Bill 124, the Protecting a Sustainable Public Sector for Future Generations Act, 2019 (the “Act”) was passed by the Ontario Legislature on November 7, 2019. The purpose of the Act is to “ensure that increases in public sector compensation reflect the fiscal situation of the Province, consistent with the principles of responsible fiscal management and protect the sustainability of public services”. The Act applies to the Ontario public service, school boards, post-secondary institutions, hospitals and other employers in the broader public sector, to the employees of those institutions and to the unions representing any of those employees.

The Act provides for a three year “moderation” period. The moderation period for unionized employers will begin, in most cases, with the term of the next collective agreement negotiated after June 5, 2019 (the date on which the Act was first introduced in the Legislature). The moderation period for non-union employers begins on the earlier of a date selected by the employer after June 5, 2019 and January 1, 2022. During the moderation period, wages and salaries cannot be increased by more than one percent per year. Further, compensation, which includes salary, wages and benefits, cannot be increased by more than one percent per year on average for all employees. These restrictions do not prohibit increases based on length of service, performance assessments or completion of an educational course or program. Employers are prohibited from providing compensation increases before or after the moderation period to compensate an employee for compensation lost due to the moderation measures.

The Government is authorized to collect data from employers about collective bargaining and non-union compensation. If the Government determines that a collective agreement or an interest arbitration award is inconsistent with the Act, it may make an order that the agreement or interest arbitration award is void. If the employer and the union voluntarily settled the void agreement, the parties will return to the same stage in bargaining as they were at when they settled. Pre-existing terms of employment will be reinstated until the terms of a new agreement compliant with the Act are resolved. If an award is declared void, the issues will be referred back to the arbitrator or arbitration board to make a decision compliant with the Act. The pre-existing terms of employment are reinstated until the compliant award is issued.

Any increases in compensation for non-union employees which are inconsistent with the Act are void and unenforceable.

Public sector unions have been very critical of the Act. It is anticipated that the Act may be challenged as contrary to the Charter of Rights and Freedoms. While we await further developments, public sector employers should consider their strategies and options to comply with the Act in relation to union and non-union employees.