On November 7, 2019, Bill 124: Protecting a Sustainable Public Sector for Future Generations Act, 2019, received Royal Assent. The Act imposes compensation restraints on certain public sector employees with the aim of giving employers in the broader public sector a measure of predictability as to their future payroll cost increases.
The Act imposes compensation restraint measures for non-union and unionized employees employed by (among others) universities, colleges, hospitals, crown agencies and school boards. The Act does not apply to executive-level employees who are subject to the Broader Public Sector Executive Compensation Act, 2014.
The “Salary Cap”
The Act defines “salary rate” as “a base rate of pay, whether expressed as a single rate of pay, including a rate of pay expressed on an hourly, weekly, bi-weekly, monthly, annual or some other periodic basis, or a range of rates of pay, or, if no such rate or range exists, any fixed or ascertainable amount of base pay”.
Under the Act, salary rate increases are limited to 1% per 12-month period for each position or class of positions. However the 1% cap does not apply if the increase is a result of:
- the employee’s length of time in employment;
- an assessment of performance; or
- the employee’s successful completion of a program or course of professional or technical education.
The “Compensation Cap”
The Act defines “compensation” broadly as “anything paid or provided, directly or indirectly, to or for the benefit of an employee, and includes salary, benefits, perquisites and all forms of non-discretionary and discretionary payments”.
Under the Act, increases to compensation entitlements for each of the following groups are limited to 1%:
- each separate bargaining unit of the employer; and
- all non-represented (e.g. non-union) employees.
To be clear, under the “Compensation Cap”, the compensation restraint for each of the above groups is calculated in the aggregate. For example, a particular bargaining unit member may receive a 2% increase based on an assessment of performance, provided that increases to the total compensation of all bargaining unit members do not exceed 1% per year.
Time Frame for Wage Cap: the “Moderation Period”
The Act creates a three-year “moderation period” during which the compensation restraints will apply. For unionized employees, the moderation period will generally coincide with the expiry of the current collective agreement (though there are several exceptions to this general rule). For non-unionized employees, the three-year moderation period begins on a date determined by the employer, provided it begins on or before January 1, 2022.
Coming into Force
The Act will come into force upon the date of proclamation which has yet to be determined. We will report on any updates concerning the in-force date.