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Third reading of Bill C-377, An Act to amend the Income Tax Act (requirements for labour organizations)

Third reading of Bill C-377, An Act to amend the Income Tax Act (requirements for labour organizations)

Third reading of Bill C-377, An Act to amend the Income Tax Act (requirements for labour organizations)

Third reading of Bill C-377, An Act to amend the Income Tax Act (requirements for labour organizations)

Published on 16 June 2015
Hansard and Statements by Senator James Cowan (retired)

Hon. James S. Cowan (Leader of the Opposition):

Honourable senators, seven months ago, when I rose on November 4, 2014 to speak at second reading of Bill C-377, I began by saying, “This is a debate I had hoped we had seen the last of.” I know that is a sentiment shared by many in this chamber, on both sides of the aisle. This is a bill that is poorly drafted, would violate the privacy of potentially millions of Canadians, would set back labour relations across the country and is very probably unconstitutional, both in violation of the division of powers and the Charter. Moreover, the governments of six provinces, representing 70 per cent of the population of this country, have asked us in the strongest possible words to not pass this bill.

Let me quickly remind honourable colleagues, and the many, many Canadians who are following this debate, of the history of this bill.

Bill C-377 is a private member’s bill that was tabled in the other place by Mr. Russ Hiebert on December 5, 2011. Its provisions are without precedent in Canadian law. Meanwhile, because it is a private member’s bill, it did not receive any constitutional vetting by the Minister of Justice or the constitutional experts in his department. It also did not benefit from the legislative drafting expertise of the Justice Department. And then, also because it is a private member’s bill, under the rules of the other place, it received very limited scrutiny in debate there.

The bill passed the other place with a number of amendments that were put forward by the sponsor at report stage and quite literally were not debated at all.

One could say this was a perfect storm.

It arrived here on December 13, 2012. And as a chamber, we did our job of “sober second thought.” First, we had a serious, substantive debate at second reading. A number of senators on both sides of the chamber took part, analyzing the bill and raising very serious, substantive issues with the bill, in particular questioning its constitutionality, implications for fundamental privacy rights, impact on labour relations in this country, and pointing out numerous serious problems with the drafting of the bill, including the amendments passed in such a hurry in the other place.

The bill then went before our Banking, Trade and Commerce Committee, which heard 44 witnesses over three weeks of hearings. These were serious hearings, colleagues. Witnesses were given an opportunity to fully state their positions and raise their concerns with the bill. Senators had an opportunity to engage with the witnesses, probing the issues raised. No one was cut off. Canadians who came before the committee left satisfied that they had been afforded a true opportunity to be heard.

And then, the members of the committee met to discuss the evidence they had heard and what they wanted to report back to this chamber. Let me read to you the observations that the members of the committee appended to their report to this chamber. And remember colleagues, this bill, which is before us now, is exactly the same bill that was before our Banking, Trade and Commerce Committee and on which they made these observations. This is what the committee said:

While the Committee is reporting Bill C-377 without amendment, it wishes to observe that after three weeks of study — hearing from forty-four witnesses and receiving numerous submissions from governments, labour unions, academics, professional associations and others — the vast majority of testimony and submissions raised serious concerns about this legislation.

Principal among these concerns was the constitutional validity of the legislation both with respect to the division of powers and the Charter. Other issues raised include the protection of personal information, the cost and need for greater transparency, and the vagueness as to whom this legislation would apply.

The Committee shares these concerns.

The Committee did not offer any amendments because these substantial issues are best debated by the Senate as a whole.

This chamber then debated the bill at third reading. Again, it was a serious, substantive debate, with excellent speeches from both sides of the chamber. Amendments were put forward by colleagues on both sides of the chamber. And in the end, in a powerful demonstration of bipartisanship, we voted to amend the bill.

That was a proud moment for the Senate. We set aside our partisan differences and did what the Senate is supposed to do — after having examined the bill, listening to witnesses, testing the concerns raised in the committee and then in this chamber, we agreed to amend the bill.

The then sponsor of the bill in the Senate, Senator Eaton, applauded our actions. In a speech last year, on March 26, 2014, speaking about the critical role of the Senate as an independent chamber of sober second thought — this was on one of the excellent inquiries into the role of the Senate launched by our late Speaker, Senator Nolin — Senator Eaton said:

We should not, must not, and cannot allow ourselves to become a rubber stamp of the House of Commons. We’ve seen the tacit indignation that can arise when, as a chamber, we choose to exercise our prerogative and push back proposed legislation.

We saw it first-hand last year with respect to our deliberations around Bill C-377, a private member’s bill about union transparency. The other place had reported and passed the bill without amendment. However, our study of its provisions concluded that there were serious concerns over the constitutional validity of the proposed legislation both with respect to the division of powers and the Charter. Other issues raised include the protection of personal information, the cost and need for greater transparency, and the vagueness as to whom this legislation would apply.

In light of those concerns and the consideration they were given here in this place, we did not pass the legislation. It was sent back to the other chamber, and rightfully so.

Colleagues, the other place never had an opportunity to consider our amendments. Prime Minister Harper prorogued Parliament and we found ourselves back at square one, so to speak. It was as though our extensive committee hearings, debates and amendments had never happened. We began afresh.

But of course, as we were reminded by our former colleague Senator Segal, who so strongly and eloquently opposed the bill on principle, the bill was the same bad bill it had been when we examined it before. In his words, Bill C-377 was:

. . . badly drafted legislation, flawed, unconstitutional and technically incompetent when it was amended last time. Unamended, it has not now become perfect simply because one senator retired to do other things.

As was often the case, Senator Segal got it exactly right. The bill had not changed; it was the exact same one that our committee had found to be so deeply flawed — conclusions shared by this chamber when we voted substantial amendments to the bill.

Given this, I thought the correct course of action following Parliament’s return after prorogation would have been to pass the same amendments we had passed in June 2013, so that the elected members of the other place would have an opportunity to consider our amendments — our best advice — and then either agree or disagree, to some or all.

I still believe that the elected members deserve the opportunity to consider our previous amendments in light of the evidence we heard and our extensive debates on the bill. That of course did not happen. Instead, we referred the bill to our Legal and Constitutional Affairs Committee.

Given the extensive evidence that had been heard last time, the committee chose to proceed with only a very few meetings — three — and scheduled them to hear very quickly from those witnesses that were called. I won’t pretend that I agreed with that approach. We subsequently learned that 75 organizations and 249 individuals formally requested to be heard by the Legal and Constitutional Affairs Committee and had their requests denied. One of those organizations was the Canadian Union of Public Employees, or CUPE.

CUPE is the largest union in the country, representing over 600,000 Canadians. What makes the decision to exclude CUPE even more difficult to understand is that the committee did agree to hear from one individual, Mr. Marc Roumy, a flight attendant, who made a number of allegations about problems he has had with CUPE. Mr. Roumy had also appeared before the Banking Committee in 2013.

CUPE itself asked repeatedly for the right to appear before our Legal and Constitutional Affairs Committee. Their request was denied. In other words, colleagues, our committee heard one side, from one individual, while denying CUPE what I would have thought was a basic right to appear and present its side. So one disgruntled individual was heard, while 600,000 Canadians were denied the right to have their representative heard by our committee.

The truncated hearings also meant that there were a number of critically important issues on which committee members were not able to hear witnesses. For those witnesses who were allowed to appear, I was disappointed to see that, to meet the committee’s self-imposed timetable, witnesses — even provincial cabinet ministers and the Privacy Commissioner of Canada — were restricted to five-minute presentations and invited only to appear on crowded panels. Indeed, witnesses were literally cut off mid-sentence, something that happens in the House of Commons, but not here in the Senate.

Colleagues, providing a venue for Canadians to be heard on Parliament Hill has always been a point of pride for the Senate. Witnesses whose requests are denied in committee in the other place know that they will be assured of a meaningful voice here. That has been a fundamental and critical part of our chamber’s sober second thought, a principle upheld here for decades, part of the “value added” of the Senate, to which many of us have pointed with pride. So, it’s deeply disturbing that our Legal and Constitutional Affairs Committee denied so many Canadians the right to be heard on a bill that will have a profound effect on their lives.

But, as the other side reminded us, we all have the extensive testimony heard by our Banking Committee. That is part of the record before this chamber as we debate what to do with this bill. There were many, many very serious submissions from many concerned, informed Canadians and organizations, which are available to all of us.

So, colleagues, why are so many Canadians so deeply concerned about this bill? The bill imposes extraordinary disclosure obligations on so-called “labour organizations” and “labour trusts.” Quite simply, there is no precedent anywhere in our statute books for the kind of disclosure obligations that this bill will impose.

It would require public filing, on the Internet for the world to see, of statements of all transactions and all disbursements for which the cumulative value is over $5,000, along with the name of the payer and payee, its purpose and description, and the specific amount paid or received.

It would require public filing, again on the Internet for the world to see, of disbursements to officers, directors and trustees, to employees who earn more than $100,000, and — this is a separate group:

. . . to persons in positions of authority who would reasonably be expected to have, in the ordinary course, access to material information about the business, operations, assets or revenue of the labour organization or labour trust. . .

The paragraph expands on what is to be posted on the Internet for all of those individuals, stipulating that it is to include gross salary, stipends and benefits, including pension obligations, bonuses, gifts, among other things.

So, colleagues, a shop steward in a union shop in a small community, even though she may earn substantially less than $100,000, may nevertheless qualify as “a person in position of authority” and therefore have her gross salary, pension benefits and any other payment disclosed to her relatives, neighbours and the entire community, just because she works for a labour organization or labour trust.

Mr. Russ Hiebert, the sponsor of the bill in the other place, claimed that, because these private organizations benefit from taxpayer-supported deductions under the Income Tax Act, taxpayers are entitled to know how their taxpayer-subsidized dollars are being used.

But, colleagues, public servants who work for the federal government are not required to have their salaries posted on the Internet, and their salaries are completely and directly paid by taxpayer dollars. Staff who work for the Prime Minister, paid for by taxpayers, are allowed to keep their salaries private.

In fact, a question was placed on the Order Paper in the other place asking how many staff in the Prime Minister’s Office earned salaries over $150,000 annually, over $200,000, over $250,000 and over $300,000. It also asked about bonuses paid to those staff. The question didn’t ask for names or individual salaries, just how many staff were in each category, significantly less information than is being asked for in Bill C-377. The Parliamentary Secretary to the Prime Minister, Mr. Calandra, tabled the following response on March 6, 2014:

Mr. Speaker, in processing parliamentary returns, the government applies the Privacy Act and the principles set out in the Access to Information Act, and the information requested has been withheld on the grounds that the information constitutes personal information.

So, it’s personal information that must be kept private if you work for the Prime Minister, but if you’re an ordinary Canadian who happens to work for a labour organization or a labour trust, no privacy for you. Instead, it will go up on the Internet, where anyone, anywhere in the world, with Internet access, can see it.

There’s a long, troubling list of disclosure requirements set out in the bill. I and others have spoken previously about them, and I hope we have an opportunity to explore some of them in the course of this debate, but I want to focus my remarks on just a few.

First is the issue of third-party contracts, where there is a general obligation to “disclose all transactions and disbursements” where the cumulative value is over $5,000. Those transactions and disbursements must be disclosed as separate entries, with the name of the payer and payee, the details of the purpose, description and specific amount that was paid or received.

Colleagues, this means every contract by every union local across the country — whether with a photocopying company, a cleaning service, coffee supply company — will have to be disclosed and posted on the Internet. Imagine how those businesses will feel about that, having the terms of their contracts known to their competitors, without having access to their competitors’ corresponding terms, just because they happen to be providing services to a labour organization or labour trust.

Colleagues, is this the government’s plan to encourage a flourishing private sector economy, to build jobs and to help small businesses to thrive and grow? To force some but not all of those businesses to post their competitive information on the Internet?

Canada has spent decades building a reputation as a good place to do business. We understand that, for the free market to thrive, businesses need to know that there are strong laws protecting their confidential business information. Indeed, this information is protected from disclosure by governments under federal and provincial access to information laws. The federal Access to Information Act, the whole purpose of which is transparency and accountability — to ensure that Canadians have access to information about what their government is doing with their tax dollars — that act prohibits the government from disclosing “financial, commercial. . . information that is confidential information supplied to a government institution by a third party and is treated consistently in a confidential manner by the third party.”

So, once again, the federal government, that most public of all public institutions in this country, is prohibited from disclosing information that this bill would require private entities to disclose. I ask you again: What possible justification is there for that?

Make no mistake, business will see this for what it is — a danger sign that Canada cannot be trusted to protect confidential commercial information. This bill today is about targeting labour organizations, but who will be next, colleagues? What precedent would we be setting? What message would we be sending to private sector entrepreneurs, here at home and around the world, about Canada as a secure place to set up a business? Is that really what we want to do?

So, colleagues, contracts between a labour organization or a labour trust and third parties must have their particulars disclosed — but even that, anathema as it is to our sense of a fair and free market economy, is not all. One of the amendments passed so quickly in the other place provided the following:

For greater certainty, a disbursement referred to in any of the subparagraphs (3)(b)(viii) to (xx) includes a disbursement made through a third party or contractor.

Colleagues, this seemingly innocuous amendment in fact arguably opens up a huge swath of the bill’s reporting obligations to the third parties or contractors themselves — not just about the contract with the labour organization or labour trust, but about the third party’s or contractor’s own activities.

For example, one very troubling obligation requires reports on certain persons’ political activities. The people at issue are the same ones I listed earlier — officers, directors, trustees; employees earning more than $100,000; and that vaguely worded category of “persons in position of authority.” As drafted, the bill asks for a statement of the percentage of time dedicated by each of these people on each of “political activities, lobbying activities and other non-labour relations activities.”

Colleagues, nothing in this section specifies that the relevant issue is time during the workday. In other words, this bill requires disclosure, and posting on the Internet, of how certain individuals spend their personal time, including how much of that personal time is spent on political activities.

This horrified many of us on the committee and horrified witnesses who appeared before us, including the Privacy Commissioner of Canada. Canada is a free and democratic country. What possible colour of right do we have to require someone to report publicly, on the Internet, about any political activities they engage in during their free time? Is there any pursuit that is more sacrosanct in a free democracy than the right to keep one’s political views and activities private? Yet this right is emphatically denied by Bill C-377, once again targeting anyone who rises to a position of authority in a labour organization or labour trust.

Why would we require someone to report publicly on their non-labour relations activities, including those activities outside of work hours? Cooking, cleaning the house, helping one’s kids with homework, talking with a neighbour, going to a church or a synagogue or a mosque — these are all non-labour relations activities and, as the bill is drafted, would appear to require public disclosure and posting on the Internet.

That sounds ridiculous because it is ridiculous — but that’s what the bill says.

I have said this before, but confidential information on the mandatory long-form census was deemed by the government to be an unacceptable intrusion into the privacy of Canadians, but public posting of how certain Canadians spend their free time is not?

Now, I am not sure this is what Mr. Hiebert had in mind when he drafted the bill, but that’s what the bill appears to require. Let there be no doubt: Anyone who stands and votes to pass this bill in this form is saying that they support imposing those requirements on certain of their fellow Canadians.

This bill also requires a statement of disbursements on political activities. Colleagues, as the Canadian Bar Association pointed out, when the other place amended the bill, it inserted the word “aggregate” in a number of these paragraphs. By basic rules of statutory interpretation, that means that those paragraphs without the word “aggregate” require itemized disclosure of each and every disbursement. The requirement to publish disbursements on political activities conspicuously does not have the word “aggregate.” So it requires itemized disclosure of each and every disbursement.

This brings me back to the amendment I quoted a moment ago, which requires disclosure — and again, on the Internet — of disbursements made through a third party or contractor. My colleague Senator Fraser asked Michael Mazzuca of the Canadian Bar Association about the implications of this. They used the example of people under contract to maintain a labour organization’s photocopier. Mr. Mazzuca confirmed that the bill would not only require disclosure of the terms of the photocopy maintenance contract, assuming it was over $5,000 for the period in question, but would also require public disclosure of the amount of time the photocopier technician — the third-party contractor — spends on political activities.

Multiply that by third-party contracts that the thousands of union locals across the country have, and you see what a monster this bill would be if it were unleashed.

By the way, “labour organization,” as defined in the bill, is much broader than traditional labour unions. Here is the definition contained in the bill:

“labour organization” includes a labour society and any organization formed for purposes which include the regulation of relations between employers and employees, and includes a duly organized group or federation, congress, labour council, joint council, conference, general committee or joint board of such organizations.

I repeat: “Any organization formed for purposes which include the regulation of relations between employers and employees . . . .” This would include many organizations that would not be considered to be traditional labour unions.

Doctors Nova Scotia is the professional association representing the majority of doctors in Nova Scotia. In fact, they are the oldest medical association in Canada. They filed a very compelling brief with the Legal and Constitutional Affairs Committee detailing how the definition of “labour organization” and the definition of “labour relations activities” combine to produce the very real possibility that Doctors Nova Scotia would be caught by the bill’s reporting obligations — this despite the fact that their physician members are independent contractors and not employees.

I won’t go through their analysis, but I commend their brief to you. Again, I think all of us would agree that this was never Mr. Hiebert’s intent. But if we pass the bill without amendment, that is what we’re agreeing to require. Doctors Nova Scotia correctly — indeed, it is an understatement — describe the reporting obligations of the bill as “onerous.” They describe how complying “will require a complete overhaul of the financial reporting” of their organization. And they go on:

To become compliant with the bill, DNS will have no choice but to shift valuable resources away from its health promotion mandates and into financial services — all because of a lack of clarity in Bill C-377 that has the potential to be interpreted overly broadly.

Is this what Canadians want their medical profession focused on in these times of budgetary constraints — not health care, but reporting details of contracts with photocopier companies and building maintenance companies?

In their brief, Doctors Nova Scotia also focused on the requirement in the bill that they provide an estimate of the time dedicated by each of their members to political activities, lobbying activities and other non-labour relations.

Colleagues, don’t we want an engaged medical profession — where doctors feel free to share the benefit of their knowledge and experience to inform Canadians and policy-makers on what will improve their health and well-being? And, of course, Doctors Nova Scotia didn’t even focus on the spider-like tentacles of the bill, requiring disclosure of disbursements on political activities by third parties and contractors with whom they deal.

There are many unintended and very problematic consequences of the bill as drafted, but in the interest of time I will focus on just one more: the provisions concerning labour trusts.

In brief, the reporting obligations of the bill don’t apply only to labour organizations but also to labour trusts. Here is the definition of “labour trusts” as set out in the bill:

“labour trust” means a trust or fund in which a labour organization has a legal, beneficial or financial interest or that is established or maintained in whole or in part for the benefit of a labour organization, its members or the persons it represents.

In other words, “labour trust” includes a fund that is established or maintained in whole or in part for the benefit of members of or persons represented by a labour organization.

A number of witnesses who testified and sent in submissions warned us of the implications of this definition. For example, this would impose a reporting obligation for retail mutual funds held in RRSPs, TFSAs or otherwise if even one person participating in the mutual fund is a member of a labour organization. Let me repeat that, because it is important: If even one person participating in a mutual fund, which could be in an RRSP or a TFSA, is a member of a labour organization, then the entire mutual fund becomes, by virtue of Bill C-377, a labour trust.

Of course, as I described earlier, the definition of “labour organization” is much broader than traditional labour unions. So identifying whether someone holding a share of a mutual fund is a member of a labour organization, you have to look much more broadly than just at traditional union members.

What does this mean? Let me read to you from the submission of the Canadian Life and Health Insurance Association, and this is consistent with what a number of financial institutions wrote to warn us:

In effect, if any union member purchases units of a retail mutual fund, that entire mutual fund would fall into the definition of labour trust, with all of the attendant reporting and disclosure obligations then applying to all individuals who purchase units of that mutual fund, regardless of any personal labour organization affiliation.

In other words, colleagues, if we pass this bill without amendment, we will be requiring every Canadian who owns a share in a mutual fund — which could be an RRSP or a TFSA — to comply with all the public reporting obligations of Bill C-377, including posting all of their information on the Internet, if just one other member of that mutual fund is a member of a “labour organization,” as defined in the bill, which could, as I’ve shown, include a doctor. How many millions of Canadians would be impacted by that?

Is this ridiculous enough for anyone yet? Is this what anyone contemplated would be unleashed by a private member’s bill to provide for greater transparency and accountability for labour organizations? We’re all aware of the serious concerns that Canadians are not saving enough for retirement. The government is now trying to increase the amount that Canadians can invest in TFSAs. Who will want to invest in a TFSA or an RRSP if to do so would mean their financial and other information could very well end up posted on the Internet? How can we responsibly pass this bill in its current form?

By the way, as the Privacy Commissioner made very clear when he testified, this disclosure would be made without the need for the fund to obtain any consent from the individuals whose information would be publicly disclosed. Under the Privacy Act, consent is required for the disclosure of personal information, but if we pass Bill C-377 without amendment, no such requirement would apply in this case.

Mr. Cameron Hunter, a consulting actuary with a specialty in labour and benefit plans, was so concerned about the scope of Bill C-377 that he contacted my office and then took time to testify about the bill. He told the committee that the bill would require the full scope of disclosure from a wide variety of plans that he’s aware of, including trusts established to collect vacation pay, that provide legal services and possibly even ones that fund substance abuse programs. He said that he’s aware of a non-profit housing program that may be subject to the disclosure requirements in this bill. Even the program Helmets to Hardhats, which provides careers in the construction trades for returning veterans, is a partnership among government, employers and building trades unions. That, too, could well fall within the “labour trust” definition.

Mr. Hunter pointed out that under the definitions, workers’ compensation plans may be subject to the bill. As he described, the Ontario Workplace Safety Insurance Board, for example, is maintained at least in part for the benefit of union members and would therefore satisfy the definition of “labour trust.”

He testified that none of these is currently covered by the amendments to the bill passed in the other place that tried to limit the scope of the labour trust issues.

One problem, as Mr. Hunter pointed out, is that the exemptions are worded as a shopping list, and there are many funds that would fall within the very broad “labour trust” definition but are not on the list. He told our committee, “In fact, given the wide array of arrangements available today, it may not be possible to develop a comprehensive list of exemptions.”

Another problem is that, as drafted, the exemption applies only to labour trusts whose “activities and operations . . . are limited exclusively to the administration, management or investments” of the shopping list of funds. So any fund that also does one thing — only one thing — in addition to the items on the shopping list would fall outside the exemption. Given the way that our financial service world operates, that means that many funds would simply not qualify for the exemption.

As Mr. Hunter described, this poses a problem for master trust arrangements, in which multiple separate trusts are combined into one larger trust. Each trust may provide different types of benefits. If any one of those benefits is omitted from the exemption list, it would taint the whole master trust, and all the other benefits, health benefits, life insurance, et cetera, would be subject to the disclosure obligations of the bill.

Colleagues, let me emphasize that while Mr. Hunter was the only witness called by our Legal and Constitutional Affairs Committee to testify on the bill on this issue, he was far from the only voice raising these very serious concerns. I mentioned the Canadian Life and Health Insurance Association of Canada, who raised the alert on the scope of these provisions. The Investment Funds Institute of Canada also submitted a brief — indeed, more than one — to point out the very serious implications of the labour trusts provisions of the bill. They pointed out that, operationally, managers of public mutual funds have no practical way to determine whether any particular investor in a fund is a member of a labour organization, and, of course as I have demonstrated, that definition is so broad that it includes many who would not normally call themselves members of a union.

Let me read to you a brief excerpt from the Investment Funds Institute’s most recent brief:

Currently in Canada there are over 9,000 series of mutual funds, each of which could be considered a labour trust under the current definition and our plain interpretation described in this letter. Therefore each of these 9,000 fund series could be subject to this reporting requirement. This is a very significant and costly administrative burden to potentially place on this industry and ultimately all of the millions of security holders of these funds.

Colleagues, 9,000 mutual funds in Canada, and according to the Investment Funds Institute, every one of them could be caught by Bill C-377, and every Canadian who has invested in a Canadian mutual fund would also be caught.

And colleagues, don’t forget that all of the provisions I mentioned earlier — the requirement to publicly disclose salaries, pension benefits, political activities, third-party contracts, and the political activities of those third parties — all these provisions apply to all entities that fall within the definition of “labour trust” as well. So for mutual funds, RRSPs, TFSAs, all those provisions will come into play.

This is nothing less than a nightmare that we are being asked to unleash on Canadians.

Think of the costs to our financial industry of trying to comply with this, as well as the cost to CRA of trying to ensure compliance. Even more, colleagues, think of the violation of the basic privacy rights that this bill would set in motion.

The Privacy Commissioner of Canada testified to express his serious concerns about the bill. Mr. Therrien was the second Privacy Commissioner of Canada to do this. His predecessor, Jennifer Stoddart, testified before our Banking Committee in 2013. She told the committee that the proposed naming of individuals under the bill “is a significant invasion of their privacy.” She said, “I think I would have problems with this bill.”

Mr. Therrien was, if anything, even more blunt. Senator Joyal asked him whether the bill, in his opinion, goes beyond what is acceptable in terms of privacy.

This was Mr. Therrien’s reply:

I think it goes too far. I think accountability is an important principle that perhaps justifies the disclosure of some information, for instance, the salaries of the highest paid union leaders, but it goes too far, I think, in requiring the disclosure of non-union activities, such as those that you mentioned, and political activities, lobbying activities. I think in that way it goes too far.

Colleagues, there will be some consequences to this invasion of privacy. Tom Stamatakis, the President of the Canadian Police Association, testified both before the Banking Committee in 2013 and before our Legal Committee recently. He spoke of his members’ concern for their safety and security after disclosure of the information — with names attached — that would be required under Bill C-377.

He told the committee that most of the elected union officials in the Canadian Police Association are also police officers, and when they complete their service with their local association, they return to a policing career. They are deeply concerned about their names and other personal information being made public and posted on the Internet. There is no predicting how many of the people engaged in criminal activity or criminal organizations could use that information.

Colleagues, I will quote from his testimony before the Banking Committee, as the time constraints were such that the chair literally cut Mr. Stamatakis off in mid-sentence when he was making this point.

This is what he said to the Banking Committee in 2013:

I will give you one good example. A person on my executive board in Vancouver is a sergeant in the Combined Forces Special Enforcement Unit in British Columbia. The sole function of that unit is to target organized crime groups, outlaw motorcycle gangs, and identify gangs engaged in serious criminal activity. Their main function is to surveil gang members and their activities with a view to successfully prosecuting them. Bill C-377 would put this individual in a situation where at the very least his name would be published. In this day and age with technology the way it is, it probably would not take much for someone to do something.

Colleagues, why would we do this? Why require disclosure that we know has a high likelihood of endangering the men and women who are working to keep us safe? They face danger enough in their jobs. Surely our job is to do our best to reduce the dangers they face, not to pass unnecessary laws that we know — we are told — will add to them.

As you see, colleagues, there are many problems with the bill that is before us. But beyond the problems there is the overarching issue of the bill’s constitutionality, and whether Parliament has the power to pass the bill in the first place.

Mr. Hiebert testified that his goal in introducing Bill C-377 is to improve transparency for labour organizations. In his words, “the purpose of the bill is to gauge the effectiveness, accountability and health of these organizations.”

Colleagues, let’s be very clear. All of us are in favour of accountability and transparency. But ensuring that labour unions are transparent and accountable is something that is already regulated under labour laws, and except for a relatively few labour unions that are federally regulated, labour law under our Constitution is a matter of provincial jurisdiction. Simply put, we do not have the constitutional power to pass Bill C-377.

This is an issue on which our Banking Committee heard extensive testimony and that our Legal and Constitutional Affairs Committee examined as well. I think it is fair to say there were a large number of constitutional experts who were very clear in their view that, if passed, Bill C-377 will be found to be unconstitutional as being in violation of the division of powers. There was only one constitutional expert who testified in support of our power to pass the bill, and that was the former Supreme Court Justice Michel Bastarache.

Former Justice Bastarache is now a lawyer in private practice. He was open and transparent with the committee that Merit Canada is a client of his firm and had asked a partner in his firm for an opinion on the constitutionality of that bill. This assignment was given to former Justice Bastarache.

For anyone who doesn’t know, Merit Canada is widely acknowledged to be a leading proponent of Bill C-377. Indeed, some believe that Merit Canada lobbied for the bill and may even have been involved in its preparation.

Former Justice Bastarache’s position is that Bill C-377 amends the Income Tax Act and that act is within federal jurisdiction. He accepts the statement that the bill is to provide for transparency and public accountability with respect to tax benefits afforded to labour organizations.

In his words:

I see no reason to question the substance of the act as being in relation to “the raising of money” under section 91(3) of the Constitution.

He acknowledged that labour organizations are affected by the bill but said that “the ancillary powers doctrine provides that as long as the bill is sufficiently integrated into the federal scheme, it is constitutional.”

Justice Bastarache says he sees “no serious encroachment on provincial powers. The object of the bill is rationally and functionally related to tax.”

Other constitutional experts who testified were considerably less sanguine about the bill’s constitutionality. Bruce Ryder is a constitutional law professor at Osgoode Hall Law School. He has taught constitutional law at Osgoode since 1987, approaching 30 years. He appeared before the committee after former Justice Bastarache testified, so he had an opportunity to consider the former Justice’s opinion before appearing.

Professor Ryder was very clear. He said:

. . . it’s quite clear that the law in pith and substance is in relation to promoting transparency and accountability for labour organizations, a matter that simply does not fall within Parliament’s jurisdiction and is therefore ultra vires.

That is pretty strong.

With respect to Mr. Bastarache’s reference to the ancillary powers document, this is what Professor Ryder said:

. . . do the financial disclosure provisions proposed by Bill C-377 play an important and substantial role in furthering the objectives of the Income Tax Act? Are they rationally and functionally connected to the objectives of the Income Tax Act in the sense that they advance its current provisions?

My answer to that is, again, it’s quite clear that the bill does not have a connection to existing provisions of the Income Tax Act, does not have a close connection to its objectives and, therefore, will be declared to be of no force and effect by the courts.

He pointed out that nothing in Bill C-377 makes any connections between the obligations under the bill and the tax status of labour organizations, or the tax consequences of the activities of or membership in labour organizations.

He addressed the argument raised by proponents of the bill that the proposed treatment of labour organizations is really no different than that of charities and athletic associations under the Income Tax Act. He pointed out that the Income Tax Act treatment of charities and athletic associations ties that treatment to their status as tax exempt organizations. By contrast, there is nothing comparable with respect to labour organizations.

Labour organizations, at least provincial ones, are created under provincial labour laws. Those provincial laws control whether or not they continue as a labour organization. The Income Tax Act has no power to create a labour organization, nor to deny its status, and nothing in Bill C-377 would change that.

In Professor Ryder’s words:

No tax consequences follow for breach of the disclosure set out in Bill C-377. That’s why I argue in my brief that the analogy to the tax treatment of charitable organizations and athletic associations, and the disclosure requirements placed on them, is completely specious once you pay attention to the detailed provisions of the Income Tax Act that are relevant.

Senator Dagenais asked Professor Ryder about former Justice Bastarache’s opinion and here is what Professor Ryder said:

Clearly there’s a disagreement between me and other constitutional scholars, who have expressed the same opinion as I have, and former Justice Bastarache. I would sum it up that Justice Bastarache and Mr. Hiebert believe it is sufficient to bring Bill C-377 within Parliament’s jurisdiction to make laws in relation to taxation because labour organizations receive public benefits in the form of tax exempt status and the deductibility of union dues. It’s sufficient to require extensive financial disclosure simply because they receive public benefits; that is enough to bring it within the taxation realm of Parliament.

Frankly, I think that’s a weak connection to income tax law. If that were the case, we could have massive disclosure requirements for just about every institution in the country, because there are so many that receive some form of significant tax benefit.

In my view — and I think it’s the view of the other constitutional scholars who have provided briefs during this bill’s journey through Parliament — there needs to be a closer connection to the tax treatment of labour organizations or the tax consequences of transactions involving labour organizations for this to be a valid exercise of Parliament’s taxation power.

Colleagues, think how dangerous a precedent we’d be setting if we claimed the right to regulate any industry or any person simply because they get a tax deduction or other benefit under the Income Tax Act. That would, in effect, erase the dividing line between areas of provincial jurisdiction and federal jurisdiction. We could override provincial governments simply by asserting our power under the Income Tax Act, because there is not a single organization or individual that doesn’t benefit in some way from deductions under the Income Tax Act.

Eight out of 10 provinces have already legislated the disclosure that they believe is appropriate to demand of labour organizations. The testimony was very clear that this bill has been put forward because the proponents don’t believe that the provinces have gone far enough. They disagree with the provincial choices.

Senator Runciman was very clear about this when he spoke at second reading. He doesn’t like the laws in Ontario governing unions’ involvement in provincial elections. Now, he himself was a minister in the Ontario government for eight years, and he had the opportunity then to bring in a law to remedy what he sees as a gap. His government, having been defeated — and repeatedly so in later elections — he understandably doesn’t agree with the legislative choices of the elected Liberal government.

But that is no ground for him or us as federal legislators to use our position in the federal Parliament to pass laws that we wish provincial governments would pass — or, in his case, that he wishes the Ontario government would pass.

We have a constitution that divides legislative powers. On this matter, and with the greatest respect to former Justice Bastarache, the authorities are overwhelmingly consistent that Parliament has no constitutional authority to pass Bill C-377.

Paul Cavalluzzo is a constitutional and labour lawyer. He pointed out that the federal power over taxation is found in subsection 91(3) of the Constitution Act, and that section talks about raising money. To be exact, it gives Parliament the power to legislate on “The raising of Money by any Mode or System of Taxation.”

Bill C-377 has nothing to do with the raising of money, by taxation or anything else. What it has to do with is regulating disclosure by trade unions, and that is labour relations law, which, except for the very few employees under federal jurisdiction, is a matter of provincial jurisdiction.

Our Banking Committee heard the same opinion from a number of other constitutional experts: Professor Alain Barré, Professor Henri Brun and Professor Robin Elliot all agree that Bill C-377, if it were to pass into law, would be found to be unconstitutional — in the words of Professor Barré, “totally unconstitutional.”

Colleagues, I have the greatest of respect for former Justice Bastarache. But as we know, most recently from the experience of the unfortunate attempt to appoint Justice Nadon to the Supreme Court, sometimes former Supreme Court justices can be wrong. Given the overwhelming weight of the evidence brought before our Senate committees, I have concluded that is likely one such case.

Several witnesses, including Mr. Cavalluzzo and the Canadian Bar Association, also raised serious Charter issues with Bill C-377. They told our committee that the bill has serious problems, in particular with respect to the freedom of expression under subsection 2(b) of the Charter and the freedom of association under subsection 2(d).

Mr. Therrien, the Privacy Commissioner of Canada, expressed his view that Bill C-377 could be challenged under the Charter. He spoke of sections 7 and 8, which are generally relevant to privacy protection, and added that freedom of expression and freedom of association could also potentially be invoked by unions or others.

Once again, former Justice Bastarache did not share these concerns. This is what he said:

With regard to the right of association, I see no problem. One must understand the limits of that right and distinguish what is constitutionally protected and what depends on legislation.

The right of association is a procedural right, and it does not protect activities. It protects the ability to unite, to make representations and to receive an answer in good faith. The Supreme Court ruled on this in Dunmore and Health Services and in Fraser.

Colleagues, this is a very surprising opinion from Justice Bastarache. Those are certainly important cases in the history of the evolution of freedom of association — and, by the way, it is a freedom, not a right, contrary to what Justice Bastarache said.

But Dunmore was decided in 2001. Health Services was decided in 2007, and Fraser in 2011. Former Justice Bastarache notably omitted any references to the seminal decisions issued just a few months ago, in January 2015 by the Supreme Court, in which the Supreme Court did an extensive review of the nature and interpretation of the Charter’s freedom of association. Those decisions significantly and profoundly expanded the scope of protection afforded by the freedom of association. Far from describing it as a “procedural right,” the court held that the freedom of association under subsection 2(d) must be given, in the words of the court, “a purposive, generous and contextual approach.” Indeed, the court took the opportunity to expressly overturn an earlier decision on the freedom of association that took a narrower approach — and that earlier decision was written by former Justice Bastarache.

As I said, I have the greatest respect for former Justice Bastarache, but in this case, I must reluctantly and regretfully conclude that, at best, his opinion is a dissenting view.

The overwhelming evidence before the Senate indicates there is a very real likelihood that Bill C-377 would be found to be unconstitutional, certainly on the division of powers and very possibly under the Charter. And as Senators Andreychuk and Frum have pointed out in another context, constitutionality is a very serious issue. To quote Senator Frum: “Why, then, should we be passing a bill, parts of which would in all likelihood be found to be unconstitutional? I believe we should not.”

But, colleagues, whatever your view of the Senate’s role in assessing the constitutionality of a bill, I think all of us would agree that the Senate has an obligation to take very seriously the position of the provinces on a given issue.

Six provinces have written to say they do not support Bill C-377. Three provincial ministers of labour appeared, expressing their governments’ strong opposition to the bill.

This is not a partisan issue. These representations were made by governments of all stripes. In several cases, governments were replaced between the representations made in 2013 and now, and the new government reiterated the position of the old. That’s certainly the case in my province of Nova Scotia.

In other words, there’s strong agreement on these issues: Bill C-377 is bad public policy; it would have negative impacts on the labour relations and economy of the provinces in question; and it deals with a matter of provincial jurisdiction.

Only one province expressed a contrary view. That was two years ago, in late June 2013, when the British Columbia government wrote to Senator LeBreton, then the Leader of the Government in the Senate, and sent a copy to me. Interestingly, that letter expressed what can best be described as lukewarm support, stating that the government supports, and I quote, “the principles behind Bill C-377,” namely, that unions “should be more transparent and accountable for their spending decisions.”

But it is more than interesting that, while expressing support for this theoretical principle, the Government of British Columbia has taken absolutely no legislative initiatives on its own to amend its own labour laws to ensure greater transparency for the unions it regulates — hence my description of their support as being “lukewarm.”

Colleagues, everyone agrees with the importance of transparency and accountability. The problem is with the way in which Bill C-377 seeks to achieve those objectives.

The Honourable Kelly Regan, Minister of Labour and Advanced Education in my province of Nova Scotia, testified before our Legal and Constitutional Affairs Committee. She expressed her government’s concern that Bill C-377 “interferes with provincial jurisdiction over labour law, which may have unintended consequences on labour management relations.”

She said:

The Province of Nova Scotia is concerned about the one-sided nature of this legislation, that it requires only one of the parties on the labour scene to disclose very detailed information that could be used against them. We’d like to see issues around basic fairness addressed.

The Province of Nova Scotia already has provisions that require unions to provide financial information to their members. Provisions in the Trade Unions Act allow union members to access copies of all financial statements, free of charge. There have been no complaints over the past five years about this provision.

Minister Regan concluded her opening statement as follows:

Others have suggested at these hearings that this is simply a tax bill and that there’s no infringement on provincial jurisdiction. I respect that the federal government has the power to order tax audits and do what it needs to do to ensure proper compliance with the Income Tax Act, but the provisions around public disclosure create an unintended consequence that will mean unions will not be operating on a level playing field.

. . . governments all across Canada are doing what they can to eliminate regulatory duplication and red tape. Nova Scotia, for example, has just signed an agreement with New Brunswick to advance this effort. It’s hard to understand why the federal government would enter into this area of provincial jurisdiction. It is an intrusion and will no doubt result in a court challenge.

That’s what Minister Regan had to say to our committee.

Colleagues, when a provincial minister of the Crown states that a proposed federal law is an intrusion on provincial jurisdiction and “will no doubt result in a court challenge,” we need to take that seriously.

Of course, the Nova Scotia government is not alone in opposing Bill C-377. The governments of Ontario and Manitoba each had their minister of labour testify.

The Honourable Kevin Flynn, Minister of Labour for the Government of Ontario, asked the Senate to reject Bill C-377, citing five reasons. First, the bill is unnecessary, as the Ontario legislature — like nearly every other provincial legislature in the country — already requires financial disclosure from unions to their members, as each of these provinces has decided is appropriate.

Second, the bill’s disclosure obligations “would create an unnecessary burden and increase costs to ordinary union members.”

Third, the bill raises serious privacy concerns.

Fourth, the bill risks destabilizing labour relations in Ontario by “unfairly attacking one side and damaging that delicate balance between employers and unions.”

Finally — and this was Ontario’s paramount consideration — is the bill’s constitutionality. In the words of the minister, if passed the bill “would have the federal government overstepping its constitutional bounds and stepping into the area of provincial jurisdiction.”

Similar views were expressed by the governments of Manitoba, New Brunswick, Prince Edward Island and Quebec. The duly elected governments of six provinces have spoken to express their opposition to our passing Bill C-377. These governments together represent fully 70 per cent of the Canadian population. Not a single provincial government has urged us to pass Bill C-377, not even the former Alberta Conservative government.

Colleagues, we all know that one of the founding roles of the Senate was to protect and defend regional and provincial interests. If we do not stand firmly by all these provinces that have reached out to us, asking us not to pass Bill C-377, then what are we doing? Whose interests are we here to protect? Merit wants this bill. Six provincial governments do not. Are we seriously considering giving Merit what it wants, while telling six provinces representing 70 per cent of Canada’s population that their views are interesting but irrelevant?

Bill C-377 is, quite simply, a bad bill. Moreover, I believe that we would be exceeding our constitutional power were we to pass it.

In 2013, this chamber came together in bi-partisan consensus and voted significant amendments to Bill C-377. We gave our best advice to the elected members of the other place as to how we believed Bill C-377 should be addressed. The other place, due to unusual circumstances of timing, never had an opportunity to consider that advice.

The bill has not changed. The concerns we shared then are just as valid today.

Prime Minister Harper has not appointed any new senators to this chamber, so there is no one here today who was not here then. Accordingly, I had intended to ask in these remarks that we join together again and pass the same amendment that we passed two years ago — that we give the elected members the opportunity they never received two years ago to consider our advice and benefit from the extensive testimony we heard that was not heard by their members.

However, in view of Senator Bellemare’s excellent amendment, which I fully support, I intend instead to propose a subamendment to subsection 149.01(6). If Senator Bellemare’s amendment is defeated, which I hope it is not, and we return to third reading debate on Bill C-377, at that time I anticipate moving the amendment that I originally planned to put forward so that, as a chamber, we can provide to the other place the opportunity they never had to consider our amendment from 2013. That’s for later in the unlikely event that we do not accept Senator Bellemare’s most reasonable amendment.

My subamendment relates to the extraordinary scope of the disclosure that Bill C-377 requires of so-called labour trusts. Senator Bellemare’s amendment would help with respect to the constitutional division of powers, but there would remain the question of the bill, including a whole range of plans and investment instruments that were never intended to be caught by the disclosure requirements of the bill.

Members of the other place recognized this and tried to limit the application of the bill by including paragraph 6(b), exempting from the bill a number of such plans. However, as I described earlier, the amendments were never debated, so no one was ever able to point out that by including the word “exclusively,” the amendment failed to achieve its purpose. My subamendment would remedy that, removing the word “exclusively.”

=Motion in Amendment

Hon. James S. Cowan (Leader of the Opposition): Accordingly, I now move:

That the motion in amendment be not now adopted but that it be amended as follows:

(a) by deleting the word “and” at the end of paragraph (a) of the amendment;

(b) by adding the following new paragraph (b) to the amendment:

“(b) by replacing line 36 with the following:

‘of which are limited to the’; and”; and

(c) by changing the designation of current paragraph (b) to paragraph (c).


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