On September 20, 2012, the Liberal government in Ontario announced an intention to freeze the wages of Ontario's public service ("OPS") and broader public sector ("BPS") managers and executives as part of a solution to reduce the province's $14.8 billion deficit. Under new measures announced by Finance Minister Dwight Duncan, OPS and BPS managers and executives will be required to accept a wage freeze, including a freeze on the maximum bonuses that can be provided. Furthermore, new executives will not be able to earn in excess of $418,000, which is twice the Premier's salary. All of this comes in advance of additional measures for rank and file public sector workers that the Government indicated will be announced "very shortly".

THE PROPOSED FREEZE

Under the proposed initiative, there are three broad categories of freeze initiatives:

  1. Managers in the BPS who receive performance pay will have their compensation frozen for two years, based on all compensation included on their T-4 slips.
  2. Managers in the OPS who receive performance pay will have their compensation frozen for three years.
  3. There will be a permanent "hard cap" on compensation for new executives. The proposed legislation would cap the compensation of new executives in the OPS and BPS at $418,000 – twice the Premier's salary. Existing executives earning more than the proposed cap will have their compensation grandfathered. Presently, there are 150 executives, mainly in the hospital, university, and electricity utility industries that earn more than this amount. The Finance Minister will have the discretion to approve exceptions if a business case is presented, such as when an organization has difficulty recruiting employees.

The Government has indicated that if a Manager under-performs and as a result earns less performance pay than in 2011, the result could be a reduction in compensation year over year. There may, however, be limited exceptions where increases are permitted (such as a mother returning from pregnancy leave).

Unions were quick to denounce these new measures as ineffective.

WHAT THE FUTURE HOLDS

It is no surprise that in implementing what may amount to sweeping wage restraint initiatives across the province, the Government has chosen to start at the top. Finance Minister Duncan stated that the move was "symbolic", noting that it is difficult to ask hospital clerks to take pay freezes when their bosses are not. He was also clear that the wage restraint will be applied equally, and that measures for other public sector employees are in the works. In particular, the government has warned unionized employees that they could face wage freeze legislation if they do not agree to "hold the line" in collective bargaining negotiations. All of this suggests that there is more wage restraint to come.

Ultimately, we will have to wait and see if the headlines and sound bites are reflected in legislation to follow. We will keep you apprised of any developments that follow.

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