Two groups representing former Nortel Networks employees say their members will have their health, pension and long-term disability benefits extended thanks to an agreement with the bankrupt company approved by Ontario Superior Court on Wednesday.

What is in the deal

Under both agreements, Nortel said it would:

  • Continue current-service funding of pension plans until the end of September 2010.
  • Pay a lump sum of $3,000 to eligible employees laid off without severance before June 30, 2010, as an advance on their claims under bankruptcy law.
  • Pay long-term disability benefits, survivor income benefits and survivor transition benefits through Dec. 31, 2010.
  • Pay medical and dental benefits to Nortel pensioners and survivors and employees on long-term disability until the end of 2010.
  • Continue life insurance benefits until the end of 2010.

A new $57-million agreement, reached on Monday, preserves benefits until the end of 2010 for roughly 20,000 pensioners; former employees who have been laid off and not yet received severance; and employees on long-term disability.

It also continues funding of pension plans until September 2010.

The Nortel pension plan was to expire Wednesday and cut off the benefits of former employees.

The two groups that have been representing former employees and pensioners in talks with the bankrupt telecommunications company are Nortel Retirees and Former Employees Protection Canada (NRPC) and Canadian Nortel Employees on Long Term Disability. They said on Wednesday that the court has approved the new agreement although the decision has not been officially announced.

The NRPC is "relieved" about the approval, the group said in a statement.

Last week, the judge overseeing the restructuring of the once-mighty technology company rejected an earlier deal that included a clause that would have allowed former employees to take advantage of future changes to federal bankruptcy laws to increase their benefits.

The new deal took that clause out.

Both the New Democrats and Liberals have tabled bills to amend the federal Bankruptcy and Insolvency Act so as to better protect employees and pensioners when a company fails. The Conservative government has not yet said whether it would support those bills.

University of Ottawa law professor Vern Krishna said the deal might have been the best the former workers could hope for, depending on Nortel's financial situation. Even if the controversial clause had been left in the deal and bankruptcy regulations were changed, former employees might not benefit, he said: "If there is no money in the corporation, the legislation is a hollow victory."

He expects the lawyers representing workers would know how much money is left in the Nortel estate.

Bankruptcy Act changes still needed: MP

Wayne Marston, the pension critic for the NDP, said his first reaction when he heard the new deal had been approved was one of sadness. But even though his party's proposed changes to federal bankruptcy legislation won't apply to the Nortel employees, he said, the act still needs to be changed to protect employees of other companies.

"Last year, we had over 5,700 bankruptcies in this country. We're still not out of this recession," said Marston, the MP for Hamilton East-Stoney Creek. "We need to act on this and we need to do it now."

A group of about 37 Nortel employees on long-term disability opposed the benefits deal, as it required employees and former employees to give up their right to sue Nortel and challenge the payment of $92 million in bonuses to Nortel executives.

Nortel was a technology giant, with 90,000 employees around the world at the beginning of 2001, but couldn't overcome mounting financial troubles and in January 2009 filed for bankruptcy protection. Since then, most of the company has been sold off.