Earlier this month Ontario’s Treasury Board President, Peter Bethlenfalvy, delivered a keynote address to the Canadian Club in Toronto that went largely unnoticed beyond the halls of Queen’s Park and those of us who advise clients on how to navigate them.
Yet what he said that day may ultimately have a greater impact on this government’s fiscal and labour relations agenda, than any of the policies related to alcohol, which have dominated the headlines for weeks.
In a news release accompanying the speech, the Ford government said that they will “engage with public sector employers and bargaining agents to explore how compensation growth can be managed in a way that results in wage settlements that are modest, reasonable and sustainable.”
This may seem innocuous enough to casual observers. However, the government listed three potential outcomes that could result from these consultations including, “voluntary agreement to wage outcomes lower than the current trend,” “trade-offs that will lead to reductions in compensation costs,” and most importantly, “consideration of legislative measures.”
It was that final reference to potential legislatively enforced measures that caught my attention and took me back to 2012 when I served as the Chief of Staff to Ontario’s Minister of Government Services, the ministry that handles Ontario’s public service contract negotiations.
After securing an unprecedented third consecutive election victory for the Ontario Liberal Party, then Premier Dalton McGuinty faced a challenge not dissimilar to the one confronting the Ford government today. Namely, how to enact short-term spending restraint designed to give the government fiscal breathing room, while it developed a long-term plan to eliminate a structural deficit that was exasperated by the ongoing fallout from the worldwide great recession of 2008.
Determined to improve the province’s fiscal situation and protect its credit rating from a downgrade by international bond rating agencies, the McGuinty government imposed a wage freeze on teachers, while allowing for some upward movement on salary grids. Shortly thereafter, finance minister Dwight Duncan unveiled draft legislation that would have imposed a two-year freeze in wages and benefits for broader public sector (BPS) workers at hospitals, colleges, hydro companies and long-term care homes.
Furthermore, under the proposed bill, all collective agreements were to be submitted to the finance minister for approval, leaving the government to approve or reject the deals, or even impose its own contract on the two parties.
Critics of the measures pointed to the governments own Commission on the Reform of Ontario’s Public Services led by former TD Bank chief economist Don Drummond, which had tabled a report earlier that year arguing against government-imposed wage freezes because they inevitably create pent up pressure for catchup once a freeze is lifted. Instead Drummond suggested structural changes designed to increase workforce productivity and reduce the BPS employment footprint over time.
The imposed settlement on teachers and the proposed wage freeze in the BPS set off a storm of protests from organized labour, the likes of which Ontario Liberals had never seen since coming to power in 2003. A concerted effort was launched by public sector unions to ensure an NDP victory in a Kitchener area by-election. Had the Liberals won that by-election, they would have once again had a majority government and the ability to shut down the opposition-led inquiry into decisions to move gas plants slated for Oakville and Mississauga (moves both the PC’s and NDP had called for during the 2011 general election campaign).
As it turned out, former-premier McGuinty decided to resign from office towards the end of 2012. McGuinty’s successor as Liberal Leader, Kathleen Wynne, decided to change course and reverse the imposed wage freeze on teachers and abandon pursuit of an imposed BPS-wide wage freeze. This however, did not stop organized labour from pursuing a legal challenge.
On April 20 2016, the Ontario Superior Court of Justice ruled that the 2012 measures related to teachers’ wages violated their Charter Right to meaningful collective bargaining because the process engaged in was “fundamentally flawed.” Essentially the court found that the government did not meet its constitutional obligation to meaningfully consult with labour partners before setting fiscal targets and imposing a program intended to meet them.
Which brings me back to the consultations announced by Minister Bethlenfalvy (President of the Treasury Board) earlier this month. I have no doubt that the government is entering these consultations in good faith. That being said, this looks like a process designed by lawyers within the Ministry of the Attorney General to meet the constitutional obligations outlined by the Superior Court in 2016. Should the Ford government decide to bend their public sector salary cost curve by imposing a wage framework on the BPS, it would surely face a court challenge as the Liberals did seven years earlier. Such a well-designed public consultation as the one referenced by the Minister in his Canadian Club speech could serve as an inoculation against constitutional risk.
Ontario has a professional, permanent public service for many reasons. One of these is to ensure that it can provide advice to new governments on how to avoid mistakes of the past. If the Ford government ends up pursuing enforced wage restraint through legislation, these consultations may prove to be their constitutional trump card.