The Executive Compensation Act and Ombudsman Act are Coming to Education

December 5, 2014 | André R. Nowakowski, Nadya Tymochenko

On March 10, 2014 we reported on the Government of Ontario’s intention to introduce legislation to strengthen the accountability and increase the transparency of the Broader Public Sector (“BPS”). In July the Ontario government did, indeed, introduce Bill 8, entitled the Broader Public Sector Executive Compensation Act, 2014 (the “Executive Compensation Act”).

If passed, this legislation will impose limits on executive compensation for certain designated organizations in the broader public sector, including school boards. Although the Executive Compensation Act is similar in many ways to previous BPS wage restraint legislation, there are a number of proposed measures that warrant closer examination. Under the Executive Compensation Act, the government will have the authority to establish “compensation frameworks” governing compensation for Directors of Education and Superintendents of Education who are entitled to or could receive compensation in excess of $100,000 in a calendar year (this is pro-rated for part-time designated executives). Other employees could also be defined by regulation as being designated executives.

The compensation frameworks may include “hard caps” on a variety of executive compensation mechanisms including, but not limited to, salaries, benefits, perquisites, bonuses, and severance payments. The Executive Compensation Act provides that it will prevail over any term of an affected executive compensation plan that conflicts with its provisions. In the event of such a conflict, the terms of the compensation plan will be rendered inoperative to the extent of the conflict. Once a compensation framework is in effect for a school board and/or the Director of Education or Superintendents, the BPSAA will no longer apply in that regard.

If a Director’s or Superintendent’s compensation just prior to the effective date of a compensation framework is greater than provided for in the framework, then the designated executive’s compensation can remain in effect. However, there is an anti-avoidance measure in the legislation which prohibits an employer from providing new or additional compensation to offset any freeze on compensation.

The Executive Compensation Act also contains enforcement measures to ensure that compensation limits are respected. School boards could be required to comply with directives to provide to the Management Board of Cabinet a broad range of compensation information for Directors and Superintendents. Any amounts paid to a designated executive which exceed the limits set by a compensation framework under the Executive Compensation Act are deemed to be overpayments. If an overpayment is made, the school board is responsible for remitting an amount equal to the overpayment to the Crown. The executive who received the overpayment then becomes indebted to the employer for that amount.

As with prior wage restraint legislation, this legislation prevails over any compensation plan and no cause of action, including for constructive dismissal, can arise from a school board complying with the Executive Compensation Act.

In addition, Bill 8 extends the powers of the Ombudsman to school boards. The purpose of the Ombudsman, as outlined in legislation, is “to investigate any decision or recommendation made or any act done or omitted in the course of the administration of a governmental organization and affecting any person or body of persons in his, her or its personal capacity.” The investigation may be initiated by a complaint from a member of the public or by the Ombudsman himself. The investigatory powers include the power to summon an individual to give evidence under oath or to produce specific documents.

Following an investigation, the Ombudsman may make recommendations to the school board, and those recommendations are to be reported to the Ministry of Education. If there is a failure to implement the recommendations made, the Ombudsman may provide a copy of the report and recommendations to the Premier and make a report to the Assembly.

Bill 8 has passed second reading in the Ontario Legislature and has just completed a public consultation before the Standing Committee on General Government. We will continue to monitor and report on the progress of this legislation.


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