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Date:
2019.11.14

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THE EMPLOYERS' EDGE

“Freeze”. It describes not just this week’s weather, but also what’s happening to public sector salaries under Bill 124.

In June 2019 the Employers’ Edge Blog examined Ontario Bill 124, the Protecting a Sustainable Public Sector for Future Generations Act, 2019 after the Bill’s first reading.  You can review that blog, here. After passing second and third readings, the Bill has received royal assent and passed into law as of November 7, 2019.  You can read the full text of the Bill here.

The Explanatory Note to the legislation states that its purpose is to ensure that increases in public sector compensation reflect the fiscal situation of the Province, are consistent with the principles of responsible fiscal management, and protect the sustainability of public services. That would appear to mean that the provincial government sees wage restraint as a way to work toward a balanced budget.

The most prominent feature of the Act, a 1% cap on public sector wage increases, annually, for a 3 year moderation period.  If you are wondering about the impact on public sector workers, data reported to the Ministry of Labour, Training, and Skills Development indicate that collective agreement wage settlements in Ontario’s provincial broader public sector averaged an annual increase of 1.3% in 2016, before increasing to 1.9% in 2017, then settling back down to 1.6% in each of 2018 and 2019 to-date.

The Act establishes different three-year moderation periods for employees who are and are not represented by unions.  The moderation period will always be three years in length, but its commencement may vary.  For unionized workplaces:

  • If a collective agreement was in place on June 5, 2019, the moderation period begins on the day immediately following the expiry of that collective agreement;
  • If there was no collective agreement in place on June 5, 2019, and the previous collective expired prior to June 5, 2019, the moderation period begins on the date immediately following expiry of the previous collective agreement;
  • If there was no collective agreement in place on June 5, 2019, and the parties were engaged in bargaining a first collective agreement, the moderation period begins on the date that the collective agreement takes effect;
  • If the parties are in interest arbitration and no award has been issued on June 5, 2019, the moderation period begins on the commencement date of the collective agreement;
  • If the parties obtained a collective agreement through interest arbitration on or before June 5, 2019, the moderation period begins on the day after the collective agreement expires.

There are exceptions to the above provisions, for which a full review of the legislation is advised.

Employers in non-union workplaces have greater flexibility in designating the moderation period.  The moderation period will be the three year period that is the earlier of: a date selected by the employer that is after June 5, 2019, or January 1, 2022.  There is however, an exception.  If the workplace provides salary adjustments for non-union employees aligned with their unionized co-workers in the same workplace, the moderation period for the non-union workers will likewise align with those under a collective agreement.

There are also some noteworthy amendments to the Act upon Royal Assent.  The Act as passed into law provides that certain voluntary exit programs, pension contribution offsets, and other prescribed payments will not be included in the scope of “salary” that cannot exceed 1% annual increase.

Similarly, the Act now excludes employers from its application if they are:

  • A local board as defined under the City of Toronto Act, 2006;
  • An Indigenous community within the meaning of the Indian Act or as may be prescribed by regulation, or an authority, board, commission, corporation, office, or organization, a majority of whose members, directors, or officers are appointed or chosen under the authority of one or more Indigenous communities;
  • A police governing authority referred to under the Police Services Act.

The Act will certainly be challenged in the courts on the theory that it is an unconstitutional restriction of the freedom of association which is understood to include the process of collective bargaining, notwithstanding that the Act specifically provides that the right to collectively bargain is continued, as well as the right to lawful strike and lockout.

On the upside for employers, the Act provides that an employer who complies with their new obligations under the Act will not be subject of any cause of action as a result of the Act’s application.  That includes separately that an employee cannot claim to be constructively dismissed by their employer as a result of the employer complying with the provisions of the Act.

What can public sector employers expect then, when it comes to future collective bargaining?  Well, if the Act remains in effect – which is not entirely certain given the seemingly obvious and inevitable constitutional challenge – you can expect that union and non-union employees will be seeking benefits that are not strictly speaking “salary”.  Think sick days, vacation days, favourable work schedules, and the like.

Fortunately, the lawyers at CCPartners are experienced and adept and navigating collective bargaining relationships as well as individual employee compensation, and keeping working relationships warm even during this salary freeze.

Click here to access CCPartners’ “Lawyers for Employers” podcasts on important workplace issues and developments in labour and employment law.

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