Everything you need to know about the public-sector salary cap

ANALYSIS: The Progressive Conservatives have introduced legislation to cap public-sector salary increases. Here’s what the new law will do, and why the government wants it
By John Michael McGrath - Published on June 6, 2019
Peter Bethlenfalvy
Treasury Board president Peter Bethlenfalvy (pictured here in September 2018) on Wednesday introduced Bill 124, the Protecting a Sustainable Public Sector for Future Generations Act. (Christopher Katsarov/CP)

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It can be easy to forget that government isn’t a faceless monolith: it’s made up of people — people doing things. And people generally need to be paid to do things. That’s why $72 billion — nearly half of the $163.4 billion the government will spend this year — goes to salaries and other forms of compensation for the 1.2 million people employed either directly or indirectly by the provincial government. On Wednesday afternoon, the government introduced legislation to control the rise of public-sector salaries. Bill 124, the Protecting a Sustainable Public Sector for Future Generations Act, is expected to sit on the order paper until MPPs return late in the fall. So what does Bill 124 do, why does the government want it, and what happens next?

What is Bill 124?

The bill sets a clear limit on the rise of public-sector compensation in both the Ontario Public Service (the non-political staff that work directly in ministries) and agencies, boards, and commissions that receive $1 million or more in provincial funding (TVO is included in this group). If Bill 124 is passed, neither salaries nor total compensation would be allowed to increase by more than 1 per cent annually. The bill doesn’t revise existing union agreements, but it would apply to any future agreements.

The bill does contain some notable exceptions: it doesn’t, for example, apply to local police. Nurses and teachers will be bound by the law, but doctors won’t be (earlier this year, the government reached an arbitrated settlement with them that guarantees annual increases of 3.5 per cent for four years). And, while the Ontario Provincial Police is technically subject to the legislation, its current agreement won’t expire until after the next election.

Why does the government want it?

The single biggest target of the legislation is the province’s large teachers’ unions. All their current contracts expire in August, and, after health care, education is the biggest expense for the government. Even if Bill 124 doesn’t become law — and Treasury Board president Peter Bethlenfalvy said Wednesday that he expects it will — the government is sending a signal to unions about what it’s willing to accept in negotiations as these contracts expire.

More broadly, this is another measure the Tories are using to try to contain the growth of government expenses. The province’s Financial Accountability Officer last month reported that the government would need to find an additional $6 billion in savings in order to balance the budget on schedule. Bill 124 could lead to hundreds of millions of dollars in savings — not enough to balance the budget, but still a sizable amount.

What happens next?

After the house rises on Thursday, MPPs won’t be returning to Queen’s Park until October 28, after the federal election. In theory, the government could call MPPs back over the summer and pass Bill 124 in just a few days, but Bethlenfalvy told reporters yesterday that he doesn’t expect that to happen. For now, Bill 124 will sit on the order paper, gathering dust. When it passes, it will likely be challenged in court by the province’s public-sector unions.

The recent legal history of wage-freeze bills is a mixed bag. Under the Liberals and Premier Dalton McGuinty, the legislature in 2012 passed Bill 115 (the Putting Students First Act), which barred teachers from striking and imposed restrictions on teacher compensation. That law was eventually declared unconstitutional by the Ontario Superior Court of Justice in 2016. A different Liberal premier, Kathleen Wynne, opted to settle with unions rather than appeal the decision.

The Tories say their bill closely resembles one that the federal government passed in 2009 under then-prime minister Stephen Harper; that legislation was challenged in court but upheld by the Ontario Court of Appeal as constitutionally valid. (Public-sector unions appealed the decision to the Supreme Court of Canada but were denied.) That court decision held that, while the right to bargain collectively is protected under the Charter, “in certain circumstances, even wage rollbacks may be permissible under s. 2(d) of the Charter” (which guarantees freedom of association).

One thing seems likely: the government will get a chance to make that argument in court sometime next year.

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