Province of Ontario Introduces New Legislation to Cap Public Sector Wages

The Ontario Government has introduced new legislation that is entitled Bill 124, Protecting a Sustainable Public Sector for Future Generations Act, 2019. This legislation seeks to cap public sector wages at 1% percent per annum and the cap is expected to last for three years.

Application to Bargaining and Non-Bargaining Unit Employees

If passed, the legislation would apply to bargaining and non-bargaining unit employees, including those employed by:

• Provincial authorities, boards, commissions, corporations, offices or organizations in which a majority of directors, members or officers are appointed or chosen by the province (including Ontario Power Generation, Independent Electricity System Operator and Ornge)
• School boards
• Colleges and universities
• Hospitals
• Every licensee under the Long-Term Care Homes Act, 2007, other than a licensee that carries on its activities for the purpose of gain or profit to its members or shareholders
• Children's Aid Societies
• Transfer payment recipients who received more than $1 million in annual funding in 2018
• The Ontario Public Service

The proposed legislation also contains language that would allow the Government to override collective agreements. It will put time-limited requirements on new compensation increases for unionized and non-unionized employees in Ontario’s public sector.

The Moderation Period for Bargaining and Non-Bargaining Unit Employees

The legislation defines the moderation period as a three year period for all in scope employees.

1. Collective agreement in operation on June 5, 2019: Moderation period begins on the day immediately following the day the collective agreement expires.
2. No collective agreement in operation on June 5, 2019 and previous agreement expired: Moderation begins on the day immediately following the day that the previous collective agreement expired.
3. Parties bargaining a first collective agreement on June 5, 2019: Moderation period begins on the commencement date of the collective agreement.

For non-represented employees, the moderation period begins on a date to be selected by the employer that is after June 5, 2019 and before January 1, 2022.

Jurisdiction Limitations on the Labour Board and Arbitrators

The legislation currently imposes limits on the jurisdiction of the Ontario Labour Relations Board and arbitrators as neither can inquire into or make a decision on whether a provision of this legislation or an order made under this legislation is constitutionally valid or is in conflict with the Human Rights Code.

Restrictions Under the Employment Standards Act, 2000

Moreover, the legislation also stipulates that a decision taken by an employer pursuant to this legislation will not amount to constructive dismissal under the Ontario Employment Standards Act, 2000 or under the common law.

Employers should be mindful that this legislation has not been proclaimed into law yet. Various unions in the province are preparing for a constitutional challenge as they allege that the proposed legislation violates their collective bargaining rights guaranteed under the Charter of Rights and Freedoms.

Our Labour Relations & Employment Group will continue to monitor the development of this legislation and its impact on public sector employers.