Proceedings of the Standing Senate Committee on
National Finance

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, 2012.

Senator Joseph A. Day (Chair) in the chair.

[English]

The Chair: I call this meeting of the Standing Senate Committee on National Finance to order.

[Translation]

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 measures.

[English]

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 weeks' time.

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 bill.

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, sir.

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 familiar with.

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 of Transport.

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 international community.

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 shipowner?

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 certificate?

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 incorporated?

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 Manitoba.

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 the services.

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 the names?

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 time.

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 that.

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 vessels slowly.

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 internationally.

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 question?

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.

[Translation]

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.

[English]

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, would you?

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 completely separate.

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 Committee.

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 today.

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 subparagraph.

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 small clarifications.

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 provision.

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 things.

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 the CPP.

These are all our amendments. We are open to any questions you might have.

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 here.

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 changes.

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.

[Translation]

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 blocks?

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 benefits.

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 self-employed.

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 out?

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 really was.

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 decision possible.

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 scenarios?

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 stated?

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.

[English]

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 be $11,840.

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 possible level.

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 this?

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 groups consulted?

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 on that.

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 regulation.

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 answer.

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 it not?

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 amendment.

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 years?

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 necessary.

Senator Finley: You are not mandated by the ministry of finance or anything else?

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 discretion?

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 think?

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 that time.

[Translation]

Senator Chaput: Let me go back to the new term "substantially gainful occupation".

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 department?

[English]

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 positive thing.

[Translation]

Senator Chaput: The definition that you just explained to me has not been fully developed yet. It is not written; it is being discussed.

[English]

Ms. Iwankow: That is right.

[Translation]

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?

[English]

Ms. Iwankow: My understanding is that this is generally treated by other jurisdictions in regulation.

[Translation]

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 include consultations?

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 required.

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.

[English]

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 definition.

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. Crosby?

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 Judges Act.

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 Canada.

Colleagues, we will now go to Division 10, clauses 210 to 218, the Canada Labour Code.

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?

[Translation]

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.

[English]

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 holiday pay.

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 explained.

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 subsection 168(1.1).

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 settlement.

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 issues.

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 order.

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 payment order.

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 unfounded complaint.

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 payment orders.

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 for proceeding.

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 existence now?

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 board.

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 acceptable.

Mr. Rochon: All of the reasons are specified. Either the complaint is not within the jurisdiction of the inspector or the complaint is frivolous.

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 sufficient.

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 at.

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 reject?

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.

(The committee adjourned.)