On February 25, 2013, Progressive Conservative MPP, Peter Shurman (Thornhill), introduced Bill 5 (Comprehensive Public Sector Compensation Freeze Act, 2013). As the name suggests, the Bill proposes a global freeze in annual compensation across the public sector and much of the broader public sector for a period of two years. The Bill passed Second Reading on February 28, 2013 and been referred to the Standing Committee on the Legislative Assembly for further review.
Summary of Bill 5
The scope of the proposed wage freeze would capture a broad range of public sector and broader public sector employers -- all employers currently subject to the Public Sector Salary Disclosure Act, 1996 (better known as the “Sunshine Law”) would be caught, including hospitals, boards of public health and other health providers that receive significant funding from the province.
Where an employer is subject to the proposed Act, the pay freeze would apply to all levels of employees, directors, officers and other office holders and would capture salary, wages and pay ranges, as well as benefits, perks and other payments that may otherwise be provided to such persons. In addition to freezing benefit levels, the Bill would also prohibit any benefit from being paid in recognition of: (i) length of employment, (ii) assessment of performance, or (iii) successful completion of programs or courses of professional or technical education, even if such benefits are currently provided for under the employee’s applicable compensation plan.
The Bill would place an obligation on all subject employers to provide the responsible Minister with compliance reports. Interestingly, whereas the Bill would require all employers to comply with the Act, any overpayment of compensation in contravention of the Act would create an onus on the employee who received the additional payment. The Bill provides that any such payments would be treated as a debt to the employer and would be fully recoverable including by means of setting off such amounts against future compensation owed to the employee.
Background to the Bill
Bill 5 may seem familiar to some observers. The provisions of the Bill are essentially identical to Bill 92 (Comprehensive Public Sector Compensation Freeze Act, 2012) which was introduced as a PC private member’s bill in May 2012. Bill 92 was defeated on Second Reading. In debate over Bill 92, both the Liberal and NDP MPPs strongly criticized the Bill citing, among other concerns, its potential illegality in overriding collective bargaining rights for public sector employees.
In light of the PC’s minority position, it is uncertain whether this latest effort will pass when the Bill returns to the Assembly on Third Reading. Bill 5 has, at the very least, outlived its predecessor and has made it through to Second Reading and Committee referral (albeit on a very narrow vote margin of 36-35).
Prior to the prorogation of the Legislative Assembly in the Fall of 2012, the Government had announced that it would be introducing a bill (the Protecting Public Services Act) aimed at restraining compensation across the broader public sector as well as for executives and managers across Ontario’s broader public sector, public service and government agencies. The proposed legislation would have:
- imposed a permanent salary cap for certain new executives at no more than twice the Premier’s salary (or other amount provided for in the regulations);
- frozen earnings for two years for certain managers eligible for performance pay; and
- required subject employers to negotiate collective agreements “consistent with the Province’s goals to eliminate the deficit and protect the delivery of public services” as expressed in mandates issued by Management Board of Cabinet, from time to time.
Now that the Legislature has resumed sitting, it is yet unclear whether the government will take up its pursuit of a public sector compensation freeze by tabling its own bill, in the form of the Protecting Public Services Act or in another form.
Compensation restraint legislation is not new to hospitals and other organizations in the public and broader public sector. The Public Sector Compensation Restraint to Protect Public Services Act (the “Restraint Act”) froze the compensation of non-unionized employees and office holders employed in the public sector and much of the broader public sector for two years, beginning in March 2010 and expiring on March 31, 2012.
The government chose not to extend the Restraint Act restrictions when they expired, but instead introduced new compensation restrictions under the Broader Public Sector Accountability Act (the “BPSAA”). Of retroactive effect to March 31, 2012, the provisions under the BPSAA primarily restrict executive and office holder compensation and cap the performance pay organizational “envelope” for all non-unionized employees (not only executives) in certain broader public sector organizations.
If either Bill 5 or the Protecting Public Services Act were enacted, this would represent an important departure from prior approaches to legislated wage freezes, potentially applying pay freezes equally for all employees, including those who are unionized, and expanding the scope of these restrictions across a comprehensive range of public sector and broader public sector organizations.
Bill 5 serves as an important reminder that public sector and broader public sector compensation will remain a key political issue in light of Ontario’s challenging financial straits. Interested parties from across the health sector and beyond will undoubtedly be keenly following the progress of Bill 5 as well as other legislative developments in this area.
 The Sunshine Law covers the Government of Ontario, crown agencies, municipalities, certain prescribed organizations including hospitals and boards of public health, as well as other public sector employers that receive a significant level of funding from the Province (defined as receiving more than $1,000,000 in government funding annually or 10% of an entity’s annual revenues from the government if the total is over $120,000).