The Liberal government has rejected an amendment to the bill creating the Canada Disability Benefit after senators sought to prevent provinces and insurance companies from clawing back the benefit.

The government accepted five other Senate amendments to Bill C-22, the Canada Disability Benefit Act, before returning the bill to the upper chamber. The bill would provide a regular benefit to low-income working age Canadians living with a disability.

Speaking in the House of Commons on Wednesday, Minister of Employment, Workplace Development and Disability Inclusion Carla Qualtrough said the rejected amendment raised “significant constitutional concerns” as both the regulation of insurance and contracting generally fall within provincial jurisdiction.

“If we went ahead with this amendment, the likelihood of an individual or organization bringing forward a court challenge would be very high,” Qualtrough said. “This would create significant uncertainty and could impact the regulatory process, which could in turn impact benefit delivery. This could very well delay benefit payments.”

Instead, she said the government would negotiate with the provinces and territories and engage with the insurance industry to ensure that benefits wouldn’t be clawed back: “The feedback we have received from the [insurance] industry is that they would not choose to offset or claw back income that is considered social assistance or a poverty reduction measure.”

Senators Kim Pate and Marilou McPhedran issued a statement opposing the government’s decision to reject the amendment.

“Parliament should be protecting taxpayers’ money and disabled people who greatly need this disability benefit rather than de facto subsidizing already rich insurance companies,” they said.

The senators disagreed with the government’s reasoning, arguing that “many federal statutes, from banking to bankruptcy, maritime insurance to divorce, human rights codes to genetic non-discrimination legislation, touch on and affect the terms and conditions of sectors within provincial jurisdiction.”

Nevertheless, the senators said they would vote to pass the legislation even without the amendment, “as the disability benefit is long overdue and desperately needed.”

Bill C-22 was introduced in the House of Commons in June 2022 and passed third reading in February. The bill passed third reading in the Senate in May, at which time it was returned to the House with the amendments.

The other Senate amendments accepted by the House included a right for Canadians denied the disability benefit to appeal the decision, and the establishment of stronger timelines for the rollout of the benefit.

The Liberal government first promised in 2020 to introduce a disability benefit modelled on the guaranteed income supplement, and the proposal was included in the 2021 federal budget. In June 2021, the government introduced Bill C-35, the Canada Disability Benefit Act, but it died when the a federal election was called later that summer.

The Liberals’ 2021 campaign platform included a promise to create a disability benefit, structured as a monthly payment, to reduce poverty among people with disabilities between the ages of 18 and 64.

Key details about the benefit, including eligibility requirements and payment amounts, are not in Bill C-22 but instead will be set by regulation within one year of the bill receiving royal assent.