More Freezes Coming in the Public Sector: Province Issues Draft Protecting Public Services Act, 2012

Laura Cassiani, Toronto
André R. Nowakowski, Toronto

The wage freeze that has swept over part of the broader public sector may now be spreading even further if the provincial government has its way.  The Ontario government yesterday announced plans to introduce legislation that will freeze compensation for the vast majority of non-union employees in the broder public sector, impose significant provincial oversight on collective bargaining and amend interest arbitration schemes in several sectors.

According to the Province, the draft bill, Protecting Public Services Act, 2012, will apply to approximately 481,000 Ontario public and broader sector employees, including but not limited to those employed by hospitals, universities, boards of health, not-for-profit long term care homes, community care access corporations and other broader public sector not-for-profit agencies who received at least $1-million in funding from the province.  Other employers may be named by regulation at some later point.

With respect to non-union employees, the bill creates the Public Sector Compensation Restraint Act, 2012 and repeals the compensation restraint measures contained in Part II.1 of the Broader Public Sector Accountability Act, 2010 (“BPSAA”).  The latter contains restraint measures that were part of the March 2012 provincial budget bill and applies to executives and office holders of employers such as hospitals who earn $100,000 or more per year.

The new legislation will impose temporary restraint measures for a two year period on all non-union employees and office holders who are eligible for performance pay.  The bill will also apply to the compensation plans for “executives”, a term that is not specifically defined in the bill.  Unlike the BPSAA restraints, the draft bill does not appear to limit its application to “executives” who earn $100,000 or more annually.

The bill would also impose the following on affected employees and office holders:

• A permanent salary cap of no more than twice the amount of the Premier’s salary (or $418,000.00/year) or an amount equal to such other amount set out by regulation unless exempted by the Lieutenant Governor in Council;
• A two-year freeze on pay and no movement up an established salary grid;
• No increases to an affected employee’s “earning envelope”, which is the performance pay paid during the 12 months before this legislation was introduced. This will limit performance pay to which an employee may otherwise be entitled under an existing compensation plan;
• A prohibition on performance pay if none was paid to an employee during the 12 month period before the bill was introduced (even if the affected employee moves into a position where he/she would be otherwise entitled to it); and
• With limited exceptions, there may be no increases to an affected employee’s existing benefits, perquisites or other payments and no new or additional benefits, perquisites or payments for two years.

The bill also enacts the Respecting Collective Bargaining Act (Public Sector), 2012, which will apply to union labour in the public and broader public sector.  The highlights of the bill include the following:

• Imposes a requirement that employers negotiate collective agreements that are “consistent with the Province’s goals to eliminate the deficit and protect the delivery of public services.”
• Grants the Management Board of Cabinet authority to issue “mandates” which will set out sector specific criteria to determine whether a collective agreement complies with the legislation.  The current draft of the bill does not include any guidance on what these mandates might include.
• Imposes a requirement that a collective agreement to which a “mandate” applies be operational for a term of not less than two years.
• Grants the Minister authority to review collective agreements to which a mandate applies, refer the agreement back to the parties for amendment if it fails to meet the criteria set out in the mandate, or impose an agreement if the parties are “not likely to be able to amend” the agreement voluntarily.

The draft bill prohibits the Ontario Labour Relations Board or an arbitrator from hearing a challenge about the constitutional validity of any provision of the Respecting Collective Bargaining Act (Public Sector), 2012.

Like its predecessor and current legislative measures, the draft bill also includes “anti-avoidance” provisions that seek to prohibit employers and parties from deferring compensation for the restraint period to some later time or accelerating it for payment before the restraint period.

The bill also seeks to impose changes to the interest arbitration scheme applicable to hospitals, the TTC and emergency services, including a requirement that interest arbitrators render decisions within 16 months with recourse to the Ontario Labour Relations Board if that time line is not met.

The government’s latest announcement comes on the heels of its repeated calls to broader public sector employers and unions to operate within fiscal restraints and the imposition of wage freezes on public school teachers through the passing of Putting Students First Act, 2012.

For now, employers are reminded that the compensation restraint measures contained in  Part II.1 of the BPSAA remain in effect.  It is not clear when the Government intends to introduce this legislation, with or without modification, into the Legislature or what final impact it will have on compensation plans and bargaining.

We will keep you apprised of all developments.

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