As a follow-up to our “Operating in an Age of Restraint” seminar as part of the Coffee Talk Health Seminar Series held on September 19, 2012 and in light of the Government of Ontario’s intention of imposing a broader compensation freeze in the public sector through the proposed Protecting Public Services Act, 2012 (“PPSA, 2012”) (see our Communiqué dated September 28, 2012), we thought it would be helpful to review the contents of Part II.1 of the Broader Public Sector Accountability Act, 2010 (“BPSAA”) which is currently in effect. If passed, the proposed PPSA, 2012 will repeal and replace these provisions.

On June 22, 2012, the Ontario Legislature passed the government’s budget bill – Bill 55, the Strong Action for Ontario Act (Budget Measures), 2012. One of the significant features of the Billwas the extension of restraint measures on executive and designated office holder compensation to replace the broader wage restraint measures that expired on March 31, 2012. These newly extended restraint measures were accomplished through amendments to Part II.1 of the BPSAA. These restraint measures did not apply to union workers in the public sector.

The Part II.1 wage restraint amendments to the BPSAA currently apply to designated executives and officer holders of hospitals, school boards, universities, colleges, Hydro One Inc., the Independent Electrical System Operator, Ontario Power Authority, Ontario Power Generation Inc. and any other employers in the broader public sector who may be named by regulation to the BPSAA. “Executive” or “office holder” is defined as any of the following individuals who earn or could potentially receive at least $100,000 in compensation on an annualized basis: the head of the organization (whatever his or her title); a full time member of the board; a vice-president; chief administrative officer; chief operating officer; chief financial officer; chief information officer or other similar executive; a director of education or superintendent of a school board; or the provost or dean of a university, college of applied arts and technology or post-secondary institution.

The wage restraint measures incorporate a complete freeze on base salary to the level in effect on March 31, 2012. With limited exceptions, the freeze applies to bonuses, benefits and perquisites. Exempted are increases in payments to designated executives and office holders if the increase is in recognition of the individual’s performance in relation to: successful implementation of cost reduction measures while protecting front-line service; achievement of articulated government priorities; or achievement of performance improvement targets set out in an annual quality improvement plan developed under the Excellent Care for All Act, 2010, if the designated employer is a public hospital. However, any such performance pay potential must have been in the compensation plan as of March 31, 2012. Further, designated employers may not increase their total performance pay envelope from that paid prior to March 31, 2012.

Part II.1 of the BPSAA prohibits a designated public sector employer from altering the title of a position or office or carrying out any restructuring that would result in the compensation freeze not applying to one or more employees or office holders to whom the freeze would otherwise have applied. There is an exception where the change is carried out solely for a bona fide purpose other than to prevent the freeze from applying to one or more employees or office holders.

Similarly, if a person becomes a designated executive or office holder on or after March 31, 2012 and before the end of the freeze, his or her compensation plan must not provide for compensation greater than that provided under the compensation plan that is in effect on his or her start date (in the new position) for other employees in the same or a similar position with the same designated public sector employer.

The newly extended restraint measures came into force retroactively, and have been deemed to have been in force since March 31, 2012. They will apply at least until the Province of Ontario ceases to have a budget deficit or until they are replaced by the proposed PPSA, 2012. At present, the most optimistic projection for the elimination of the deficit is 2017.

We will keep you apprised of all developments with respect to the proposed PPSA, 2012, and its impact on Part II.1 of the BPSAA.