the new definitions.
The same is true for clause 222 on page 238. Section 199 provides the
specific provisions for holiday work for managers and professionals. There
are no changes there, just wording issues being corrected.
Section 200 clarifies that holiday pay is deemed to be wages, something
that was already in the code.
Section 201 is an addition which specifies that when determining
eligibility requirement for employees who have been employed for at least 30
days, service with two employers where there has been a sale or transfer of
business will be deemed to be service with a single employer. In other
words, if an employee has already been employed for more than 30 days but
the business has been sold to a new employer, the employee would be deemed
to qualify for holiday pay. This is just an additional clarification to
ensure that employees do not lose entitlement to holiday pay as a result of
a transfer of business.
A second key change that these amendments make is establishing a
statutory complaint mechanism for most complaints under the code. Currently,
complaints for unjust dismissal are covered under section 240 of the code,
which provides an actual complaint mechanism. It specifies when a complaint
can be launched, how it can be accepted, how it is dealt with, et cetera.
For everything else under the code, the legislation does not specify
anything. It does not specify how a complaint is to be made, how it is to be
treated, et cetera. Therefore, as a result, over the years we have had to
use policies to determine under what circumstances complaints will be
accepted, et cetera.
That has proved to be a problem, in part because the current policy has
no legal weight, so it can be challenged, and it also lacks some clarity for
employees. These amendments will establish a statutory complaint mechanism
for all complaints not related to unjust dismissals. That includes wage
complaints, complaints for not having been given an unpaid leave and any
other complaints that could fall under the code.
In terms of what the statutory complaint mechanism will establish here, I
will move directly into the clause by clause on page 239, starting with
clause 223. These provisions establish the complaint mechanism. They specify
that basically any violation of the code can be the subject of a complaint,
other than something related to unjust dismissal. Again, that has been
The complaint mechanism will specify the time frame within which a
complaint must be launched, and it does specify that this has to be done
within six months from the last day on which the employer was required to
pay wages where it is related to a wage complaint, or in any other case six
months from the day on which the subject matter of the complaint arose.
Proposed subsection 251.01(3) lays out some exceptions to that rule. The
main one is that if an employee has launched a complaint to the wrong
government body, the complaint could be accepted or deemed to have been
filed on the day it was filed with the other body. Again, if it has been
launched with the provincial Ministry of Labour, the Canada Industrial
Relations Board, or the Canadian Human Rights Commission, if someone has
made an honest mistake, we want to ensure we are not penalizing them. Their
complaint would be deemed to be within the six-month time limit if it was
done or presented within that time frame to the other body.
There is also a "for greater certainty" provision under new subsection
251.01(5). We are now on page 240. This is just to specify that those
complaints that could not have been launched because they had to be dealt
with under a grievance procedure would still have to be dealt with under a
grievance procedure. This is something that currently exists under
Moving on to proposed section 251.02, still on page 240, there would be a
provision allowing inspectors to suspend a complaint for a certain period of
time. This is for those circumstances where somebody launches a complaint
but either information may be missing as part of the complaint or the
inspector would expect the employee to take certain steps to allow the
complaint to be promptly investigated. This is just to allow the complaint
to be deemed to have been timely — to have been filed within six months —
but to be suspended until the employee does what needs to be done to ensure
that the complaint can be dealt with.
Again, this may be providing additional information in the complaint form
that was missing. It might sometimes be even just talking to the employer;
sometimes we have complaints that have been filed by employees who have not
even contacted their employer yet to see whether an error had been made and
could be corrected. Again, it is just to ensure everything has been done
properly so that we investigate the complaints in a timely manner.
Proposed section 251.03 would be a new provision allowing inspectors to
assist parties in reaching a settlement. Again, this is something very
similar to what we have currently with respect to the complaint mechanism
for unjust dismissal complaints. The idea is that sometimes parties may
agree on a settlement, and this is to allow inspectors to assist them to do
that. By having that provision, we are ensuring that inspectors will be
protected from personal liability in any help they provide.
Proposed section 251.04 provides that if there is a settlement regarding
the payment of wages, the amounts due can be paid to the minister and then
transferred or transmitted to the employee. Again, this is to ensure that
there is a process in place to expedite the process and ensure that
employees get their wages quickly.
There is a provision there that is, again, similar to what we have
elsewhere in the code to specify that no prosecution for failure to pay an
employee can be made without the minister's consent, if there has been a
Proposed section 251.05 on page 241 specifies the grounds under which a
complaint could be rejected by an inspector. In this case, I think it is
important to note that this is a situation where it may be rejected but it
will not necessarily be rejected in these cases. This section provides a
fairly fulsome list. I will not go into all of the details, but basically it
does provide that it can be rejected if the complaint is frivolous or
vexatious, if the complaint has been settled, if there are other means
available to the employee to resolve the subject matter of the complaint
that should be pursued, or if the subject matter of the complaint has been
adequately dealt with. Again, if the employee has gone to court to deal with
a particular subject matter and it has been dealt with by the court,
obviously we will not entertain that complaint or reassess after a court has
already made a decision.
It does specify that if an employee is covered or is subject to a
collective agreement that deals with the subject matter of the complaint and
provides basically an arbitration process, then the employee will be
expected to go through that particular grievance procedure to deal with the
Finally, if an inspector had suspended a complaint but the employee has
done nothing to deal with or make it possible to deal with the complaint, in
that case it could be simply rejected.
If there is a rejection, we are providing for a review mechanism in this
legislation. Again, that is just to ensure that there is no arbitrariness in
any rejection. It is that an employee whose complaint has been rejected can
ask for administrative review of that rejection. We are on page 242 now. The
subsequent proposed subsections simply specify how the review is to be
conducted and include a privative clause so that people do not go to court
all the time to challenge the results of the review.
That brings us to clause 224. This is the third broad series of changes
we are making under this legislation, and this is to specify the limits on
the period that can be covered by the payment order. Under the code
currently, where an inspector finds that an employer has not paid wages to
an employee, and these wages are due, the inspector can issue what we call a
payment order, which is an order to pay the amounts set out in the actual
If the inspector finds that there are no wages owed, a notice of unfound
complaint will be issued. Currently there is no statutory limit on the
period of time that can be covered by a payment order, and that has proved
to be a bit of a problem. We have set down some limits through policies, but
these do not have any legal weight. The purpose of these amendments is to
clarify the period that can be covered by a payment order. It is being
specified here that this could be a 12-month period from the date of the
complaint or, where the employee's employment has ended prior to the
complaint, 12 months from the date that the employment was terminated.
Clause 224 on page 242 does that by specifying the time limit for the
It also clarifies under subsection 2 when a complaint will be deemed to
be unfounded. Again, it just clarifies that if an inspector looks at
records, does the inspection and investigation and finds that no wages were
owed in the six- month period prior to the complaint, in that case it will
be deemed to be found an unfounded complaint. It would fall outside of the
six-month time frame for filing the complaint, anyways.
This brings us to the fourth item, which is quite related. Under the code
right now where a payment order or notice of unfounded complaint has been
issued, an employee or employer, or where the payment order affects a
corporate director, the corporate director can ask to have the payment order
or notice appealed before an outside wage referee. This process can take
quite a bit of time and can be somewhat expensive. Therefore, it is being
proposed in the bill right now to provide for an administrative review
mechanism that would be the intervening step. Therefore, before going before
a wage referee, the issue could be dealt with more expeditiously through an
administrative review. This is what on page 243 the new section 251.101
would be dealing with. Again, that is ensuring that there is an internal
review mechanism and that this would be able to deal with mostly factual
issues and all issues related to the payment order or the notice of
Now, for this particular review, given that there may be very technical
or complex legal cases, the minister would still have the flexibility to
send a request for review directly before a wage referee. That is what
subsection 7 deals with under this particular mechanism.
Again, this does not preclude going before a wage referee, but it would
certainly limit the number of cases that go before one. The new 251.11, on
page 244, specifies the grounds under which a case that has been reviewed
through the administrative review mechanism can be appealed before a wage
referee, and this would be limited to cases where there are issues of law or
jurisdiction. That is what 251.11 deals with.
Clause 226 simply adjusts the language in the current section 251.12, and
this is to encompass the new administrative review mechanism just to ensure
that everything is lined up properly.
The following provisions on page 245, clause 227, specify that where
monies have been deposited with the Minister of Labour, the minister can
basically issue these amounts to any person to whom they are due. Under the
current provision, this can be provided only to employees. If employers have
deposited money, they can be reimbursed only if it goes before a wage
referee. This is being clarified so that if no wages are owed, they can get
the amounts back.
Clause 228 looks at the enforcement of payment orders and specifies some
conditions for the payment order to be filed in court to be enforced. It
clarifies that if a payment order is still subject to a review or an appeal
or if the payment order is to be superseded by a decision of a wage referee,
it cannot be filed for enforcement. Again, just logically speaking, these
would not have any legal weight.
There are some minor adjustments to regulation-making powers. Again, this
is just to specify additional circumstances under which a complaint that has
been filed more than six months after the event can still be accepted. This
provides a bit of flexibility. There are some transitional provisions that
mean that any complaints, wage payment orders or basically anything that
happened before these provisions come into force will be treated under the
old rules as opposed to the new provisions.
The coming-into-force provisions at the very end, clause 232, clarify
that these provisions can come into force on different dates and, therefore,
it is possible that the changes-to-holiday-pay calculation may come into
force, for example, before the new administrative review mechanism for
That concludes the clause by clause.
The Chair: Thank you very much, Mr. Rochon. Do you have the Canada
Labour Code here with you?
Mr. Rochon: I have a copy, yes.
The Chair: I am looking at page 245 and the amendment to section
264 of the act, so that would presumably be the existing act that is
amended. This is a regulatory —
Mr. Rochon: There are actually different regulation-making powers
under different divisions, but that is the general provision that applies to
the whole of Part 3.
The Chair: How does it begin? "The minister shall have . . ."
Mr. Rochon: Let me read that to you. This is basically
regulation-making powers for the Governor-in-Council, just to be clear.
The Chair: Yes, okay.
Mr. Rochon: It reads: "The Governor-in-Council may make
regulations for carrying out the purposes of this part and, without
restricting the generality of the foregoing, may make regulations . . ."
and here we have a full list: for example, requiring employers to keep
records, designating any branches, undertakings, et cetera, as establishment
for the purposes of the part. There is a fairly long list of issues there.
We are basically amending 264 just to clarify a regulation making power
that appears earlier in the bill. This is just to make it absolutely clear
that, yes, the Governor-in-Council could specify additional circumstances
under which complaints can be accepted after the six-month time frame.
The Chair: Okay. If there were nothing in there, it would be nice
to know that there would be coming, in regulations, some stipulated method
Mr. Rochon: At the moment, no regulations are expected. However,
the reason that this has been put in the bill is to give some flexibility in
case something should come up in the future. There may be some things that
we have not foreseen and that need to be properly taken into account, and,
again, this gives us that flexibility.
The Chair: Hence the use of the word "may."
Mr. Rochon: Exactly.
The Chair: I understand that now, thank you.
Now, on page 239, the inspector is obviously an office that is in
Mr. Rochon: Yes, it is.
The Chair: You are using that same position.
Mr. Rochon: Absolutely.
The Chair: It would be quite important for the employee to have
confidence in the inspector process. Could you tell us who the inspector is,
who fills that office?
Mr. Rochon: Okay. Basically, there are actually inspectors across
the country. There are several dozen inspectors. Policies and guidelines
will need to be set out. We are not expecting inspectors to just go ahead
and make any decisions they feel like. There will be guidelines so that
there is some consistency, of course, in terms of decision making across the
The other thing, as mentioned, is that, in terms of the rejection of
complaints, we are providing for an administrative review mechanism to
ensure that any employee who feels that the inspector has wrongly dismissed
the complaint can have a second opinion. Again, this would be at a more
senior level and will ensure that there is consistency in terms of decisions
across the board so that people are not disadvantaged through that.
The Chair: My first question was getting at the importance of the
inspectors' appearing to have an independence and an ability to deal with
this in a fair and independent manner. You have convinced us, I think, that
these individuals, across Canada, are qualified to do this.
Mr. Rochon: Oh, they are, indeed. They are trained for this. The
actual powers of inspectors are already set out in the code. We are not
amending those, so they do not appear in the bill, obviously. These are
qualified individuals. Obviously, some changes are being made to the code,
so everybody will have to be trained appropriately and guidelines will have
to be set out.
The Chair: Are they legally trained?
Mr. Rochon: Again, I am not the one carrying out the training, but
they are trained to understand the provisions of the code. Whenever there
are changes, they are trained so that they know exactly what the changes are
so that they can actually enforce them properly.
The Chair: Okay. Mr. Rochon, the only other point I have is at the
bottom of page 241. This is the point that you were just talking about, this
administrative review. If the employee is not happy with the outcome and the
decision on the complaint by the inspector, you provide in sub 3, at the
bottom, a new process.
Mr. Rochon: Indeed.
The Chair: That new process requires that the employee make the
request in writing.
Mr. Rochon: Yes.
The Chair: That I understand. They would make an application for
review in writing. What I do not understand is "with reasons." How does
the employee know what reasons would be acceptable for a review?
Mr. Rochon: First of all, I think that it is important to clarify
that where there is a rejection of a complaint, the reasons have to be
provided in writing to the employee so that the employee would understand
why it has been rejected.
The Chair: Yes.
Mr. Rochon: We would expect the employee to basically state, in
the application, why there is perhaps a disagreement with the reasons that
were issued. Again, if the complaint has been rejected because, let us say,
it had been settled, the employee could respond to say, "No, there was
never any settlement, or, if there was a settlement, it was under duress"
or whatever the reasons may be. Therefore, we can at least look at that
particular issue. Again, we are expecting that employees will provide at
least an explanation as to why they disagree with the initial assessment.
The Chair: You outlined half a page of how the complaint could be
rejected. You are saying nothing about the reasons. What I am worried about
is that this might be a false provision from the point of view of protecting
the employee because there is no definition of what reasons would be
Mr. Rochon: All of the reasons are specified. Either the complaint
is not within the jurisdiction of the inspector or the complaint is
The Chair: I am sorry but I am talking about the second last line.
Proposed section 251.05(3) states:
The employee may, within 15 days after the day on which the employee
is notified of the rejection, request in writing, with reasons, that the
Minister review the inspector's decision.
I understand this to say that the employee is notified of the rejection
and requests in writing, with reasons, that the minister reviews the
decision. The employee puts in a request for a review with certain reasons,
which could be a barrier to his request for a review being dealt with
because you or someone in the ministry may decide that the reasons are not
Mr. Rochon: It is important to note that the requirement is to
provide something in writing, and there would have to be some kind of
justification. However, there is no process for rejecting a review on the
basis that someone does not like the reasons that have been provided. If an
employee were to state, "I disagree with the decision of the inspector. The
inspector said that this was a frivolous complaint, but this was not a
frivolous complaint," it would probably be deemed sufficient to be looked
The process will be to determine the review. At that point, if the
complaint has merit or if the complaint should not have been rejected on any
of these grounds, the person doing the review will be able to assess that.
To be clear, with this particular language, we are trying to avoid
situations where somebody will simply say "I wish to have a review of a
decision" without stating why.
The Chair: They might not like the decision and think the
inspector was wrong. Is that reason enough?
Mr. Rochon: The person would have to say, "The inspector was
wrong," and provide a couple of lines to state why the complaint should
have been accepted right off the bat — provide some explanation.
The Chair: We are back to the letter to the employee saying, "You
should have given us a couple more lines; therefore, your request for a
review is denied."
Mr. Rochon: These are good questions, by the way.
The Chair: I am thinking from the point of view of the employee.
Mr. Rochon: Absolutely.
The Chair: You are saying that we are creating a wonderful new
review mechanism for them, but then you put in the words "with reasons"
without saying which reasons.
Mr. Rochon: We are not going to reject —
The Chair: Why put the words in there if you are not going to
Mr. Rochon: There could be a rejection or we could ask the
employee for further information in writing once we get the request. If the
employee were to say, "I wish to have that decision reviewed," we would
expect the employee to explain to us the nature of the complaint and, if it
has been deemed frivolous or outside jurisdiction, to explain why the
employee is under our jurisdiction or why this is a substantive complaint.
With that, we would be able to move forward with the review.
It is important to emphasize that the purpose of this is to give us as
much information as needed so that we can proceed expeditiously. This is not
to block requests for review. If something is provided in writing to
indicate at least the nature of the issue, it will be deemed sufficient to
go to review.
The Chair: I will not prolong this discussion because you and I do
not agree on this, obviously. I am trying to point out that you have "in
writing" in the bill, but you are proposing another qualifier. We have this
wonderful right to ask in writing with reasons for a review from an
inspector but you do not define the reasons. We are talking about employees
who are not sophisticated in the law and probably not represented by
lawyers. However, they may be very sophisticated in other things and when
they read "with reasons," it takes away, in my view, something that is a
good addition by putting a limit on it.
Senators, does anything flow from that discussion? If there is nothing
further, I thank Mr. Rochon for doing a fine job of helping us through the
various proposed amendments to the Canada Labour Code. We look forward to
seeing how these will be implemented over time.
Mr. Rochon: Thank you very much.
The Chair: That concludes our hearing for this morning. We will
convene at 1 p.m. tomorrow, when we will proceed with Division 11 and the
Merchant Seaman Compensation Act. You can brush up on that information
overnight. Thank you.