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CAW: Nortel Shouldn't Break Severance Contract

Canadian Auto Workers union called on an Ontario judge to order Nortel to make severance and other payments to ex-employees cut off when the company got creditor protection.

TORONTO (CP) -- Nortel Networks Corp. shouldn't be allowed to ignore parts of its contract with the Canadian Auto Workers union, as it did when severance and other payments to former employees were cut off the day it got creditor protection, a CAW lawyer asserted Tuesday.

While Nortel noted that severance and other post-employment payments have been frequently suspended by companies when they're under the Companies' Creditors Arrangement Act, the CAW called on an Ontario judge to order Nortel to make the payments.

CAW lawyer Barry Wadsworth acknowledged that, typically, under CCAA the courts have recognized that former employees have been treated like other creditors owed money when it comes to receiving severance and other post-employment payments.

In other words, they will have to wait until all the competing claims are sorted out and whatever money is available is distributed according to a court-sanctioned arrangement -- usually less than the full amount owed by the company.

But in this case, Wadsworth said, the Canadian Auto Workers should be treated like other suppliers who continue to provide services to a company under CCAA -- and that means maintaining contractual obligations on severance and retirement assistance for CAW members.

The CAW has only 45 members still working at Nortel but claims to also represent about 600 former members who have retired from the company -- a claim that is contested by Nortel.

But the union's motion was supported by lawyers acting on behalf of thousands of other former Nortel employees, some members of other unions but the vast majority formerly in non-union positions.

Nortel has said it had about 6,000 employees in Canada when it sought protection from creditors, which are collectively owed billions of dollars.

The company had about 30,000 employees worldwide as of Sept. 30, but has cut thousands of jobs globally before and after filing for court protection on Jan. 14 in Canada and the United States.

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