Open this photo in gallery Steve Long, president of Long & McQuade Musical Instruments, says Ontario’s new holiday pay calculation 'was just wrong' and is happy the government has reinstated the old policy and will review the rules. Moe Doiron/The Globe and Mail

The Ontario Liberal government is reversing a contentious piece of its new employment legislation around calculating public holiday pay, which business owners argued was both costly and flawed. The about-face, on the eve of a provincial election campaign, has some business groups hoping there could be other changes made to the controversial Fair Workplaces, Better Jobs Act (Bill 148) that took effect on Jan. 1.

Late Monday, the Ontario government announced a new regulation that reinstates its old public holiday pay calculation starting with the Canada Day holiday, “following feedback and discussions with stakeholders.” The government also announced a review of the public holiday rules, with a goal to have a new system ready by 2020. “This review of the public holiday pay section of the Employment Standards Act is part of our overall commitment to address the realities of the modern workplace and create a fair society,” Labour Minister Kevin Flynn said in a statement.

Small business owners were confused by the Ontario government’s new public holiday pay calculations, which increased the amount paid to some casual employees. The change discouraged some employers from bringing on casual or part-time employees because of the higher costs. Some business owners said they were paying more in additional holiday pay a month than what they were forking over owing to the increase in minimum wage to $14 from $11.60.

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“My big objection to it was that it was just wrong,” says Steve Long, president of Long and McQuade Musical Instruments and Yorkville Sound, who wrote a letter to the government earlier this year arguing against the change. “It was badly done ... I think they realized they blew it.”

Under Ontario’s new formula — which will be revoked on July 1 but will not result in retroactive pay changes — public holiday pay is calculated by dividing regular wages earned in the pay period before the public holiday by the number of days worked in that pay period. The calculation is based on the past two weeks. In the past, public holiday pay was calculated by taking the amount earned in the four weeks prior to the holiday, divided by 20 days.

Under the old system, for example, a full-time person would get paid a full day for a statutory holiday and a half-time person would get a half day. Someone who only worked one eight-hour shift a week would receive 20 per cent of a day’s pay. Under the new system, a full-time worker would still get a full day of pay for the public holiday and someone working half-time would get a half day. However, according to the government’s holiday pay calculator, if someone worked just one eight-hour day in the two weeks before the holiday, they would receive eight hours of pay – or a full day, which is the same as a full-time employee.

“There were a number of weird outcomes,” says Karl Littler, vice-president, public affairs with the Retail Council of Canada. His organization, alongside other business groups and business owners, lobbied the government to revisit the public holiday changes.

The Canadian Federation of Independent Business (CFIB) wrote a letter to Mr. Flynn and all provincial parliament members last month, saying the new formula was “unfair to businesses with part-time employees and has already resulted in layoffs and reduced employee hours….This is one of the top Bill 148-related issues we’ve been hearing about from small businesses since Jan. 1,” the CFIB letter states.

Tiina Luik, owner of the Bead-Dazzled jewellery and craft store, has been reducing hours for the nine part-time workers at her two Ontario locations in Burlington, Ont., and St. Catharines, Ont., as a result of the public holiday pay changes.

“I’m grateful for the reprieve,” says Ms. Luik, who plans to increase hours for her staff again once the old system starts up again this summer. “I just hope that it’s permanent,” she adds.

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Mr. Littler of the Retail Council of Canada says there didn’t appear to be much resistance from the government when they laid out their concerns about the public holiday pay changes over the past few months.

“What we found was that, when we presented the arguments to them, they were pretty responsive,” he says.

Mr. Littler isn’t characterizing it as a politically motivated change. “I think it’s a case where they saw a public policy problem and moved to fix it,” he says. “We would regard it as a victory for [our] advocacy effort … as well as a victory for common sense and good public policy.”

Julie Kwiecinski, the CFIB’s director of provincial affairs for Ontario, says the reversal signals the government is willing to reconsider parts of its legislation already passed. That could include the next change around scheduling of workers, including on-call staff, which is set to kick in on Jan. 1, 2019.

“This is an opportunity to look at a full review on those provisions as well,” she says. “If someone out there is looking at a bill that has been passed and thinking the job is done, there is no fix, this is an example … that it’s possible.”

Another change coming Jan. 1 is the increase in the minimum wage to $15 from $14 today, which will be a hot topic in the election. Progressive Conservative Leader Doug Ford has vowed to freeze the minimum wage at $14.

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