Hindsight is 2020: Bill 124’s First Year in Review

On November 7, 2019, the Provincial Government passed the Protecting a Sustainable Public Sector for Future Generations Act, 2019 (commonly known as “Bill 124”) into law, limiting public sector and broader public sector (“BPS”) compensation and wage growth. This Bill promised to cause major disruption to the standard compensation and bargaining patterns in the areas it affected (including many developmental service sector or “DS Sector” employers).

We have now had a year of Bill 124, and have been actively bargaining on this issue, filing submissions (successfully) with the Treasury Board for exemptions, and advising employers from around the province on how to navigate this challenging issue, including during the pandemic.  In this article, we provide a review of how this legislation has been interpreted and applied in 2020.

Brief Introduction to Bill 124

Bill 124 limits salary and compensation increases for the public sector and BPS entities to which hit applies, typically limiting wage and compensation growth to 1% per year for a three year period.

Our firm has written extensively about the operation and requirements of Bill 124, and will not recap the basic operation here. However, we recommend reading our prior articles (linked here and within the linked article) for background.

We will note that the Province passed amendments to Bill 124 on December 8, 2020 that increased the Governments power to enforce its requirements. We wrote about these changes recently on our firm’s website.

Bill 124 and COVID-19

Bill 124 was built for a world before Bill 124. The Pandemic has brought to sudden and painful light many of the wage inequalities and underfunding of social services in the province, and this was only exacerbated by the ongoing effect of Bill 124.

In the DS Sector in particular, there was great concern that Bill 124 would prevent agencies from legally providing enhanced pandemic pay to employees in order to incentivize recruitment and retention in the face of a new and unforeseen threat. For the first 6 weeks of the pandemic, agencies flew blind and made the best choices they could.

Fortunately, on May 1, 2020, the Province passed Emergency Order O Reg 195/20 under the Emergency Management and Civil Protection Act (“EMCPA”), which temporarily suspended Bill 124’s application to temporary pandemic-related payments. This permitted Employers to provide much needed pandemic pay. This emergency order was continued even after the EMCPA was inactivated and replaced with the Reopening Ontario (A Flexible Response to COVID-19) Act, 2020 (the Province’s longer-term COVID-19 response legislation), and it continues in effect up to today.

While this emergency order has been an important tool for employers in responding to COVID-19, it must be kept in mind that it does not permit permanent increases in compensation or compensation increases unrelated to COVID-19. The emergency order makes very clear that its exemptions are only for the duration of the emergency. Moreover, the Province’s recent amendments to Bill 124 strengthening its enforcement powers signal that the Province intends to return to enforcing Bill 124 more strenuously once the pandemic subsides.

Case Law Update

A large number of decision-makers have interpreted Bill 124 over the past year, and provide useful insight into a variety of Bill 124 topics. We summarize some of the key takeaways here.

  1. Arbitrators Refuse to Ignore Bill 124, Despite Union Requests

Throughout the year, arbitrators have consistently refused union requests (typically made in interest arbitration) to simply ignore Bill 124. Arbitrator Gedalof was the first to deal with this argument in Mon Sheong Home for the Aged and ONA, Re, 2020 CarswellOnt 1548 [Mon Sheong], 143 CLAS 35 (ON Arb), where he rejected it outright. He held that labour arbitrators are creatures of statutes and cannot choose to simply ignore some pieces of legislation. This was despite the fact that several unions are currently challenging the constitutionality of Bill 124. Many arbitrators since have dealt with this issue, and all have come to the same conclusion as Mon Sheong. Even during the pressures of COVID-19, while some arbitrators have expressed frustration at Bill 124 limiting their jurisdiction in the face of a pandemic, they have continued to apply it. This has led to some fiery dissents by union nominees to arbitration boards.

However, interest arbitrators have also near-universally remained seized to revisit interest arbitration decisions in the event that Bill 124 is later found to be unconstitutional, is repealed (or is amended so it does not apply to an employer) or if the Province grants an exemption from Bill 124 to the workplace parties. This practice has drawn some sharp criticism from dissenting employer nominees to arbitration boards. The practical result for employers is an ongoing specter that collective agreements made by interest arbitration could be reopened retroactively if there is a change to Bill 124’s status. It does not appear that this would have any effect on purely bargained collective agreements, however, unless the parties have negotiated a wage reopener.

  1. Arbitrators Generally Refuse to Read Bill 124 In a Limited Way

Another trend in the case law is that arbitrators mostly (though not universally) refuse to read Bill 124 in a way that would limit its application. There are four key examples of this below.

First, Mon Sheong held that the criteria for Bill 124 to apply should be read broadly. Arbitrator Gedalof interpreted an exemption within Bill 124 for certain entities operating for the profit or gain of their members or shareholders. The Union in Mon Sheong argued that a non-profit that served the community could be seen as operating for the “gain” of their “members” (the community) such that Bill 124 did not apply. However, Arbitrator Gedalof rejected this argument, as it would effectively exclude all nonprofits and eviscerate Bill 124. The term “members” had to be read only to mean the formal members of the non-profit organization as identified in the organization’s letters patent. Thus, Bill 124 applied to the workplace parties.

Second, Arbitrator Slotnick in Hamilton Jewish Home for the Aged and SEIU, Local 1, Re, 2020 CarswellOnt 16287 [Hamilton] (ON Arb) refused to read in language to the $1 million public funding threshold for Bill 124 that would limit the law’s effects. Bill 124 does not apply to certain entities unless they received more than $1 million in public funding from the Province in 2018. The law states that this $1 million in funding would be “as determined for the purposes of the Public Sector Salary Disclosure Act, 1996”, widely known as the “Sunshine law” (and which created the “Sunshine List”, which identifies all persons receiving over $100,000 in government salaries per year). The union in Hamilton argued that this $1 million threshold for Bill 124 had to actually be $1 million in salaries of $100,000 or more (or just salaries in general) for Bill 124 to apply, given that reference to the Sunshine Law. However, the Arbitrator rejected this. While the reference to the Sunshine Law was confusing, it was found to merely be intended to sync up the calculation of government funding in both acts.

Third, Arbitrator Stout in Participating Hospitals (Ontario Hospital Association) v Ontario Nurses’ Association, 2020 CanLII 38651 [Participating Hospitals] (ON Arb) rejected a request by a union to add a new, higher wage grid step onto their collective agreement. The union had argued that the exemption in Bill 124 for wage increases that recognize an employee’s years of service permitted this step. However, the Arbitrator noted that Bill 124 had to be read in light of its purpose (limiting and moderating compensation growth), and that this exemption was thus limited to permitting movement along pre-established wage grids and compensation caps.

Fourth and finally, Arbitrator Johnston in St. Peter’s Residence At Chedoke (Thrive Group) v. Niagara Health Care and Services Workers Union Local 302 Affiliated With CLAC, 2020 CanLII 33060 [Thrive Group] (ON Arb) rejected a union argument that he was permitted to award more than 1% in wages and compensation. The union pointed to the fact that Bill 124 gave the Provincial Government sole discretion to declare a collective agreement or arbitration award to be inconsistent with Bill 124. In short, the union claimed that the arbitrator was free to award more than 1%, after which it was up to the Province to decide whether to permit it or strike it down. The Arbitrator flatly rejected this approach, holding that the Province’s power to declare collective agreements to be inconsistent was merely an administrative clause to enforce Bill 124. Much clearer language would be required to justify the existence of the power that the union argued for.

These cases illustrate how arbitrators generally read Bill 124 in a way that furthers its legislative purpose of limiting compensation growth. At the same time, however, Bill 124 has been read in some limited cases in a way that limits its application or in ways that favours union calls for more flexibility.

For example, Arbitrator McNamee in Oneida Nation of the Thames EMS and CUPE, Local 35.6, Re, 2020 CarswellOnt 8876 [Oneida Nation], 145 C.L.A.S. 42 (ON Arb) found that Bill 124 did not apply to an emergency medical services organization that was funded by the MOHLTC through a first nation. This involved a broad reading of the exemption from Bill 124’s effects for “a council of the band within the meaning of the Indian Act (Canada)”. So, some diversity remains among arbitrators to these approaches.

However, even where diversity has occurred, other arbitrators are sometimes quick to reestablish a broad interpretation for Bill 124. For example, in Groves Memorial Community Hospital and OPSEU, Re, 2020 CarswellOnt 10586 [Groves], 145 C.L.A.S. 128 (ON Arb), Arbitrator McNamee broadly read an exemption to Bill 124’s compensation and wage restrictions where the increases are the result of the increased cost of providing benefits. The Arbitrator took this to mean that down-stream costs of increasing wages (like increased overtime and vacation pay) were not included in the 1% compensation cap under Bill 124. This would have given workplace parties increased latitude to provide compensation increases.

However, Arbitrator Kaplan has flatly rejected this interpretation of the benefits exemption in two subsequent cases: Hospital for Sick Children and CUPE, Local 2816.01 (Part-time and Casual Unit), Re, 2020 CarswellOnt 15012 [Hospital for Sick Children] (ON Arb) and Residence Saint-Louis and ONA, Re, 2020 CarswellOnt 15475 (ON Arb). He took the position that Groves had failed to properly apply the rules for interpreting legislation, and that Bill 124 had to be given a broad reading in accordance with its purpose of moderating compensation and wage growth. The exemption for increases to the costs of providing benefits, in Arbitrator Kaplan’s view, was clearly meant to only exempt increases made by parties other than the employer (like an insurance provider).

  1. The Labour Relations Board Retains its Remedial Powers

Finally, the Labour Relations Board in OPSEU v. Trillium Health Partners, 2020 CarswellOnt 10824 [Trillium] (OLRB) (Vice-Chair Turtle) found that Bill 124 did not limit its power to remedy breaches of the Labour Relations Act that occurred before Bill 124 came into effect. In that case, the Employer had violated the statutory freeze on changes to the conditions of employment after a bargaining unit had recently certified. The Employer had not awarded standard wage increases that they should have during that freeze period. The Vice Chair held that nothing took away the Board’s power to issue such wage increases, and that they were not subject to Bill 124 because they didn’t arise from either the collective agreement or an arbitration award.

This signals that employers currently involved in Labour Board Litigation are not protected from retroactive remedies by the compensation limits in Bill 124.

  1. Arbitrators Express Reluctance to Indirectly Extending Bill 124 to Non-Covered Employers

Arbitrator Kaplan in Niagara Homes for the Aged and ONA, Re, 2020 CarswellOnt 15826 [Niagara Homes] (ON Arb) (Kaplan) did set some limits on how far Bill 124 will go. There, he was considering whether Bill 124 could indirectly limit compensation growth for non-covered employers who underwent interest arbitration. The employer there was not covered by Bill 124 but had often followed the compensation patterns of hospitals that were subject to Bill 124. The employer argued that compensation growth should thus continue to follow those hospitals and limit themselves to 1% growth.

Arbitrator Kaplan rejected this approach, noting that while interest arbitration aims to replicate the effects of free bargaining (which is why it looked at the bargains other workplaces had reached), Bill 124 did not replicate free bargaining. This justified continuing along the same compensation growth trends that the parties had been following before Bill 124. Thus, Bill 124 was found not to have effect here. This case illustrates that there are limits to how far arbitrators will apply Bill 124.

As always, PooranLaw will continue to monitor developments related to Bill 124 and provide updates on our website. In the meantime, if you require legal assistance, we encourage you to reach out to your regular PooranLaw lawyer, or any member of our team.

Note: This article provides general information only and does not constitute, and should not be relied upon as, legal advice or opinion. PooranLaw Professional Corporation holds the copyright to this article and the article and its contents may not be copied or reproduced in any form, in whole or in part, without the express permission of PooranLaw Professional Corporation.