Nortel Layoffs Strain Canada’s Public Insurance System

After telecom equipment maker Nortel Networks declared bankruptcy more than a year ago, it told employees in the United States they could have pension benefits, but not severance pay. The situation was similar in Nortel’s home country of Canada, and now the public insurance system is bearing the brunt of that decision.

An independent financial analyst told television show Canada AM on Tuesday that Nortel’s restructuring plan is costing Canadian taxpayers a lot of money.

“To cut costs you terminate employees and also to cut costs you don’t pay those terminated employees severance pay,” Diane Urquhart told the morning show. “But clearly these employees still have monthly bills to pay and they’re going to go on public employment insurance plans.”

Urquhart said most Canadians don’t realize the abuse their system is taking, which explains the absence of taxpayer outrage. In the United States, the public was incensed over the AIG bailout, for example, but in Canada, “most people don’t recognize what is going on,” Urquhart told Canada AM.

“In this time of economic stress, there are great strains on the employment insurance system of Canada,” Urquhart said.

Since filing bankruptcy on Jan. 14, 2009, Nortel has auctioned off its most valuable assets and fired thousands of employees. And as Nortel has sold its properties, it continually has prioritized major creditors ahead of pensioners, incensing long-time workers who could be facing life without the benefits they earned. And now, with more former Nortel staff looking to the government for help, Canada – under the same economic strains as the rest of the world – could be in for some crippling financial obligations.

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