Bill 124 Receives Royal Assent

Bill 124, the Protecting a Sustainable Public Sector for Future Generations Act, 2019, received Royal Assent on November 7, 2019 and is now in force.  The Act establishes three-year “moderation periods” for both represented and non-represented employees in the public sector, during which salary increases are limited to 1% per year.

Application

The Act applies to a wide range of employers in the Ontario public sector, including but not limited to Crown corporations, school boards, universities, hospitals, long-term care homes, and children’s aid societies.  The Act also applies to non-profit corporations or organizations that received at least $1 million in funding from the Province in 2018.

The Act does not apply to municipalities, municipal boards, indigenous communities, police governing authorities or for-profit organizations (unless specifically prescribed under the Act).

Commencement of Moderation Periods

The Act establishes various rules for determining when the applicable three-year “moderation period” begins.  The moderation period differs depending on whether the employees are represented or non-represented. 

Represented Employees

Where employees are represented by a bargaining organization, the following moderation periods apply:

Bill 124 Receives Royal Assent

Despite the above, if on or before June 5, 2019, the parties have, in good faith, entered into

  1. a memorandum of settlement for a collective agreement ratified after June 5, 2019; 
  2. a collective agreement ratified on or before June 5, 2019 that comes into operation after that date; or, 
  3. an agreement to renew a collective agreement that is in operation on June 5, 2019 for a single specified term, 

then the moderation period begins on the day immediately following the day on which the collective agreement that gives effect to that agreement expires and ends three years later. 

Further, if on or after June 5, 2019 but before November 8, 2019, the parties have, in good faith, entered into 

  1. a memorandum of settlement for a collective agreement that expires no later than December 31, 2021;
  2. a collective agreement that expires no later than December 31, 2021; or, 
  3. an agreement to renew a collective agreement that is in operation on June 5, 2019 for a single specified term that expires no later than December 31, 2021, 

then the Minister may make regulations specifying that the moderation period begins on the day immediately following the day on which the collective agreement that gives effect to that agreement expires and ends three years later.

Non-Represented Employees

The moderation period generally begins on the earlier of: (i) a date to be selected by the employer that is after June 5, 2019; or (ii) January 1, 2022.  However, where a compensation plan establishes that salary increases provided to a non-represented employee will correspond to those provided to represented employees under a collective agreement, the same moderation period that applies to the represented employees will apply to the non-represented employee.

Maximum Increases in Salary Rates and Compensation

The Act prohibits employers from providing:

  1. an increase in salary rate greater than 1% for each 12-month period of the moderation period; and
  2. any incremental increases to existing or new compensation entitlements that in total equal more than 1% on average for all employees (either all employees under the collective agreement or all non-represented employees) for each 12-month period of the moderation period

The Act however permits increases in salary rates over 1% where the increase is in recognition of the employee’s seniority, performance, or successful completion of a course or program. In effect, this means that employees may still move up pre-existing salary grids or receive merit increases, but that the grids themselves may not be altered beyond the annual 1% caps imposed during the moderation periods.

Under the Act, compensation is defined as “anything paid or provided, directly or indirectly, to or for the benefit of an employee, and includes salary, benefits, perquisites and all forms of non-discretionary and discretionary payments.” As a result, the increase in total compensation package, inclusive of an increase in salary rate, may only be up to 1% per year. The increase in compensation is measured by calculating the average of total compensation entitlements for all employees covered by a collective agreement.

The Act establishes that the following do not constitute an increase of compensation entitlements:

  • Cost increases to the employer (for providing a compensation entitlement);
  • Payments from a voluntary exit program that has been approved by the Management Board of Cabinet;
  • Increases in exchange for increased member required contributions resulting from employer switching from a single employer pension plan into a jointly sponsored pension plan; 
  • Payment exemptions as prescribed by regulation.

Oversight and Other Provisions

The Act includes an anti-avoidance provision that prohibits employers from providing compensation to employees before or after the applicable moderation period for compensation that the employees will not, do not or did not receive as a result of the Act.

Under the Act, the Management Board of Cabinet may issue directives to employers requiring them to provide information relating to collective bargaining or compensation for the purpose of ensuring compliance with the legislation.  The Minister has the discretion to make an order declaring that a collective agreement or arbitration award is inconsistent with the Act.

Constitutional Challenge

On November 4, 2019, the Standing Committee on General Government held public hearings on Bill 124. Sixteen union representatives expressed their concern with respect to the constitutionality of the Act. Some unions have subsequently indicated an intention to jointly challenge the Act.

In light of the above, it is possible that the Act will be subject to a Charter challenge, particularly given that the negotiations for the renewal of collective agreements in the education sector are underway.   

We will continue to monitor the status of the Act. For more information about the Act and how it will impact your workplace, please contact the firm.