On June 5, 2019, the Government of Ontario introduced wage cap legislation (Bill 124) the purports to restrict compensation increases for employees in the Broader Public Sector. Bill 124, the Protecting a Sustainable Public Sector for Future Generations Act, 2019, contains compensation restraint measures for non-union and unionized employees employed by the Ontario government, Crown agencies, the broader public sector (including government funded not-for-profit organizations in the Developmental Services and Home Care and Community Services sectors), and other organizations that receive funding from the government of Ontario.
The Bill creates a 3 year “moderation period”, during which:
- salary rate increases are limited to no more than 1% per 12-month period for any individual position or class of position; and
- any incremental increases to existing compensation entitlements or new compensation entitlements are limited to no more than 1% averaged over all employees covered by a collective agreement or across the employer’s non-unionized employee group.
The Bill defines compensation as “anything paid or provided, directly or indirectly, to or for the benefit of an employee, and includes salary, benefits, perquisites and all forms of non-discretionary and discretionary payments”. The Bill also includes “Anti-Avoidance” restrictions that essentially prohibit an employer from paying out compensation before or after the Moderation Period to make up for sums not received during the Moderation Period. Finally, the Bill provides the government with the authority to order that a collective agreement is inconsistent with the Act and require the parties to renegotiate terms that are consistent with it.
The government will be returning to the house at the end of October and has asked stakeholders for feedback on the Bill in the interim. If passed, Bill 124 would likely have retroactive effects to June 5, 2019 if passed.
Based on our early experience with this issue at the bargaining table since the legislation was introduced, some union representatives appear to recognize that employers can’t reasonably be expected to negotiate deals that would exceed the moderation period limits described above. At the same time, union protests around the province and a likely strike in the education sector (a key sector impacted by Bill 124) may influence the legislative process. In addition, a review of Interest Arbitration awards (for employers covered by the Hospital Labour Disputes Arbitration Act) demonstrates that arbitrators have treated the Bill as ineffective until passed. According to the language of the Bill, these awards stand to be unwound and rendered ineffective after the Bill passes – at considerable legal expense – for both unions and employers.
What can an employer do in the meantime? Each agency’s situation will depend on a number of variables (pay equity, collective agreement language, union status, bargaining position on June 5, 2019, and what your past practice has been in managing funding and budgets). We recommend that you speak with your legal counsel to determine how your budget is affected by Bill 124 and best practices managing compensation during these uncertain times.
In the meantime, we will continue to monitor the situation and will provide you with updates on the developments as they emerge.