Update: Bill 124 passes, Imposing Wage and Compensation Limits on the Public Sector

On November 7, 2019, the Provincial Government passed Bill 124, the Protecting a Sustainable Public Sector for Future Generations Act, 2019 (The Act). This means Bill 124 is now law in Ontario. Since June 2019, we have been monitoring the status of Bill 124 and previously considered its potential impacts on agencies in the DS Sector.

The Act limits salary and compensation increases for the public sector and broader public sector (BPS), and will likely impact bargaining and workplace relations. Employers should be aware that under the new law there are different time frames for when these limits start to apply. Employers should review their collective agreements to ensure compliance with the Act and consider its impact in planning for future negotiations.

Key Changes:

(i)  Who the Act Applies to:

The Act applies to unionized and non-unionized employees of the Provincial government, Crown agencies, and the BPS including hospitals, school boards, agencies under the Long-Term Care Homes Act, and non-profit organizations receiving at least $1,000,000 in government funding.

However, the new amendments exclude certain new employers, including:

    • Local boards under the City of Toronto Act
    • Indigenous Communities
    • Authority, board, commission, corporation, office or organization of persons, including a council of the band within the meaning of the Indian Act (Canada) in certain circumstances.
    • police governing authorities

(ii)  3-year moderation period and new exceptions

The Act establishes a 3-year “moderation period” that will retroactively apply to expired collective agreements that are renewable June 5, 2019 and onwards. The Act imposes the following restrictions on salary and compensation increases:

    • salary rate increases are limited to no more than 1% per 12-month period for any individual position or class of position;
    • no collective agreement or arbitration award may provide for any incremental increases to existing compensation entitlements or for new compensation entitlements that in total equal more than 1% on average for all employees covered by the collective agreement for each 12-month period

The biggest change in the final version recognizes that ongoing negotiations may have been disrupted by the application of the moderation period on June 5, 2019. The amendments relating to the start of the moderation period provide that:

    • if, on or before June 5, 2019, a collective agreement was entered into, in good faith, that was not ratified or implemented until after June 5 2019, the moderation period will be delayed until the day after the collective agreement expires
    • The Minister may (by regulation) delay the moderation period until the day after the collective agreement expires, if, through a written agreement any of the following were entered into, in good faith, after June 5 2019:
        • A memorandum of settlement for a collective agreement that expires no later than December 31, 2021;
        • A collective agreement that expires no later than December 31, 2021;
        • An agreement to renew a collective agreement that is in operation on June 5, 2019 for a single specified term that expires no later than December 31, 2021.
    • If, an arbitration award was issued after June 5, 2019 but before the Act came into force, the moderation period will not begin until the day after the new collective agreement expires

The Act also supersedes all collective agreements and arbitration awards that do not fall into the exceptions above. It also gives the Minister the exclusive power to determine if an applicable collective agreement or arbitration award is inconsistent with the Act (after submissions from the parties).

While the new restrictions under the Act are significant, workers still have opportunities to receive larger salary increases based on the recognition of:

        • length of service
        • performance assessment
        • an employee’s successful completion of a program or technical education

Employers should also be mindful of new amendments relating to voluntary exit payments and pension contribution offsets that may also be excluded from the Act’s restrictions.

(iii)  Potential Challenges

Many unions across the province have expressed concern and disagreement with the Act. Although the Act expressly recognizes collective bargaining and strike rights, the Ontario Federation of Labour and other unions have already signaled they will challenge the Act’s constitutionality through the court.

Pooranlaw will continue to monitor the Act’s implementation and provide updates on any new developments. Please contact Pooranlaw if you have further questions.