Former employees of Nortel Networks Corp. will see their benefits coverage extended until the end of 2010 under a new $57-million financing deal unveiled yesterday.
The agreement, negotiated between Nortel and two groups representing former employees, will affect tens of thousands of pensioners, long-term disability recipients and workers whose severance payments were cut off after Nortel filed for court protection from creditors in January last year.
Among those affected are 400 employees receiving long-term disability benefits, who will now receive those payments until the end of the year instead of seeing them come to an end on March 31 as expected. Nortel funded its own long-term disability coverage plan for workers, which meant the company's insolvency has left their fate uncertain.
The deal will also see pensioners and employees on long-term disability continue to receive medical, life and dental benefits until the end of the year instead of March 31.
The proposal, which still requires court approval, will also provide up to $3,000 in a lump sum to workers who were terminated before Nortel's court protection filing, and who did not receive all of their promised severance pay. The payments, totalling $4.2-million, will be treated as an advance against the employees' claims, which means employees can try to collect more as creditors.
Nortel chairman David Richardson said the deal means employees will have received almost two years of medical, dental and long-term disability coverage by the end of 2010.
Nortel estimates it will pay $100-million to fund pension and benefits costs while operating under court protection.
Susan Kennedy, an employee on long-term disability who represented workers in negotiating the agreement, said the deal buys people on long-term disability almost a year to make alternative arrangements to adjust to the potential loss of income.
"When you're thinking your benefits could end on March 31, a sort of panic sets in, and people are very stressed out and very worried," she said in an interview. "At least if you give us the benefits for the rest of the year, I think it will help people to calm down a little bit and start to plan for the future."