Law Times

Law TiMes • March 21, 2011 FOCUS PAGE 15 panies undertake a restruc- turing process, they face new rules around employee-related claims. Some of the changes to the Companies' Creditors Arrange- ment Act address issues related to employees. Accordingly, Lily Harmer, a partner at Paliare Ro- land Rosenberg Rothstein LLP, and Allan Nackan, a partner at Farber Financial Group, deliv- ered a presentation on Feb. 4 at an Ontario Bar Association program on strategies for deal- ing with employee claims dur- ing restructuring proceedings. Th ey both found that law- yers who attended had a tre- mendously positive response to their presentation. "It's an interesting topic, and lawyers are always interested in this issue," says Harmer. "It's an important area that isn't given enough consideration." Th e recent amendments to the CCAA aimed to ensure there's a protocol for the treat- ment of employees. "If the company goes bankrupt, they might get a greater payout un- der the Wage Earner Protec- tion Program than they would get after the approval of a plan in court," says Nackan. But, he adds, "Th e govern- ment, in one of their budgets, expanded the scope of the Wage Earner Protection Pro- gram but they didn't make any equivalent change to the [Bankruptcy and Insolvency Act], although I'm sure it's un- intended." In their presentation, the pair addressed issues related to both unionized and non- unionized companies. In some situations, unions can be very savvy and sophisticated in their approach to a restructur- ing while accommodating the company in an eff ort to help save it. "In the Stelco insolven- cy a few years ago, it was ulti- mately the union that brought the successful bidder to the table, so it really depends on the union," says Harmer. "But it's fair to say that most fi nan- cial creditors like banks aren't happy when they hear that a union is involved because they can be helpful or not helpful depending on the tactic they take even though the union is almost always interested in the preservation of the business." In one situation Harmer was involved in, the union agreed to draft a new collec- tive agreement that would help save the company's fi nan- cial viability. Nackan, meanwhile, af- fi rms that not all creditors will be enthused about a union's involvement. "It defi nitely changes the dynamic when a union is involved and it can be either positive or negative depending on the union," he says. Restructurings complicated by employee issues R BY DARYL-LYNN CARLSON For Law Times ecent amendments to bankruptcy legislation mean that when com- For his part, Nackan has been involved with restructur- ings that turned bad. "We've had situations where people have chained themselves to the machinery at the loading dock because there was a truck pulling up to haul the machin- ery away," he says. Yet many judges have shown empathy for the employees in- volved. "Very often, we're in court and the judge is very con- cerned about how the employ- ees are being treated," Nackan notes. "Judges often recognize employee issues, particularly in towns where there is a big- industry employer, and the judge will make sure the em- ployee interests are taken into account in the broader context of the community's interests," Harmer says. Probably the most visible current court battle involving employees is the Nortel Net- works Corp. matter. In that case, a group of dissident long-term disability employees is taking its fi ght to the Supreme Court of Canada. "It's truly a global enterprise and it's complicated enough when you're just in Canada," says Nackan. "Th e complexi- ties are immense." In an accompanying paper, the pair outline an approach to eff ectively representing may be employee groups who wish to have separate represen- tation from either their union or from [representative] coun- sel for the majority." As a result, there can be confl icting interests. Neverthe- less, the pair note that some unions have become increas- ingly sophisticated in their in- volvement with restructurings employees in a bankruptcy and restructuring proceeding. "Representation of employee interests may come in diff erent forms," they wrote. "First, there may very well be one or more unions with exclusive bargain- ing rights for their members. Second, representative counsel orders for non-union employ- ees have been used increasingly in CCAA cases. Th ird, there and that courts have endorsed union participation as an es- sential component of the pro- ceedings. "Th is requires other credi- tors to take unions and their demands seriously, particularly if the insolvency is to succeed in preserving an ongoing busi- ness in some form," they wrote. "Sometimes unions are in a position to strike if a collective agreement expires during an insolvency or perhaps if a no- tice to bargain is served pursu- ant to section 65.12 of the BIA or section 33 of the CCAA. "Th is can either give the union additional bargaining power if an ongoing business is part of the plan and labour is essential to that ongoing busi- ness or result in labour chaos. Judges often recognize employee issues, particularly in towns where there is a big-industry employer, and the judge will make sure the employee interests are taken into account in the broader context of the community's interests. Either way, from a practical perspective, such issues must be adequately recognized and addressed." Ultimately, they point out: "Th ere is clearly a lot going on in relation to employee claims in restructuring proceedings. An aging population suggests that pension issues are sure to maintain prominence for some time." Bankruptcy in Canada Fourth Edition The most authoritative statement of the law since 1922 Substantially revised and rewritten by two leading practitioners, this fourth edition is of benefit to civil and common law practitioners. It offers a concise, comprehensive description of bankruptcy in general, and the distinctive features of the Canadian system in particular. 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Prices subject to change without notice, to applicable taxes and shipping & handling. Honsberger_Bankruptcy in Canada (LT 1-2x4).indd 1 www.lawtimesnews.com LT0322 3/16/10 3:57:48 PM John D. Honsb erg er, Q.C. and Vern W. DaRe Bankru of Debts Regulat ptcy and Ins olve Bankru nc ions y General ptcy and Rule Ins s olve Ord nc y Act, erly Payment

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