Technology giant Nortel has been selling off its units since falling under bankruptcy protection in January. (Rebecca Zandbergen/CBC)

A private member's bill proposed by a New Democrat MP could help protect employees and pensioners in the wake of a corporate collapse.

Wayne Marston, a Hamilton-area MP, tabled the so-called Nortel bill in early November to change the federal Bankruptcy and Insolvency Act so that former workers and pensioners would become preferred creditors in situations of corporate bankruptcy.

Currently, former workers — like those who were with Nortel Networks Corp., which filed for bankruptcy in January — are considered unsecured creditors and are at the back of the line to receive payouts from bankruptcy proceedings.

Laid-off and retired Nortel employees are having to fight the company in court for their severance packages, pensions and disability payments, and a recent court ruling suggests there is no guarantee they will be paid. On Thursday, the Ontario Court of Appeal ruled that Nortel did not violate the law when it refused to pay 45 former workers any severance or retirement payments.

While opposition bills are rarely passed into law, Marston said his proposed legislation has been well-received by both government and opposition members. However, he stressed that Parliament needs to work quickly to get the amendments in place in time to help former Nortel employees.

More exec raises approved

The recent news of executive bonuses at Nortel has highlighted the push for legislative change to help former workers get severance and pensions in cases of corporate collapse. On Thursday, CBC News reported that management at Nortel Networks, already under fire for handing out executive bonuses, approved a plan this fall to give another round of raises to its top managers.

According to an internal corporate document obtained by CBC News, 72 Nortel executives will receive a total of $7.5 million US in salary increases, investments or bonuses on top of their current salaries in 2009.

The biggest earner under the new compensation plan is former treasurer John Doolittle, who took over as head of the company's corporate group in August. Doolittle's total compensation has been bumped to $1.68 million this year, an increase of $1.12 million over 2008, when he earned $390,000 US in salary and an estimated $170,000 US in investment and bonus money.

Marston said he's disgusted by the news of the bonuses.

"This particular group of people and the gentleman who heads up [Nortel] makes half-a-million a year, now getting $1.7 million in bonuses … How does he sleep at night?"

Chris Buchanan, a former Nortel manager who was laid off a year ago with no severance, said the bonuses may not be illegal, but they're unethical.

"I'm puzzled, is the polite way of putting it. I don't think there's any working employee at Nortel who really understands what the logic is at the exec level. I think there's a lot of suspicion that the execs, their primary goal is to maximize the incentives they got."