In Ontario, the Public Sector Compensation Restraint to Protect Public Services Act, 2010, more commonly referred to as the ‘wage restraint legislation’, has now passed second reading in the legislature.

The proposed Act applies to every employer that received at least $1,000,000 in funding from the Government of Ontario in 2009 and does not carry on its activities for the purpose of gain or profit to its member or shareholders. It also applies to the Crown, universities and colleges, hospitals, school boards, Hydro One, Ontario Power Generation, and boards of health under the Health Protection and Promotion Act. However, the proposed Act does not apply to municipalities and certain other organizations subject to municipal oversight, or to employees who bargain collectively.

The wage restraint legislation is just one part of a larger piece of legislation (the Creating the Foundation for Jobs and Growth Act, 2010) which will implement the 2010 budget, and proposes the following:

  • ‘freezing’ compensation of all employees and office holders who are employed by prescribed employers such that their rate of pay cannot be increased during the freeze period from March 24, 2010 to March 31, 2012;  
  • ‘freezing’ benefits so that a benefit, perquisite or payment provided to an employee cannot be increased during the freeze period, nor can new or additional benefits, perquisites or payments be provided during the freeze period;
  • prescribing parameters and restrictions for compensation of new hires, employees who are promoted or transferred, and employees subject to an expired or renewed contract; as well as restrictions on retroactive compensation;
  • requiring employers subject to the legislation to file reports with the government aimed at demonstrating compliance with the provisions; and
  • creating the new Public Sector Compensation Restraint Board.

As it is currently written, the legislation will retroactively prohibit increases in compensation and benefits as of March 24, 2010.

The wage restraint legislation establishes exceptions to the freeze provisions. For example, the legislation allows for increases in an employee's rate of pay within a pay range under a compensation plan that was in effect on the effective date (March 24, 2010), provided the increase is in recognition of certain factors as set out in the Act and the maximum compensation within the pay range or within the applicable step in the pay range is not increased. A similar exception exists which allows for increases to, or the addition of new benefits, perquisites or payments to an employee in certain circumstances.

The legislation is still not passed and is subject to change. As it is currently written, the wage restraint legislation gives rise to a number of questions and concerns that are not clearly addressed in the draft Act, and we are monitoring the progress of this legislation closely. We will keep you apprised of any significant developments or changes.