Ontario Government Places Restrictions on Wage Increases

On June 5, 2019, the Ontario government introduced Bill 124 – the Protecting Sustainable Public Sector for Future Generations Act, 2019 – which imposes restrictions on wage increases and compensation for a variety of unionized and non-unionized workers in Ontario over the next 3 years.

The Bill establishes a series of 3-year “modernization periods” depending on whether an employer is unionized or non-unionized and the status of any collective agreement that may be in place. It applies to a wide range of employers, including every agency of the Crown, school boards, universities and colleges, public hospitals, non-profits, long-term care homes, children aids societies, the Ontario Power Generation and any not-for-for profit organization that receives more than $1 million in funding from the government. It does not apply to municipalities or for-profit entities.

The legislation provides that no collective agreement, arbitration award or employer may provide employees with an increase in salary rate that is greater than 1% per year during the 3-year modernization period. The legislation also imposes limits on incremental or new increases to overall compensation (1%), which is defined very broadly to include salary, benefits, perquisites and all forms of non-discretionary and discretionary payments to employees. Certain increases are exempt from the cap. The legislation does not prohibit an employee’s salary rate from increasing in recognition of an employee’s length of time in employment, an assessment of performance or the successful completion of a program or course of professional or technical education.

There are oversight mechanisms in the proposed legislation to ensure compliance such as the power for the Management Board of Cabinet to issue directives to employers to provide information related to collective bargaining or compensation for the purposes of ensuring compliance with the Act. Under the Act, the Minister may make an order declaring a collective agreement or any arbitration award is inconsistent with the Act. The legislation also imposes limits on the Ontario Labour Relations Board and arbitrators to inquire into the constitutional validity of the legislation or whether the legislation is contrary to the Ontario Human Rights Code. The legislation also protects employers against allegations related to constructive dismissal under the Ontario Employment Standards Act, 2000 or under the common law for compliance with the legislation.

The legislation is not yet proclaimed into law. In fact, the legislation will not likely be passed into law until October 2019 at the earliest. However, employers impacted by this legislation should be aware of this legislation as it will apply retroactively to June 5, 2019, meaning that any agreements, decisions or arbitration awards made after June 5, 2019, would be subject to the restrictions contained in the legislation. Please contact us if you have any questions about this proposed legislation or the potential impact that it may have upon your workplace.