By Dan Attwell,Jamila Bolahood,Tino Perruzza(Student) Firm: Mathews, Dinsdale & Clark LLP

The Canadian province of Ontario has introduced a wage restraint law that will restrict salary increases for many public sector workers over three years. This article explains the main provisions of the law and details the categories of employers affected.

After being introduced by the Ontario government on 5 June 2019, Bill 124: Protecting a Sustainable Public Sector for Future Generations Act, 2019 (‘Bill 124’) received Royal Assent on 7 November 2019. The legislation carries with it significant ramifications for many public sector employers, as the Act imposes three-year periods of salary moderation and compensation restraint measures that apply to both unionised and non-unionised employees of public sector employers including the government of Ontario, Crown agencies, the broader public sector, and various organisations that receive funding from the Ontario government.

During each three-year period, both salary increases and compensation entitlements cannot exceed 1% in each 12-month span, though there are certain exceptions.

Does Bill 124 apply to you?

Bill 124 applies to a number of employers, employees and unions operating within the public sector. The following is a non-exhaustive list of those directly impacted by the recent passing of Bill 124.

Employers

The following employers will be subject to the provisions of Bill 124:

the Ontario government and all manner of Crown agencies, boards, commissions, etc.;

school boards;

public hospitals;

universities and colleges;

children’s aid societies;

Ornge;

Ontario Power Generation and its subsidiaries;

non-profit long-term care homes;

any not-for-profit organisation that received at least CAD 1,000,000 in funding from the government of Ontario in 2018; and

any other authority, board, commission, committee, corporation, council, foundation or organisation that may be prescribed by regulation.

On the other hand, Bill 124 does not apply to:

municipalities and local municipal boards;

boards, authorities, offices or other organisations whose members are chosen or appointed under the authority of a municipal council or Indigenous community;

indigenous communities;

police governing authorities; and

‘for-profit’ entities.

Employees and unions

The system created under Bill 124 is applicable to all workers and bargaining agents in the workplaces captured by the Act.

The Act applies to both unionised and non-unionised employees. Bill 124 also gives the President of the Treasury Board (the minister responsible for Ontario’s fiscal plan, the ‘Minister’) the authority to declare that certain employers and/or employees are exempt from the provisions of the Act. The Minister may also determine that the Act does not apply to a collective agreement.

The effects of Bill 124

Salary moderation

Bill 124 puts in place wage restraints that correspond with three-year moderation periods.

With regards to salary increases, Bill 124 limits these to 1% per 12-month span within the moderation period. This cap is applicable to any position or class of positions, and applies regardless of whether the increase is pursuant to a compensation plan, collective agreement, or arbitration award. It is worth noting, however, that the 1% cap does not apply to increases that are related to collective agreements or compensation plans that provide for such increases on account of an employee’s length of service, performance or education.

Bill 124 similarly places an annual 1% cap on compensation increases for new or existing compensation entitlements, averaged over all workers subject to the Act in a given workplace. The term ‘compensation’ extends to salary, benefits, and various other forms of payment made to employees.

Though Bill 124 applies to both unionised and non-unionised employees, the application of moderation periods is not necessarily uniform across both sets of workers. For example, the salary moderation period will not prevail against the provisions of a collective agreement in effect on 5 June 2019 and prior. The three-year moderation period would begin following the agreement’s expiry. Otherwise, collective agreements and interest arbitration awards coming into force after 5 June 2019 are subject to Bill 124’s wage restraints.

With regards to non-unionised employees, employers have greater flexibility in determining when the moderation period begins, though such it must begin before 1 January 2022.

Anti-avoidance measures

Bill 124 also provides for anti-avoidance measures so as to restrict employers from using different techniques, such as providing payments outside of the moderation period, as a means of getting around the Act’s wage restraints.

Compliance powers

The Management Board of Cabinet (a Cabinet sub-committee responsible for fiscal planning) may require that employers and employers’ organisations provide information concerning both collective bargaining and compensation so as to ensure that the Act is being complied with.

Further, Bill 124 provides the Minister with the authority to determine that a collective agreement or interest arbitration award fails to comply with the Act. In the event that such an order is made, the Act provides for the subsequent steps to be taken to bring the collective agreement or interest arbitration award into compliance with the Act.