Bill 124: Public Sector Wage Cap Legislation is met with Immediate Challenge After Receiving Royal Assent

Written by on January 13, 2020 in Employment Law Blog, Employment Law Issues

On November 7, 2019, Bill 124: Protecting a Sustainable Public Sector for Future Generations Act, 2019received Royal Assent. This highly controversial legislation, which affects bargaining rights, compensation and benefits for Ontario public service and public sector workers, is now law in Ontario.

Scope and Purpose

Bill 124 imposes compensation restraint measures on non-union and unionized employees employed by the provincial government, Crown agencies, universities, colleges, hospitals, school boards, agencies under the Long-Term Care Homes Act, and non-profit organizations receiving at least $1,000,000 in government funding. The Act does not apply to executive-level employees who are subject to the Broader Public Sector Executive Compensation Act, 2014.

The statute is designed to give employers greater predictability as to their future payroll cost increases.

The “Salary Cap”

The Act defines “salary rate” as “a base rate of pay, whether expressed as a single rate of pay, including a rate of pay expressed on an hourly, weekly, bi-weekly, monthly, annual or some other periodic basis, or a range of rates of pay, or, if no such rate or range exists, any fixed or ascertainable amount of base pay”.

Under the statute, salary rate increases are limited to one (1) percent per twelve (12) month period for each position or class of positions. However, the one (1) percent cap does not apply if the increase is a result of the employee’s length of time in employment; an assessment of performance; or the employee’s successful completion of a program or course of professional or technical education.

The “Compensation Cap”

Bill 124 defines “compensation” broadly 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.”

Under the Act, increases to compensation entitlements are limited to one (1) percent for each separate bargaining unit of the employer and for all non-union employees. This is calculated in the aggregate, meaning that a particular bargaining unit member may receive a two (2) percent increase based on an assessment of performance, provided that increases to the total compensation of all bargaining unit members do not exceed one (1) percent per year.

The “Moderation Period”

The Act creates a three-year “moderation period” during which the compensation restraints will apply. For unionized employees, the moderation period will generally coincide with the expiry of the current collective agreement. For non-unionized employees, the three-year moderation period begins on a date determined by the employer, provided it begins on or before January 1, 2022.

Challenges to the Legislation

Unions across Ontario responded to the passage of the legislation with concern, and have signaled their intention to challenge the Act’s constitutionality. The Ontario Federation of Labour, which represents more than fifty unions and one million workers in Ontario, has announced the launch of a campaign to repeal the legislation, which it says undermines the free and fair collective bargaining rights of workers enshrined in the Charter and forces workers to accept compensation increases that fall far below the rate of inflation.

We will continue to monitor the unions’ challenge to Bill 124.

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