Commission on the Reform of Ontario's Public Services

Chapter 15: Labour Relations and Compensation
The interest arbitration process in Ontario is a major determinant of wage (compensation)
settlements in the Ontario BPS for unionized employees; all hospital employees, long-term
care workers, police officers, professional firefighters and Toronto Transit <strong>Commission</strong>
employees have no right to strike and thus have unresolved bargaining issues decided
through interest arbitration. Interest arbitration is also used periodically in other industries,
such as ambulance services and energy, and is used as a dispute mechanism of last resort to
settle disputes after striking employees are ordered back to work.
The system of interest arbitration is very important. Unfortunately, the system has recently
come under increasing scrutiny and attack. The arbitration system thus must not only work,
but it must be seen to work.
The <strong>Commission</strong> heard many submissions from employers in the BPS claiming that arbitration
is seriously flawed, even broken. Specific charges included the granting of high compensation
awards, ignoring “ability to pay” arguments and long delays that are sometimes followed by
high retroactive awards that had not been budgeted for.
Our research leads us to make recommendations to improve the arbitration process. But we
hasten to add that we do not find the system to be broken. In general, arbitration awards have
followed freely negotiated settlements. The notion of “ability to pay” is understandably difficult
to apply in the public sector where most of the employer entities could raise taxes if pressed.
Further, we found that the employer often did not present evidence of this argument to the
arbitrators.
We believe the recommendations set out below will improve the system. However, by
themselves, the changes will not materially change the sorts of compensation increases
awarded through arbitration. The fiscal situation dictates that those compensation
increases must be highly constrained over the next several years. That will only happen if the
public-sector employers adopt tough, but fair, stances in negotiations. The pattern will then
likely be reflected in arbitration.
Wherever government, BPS employers and bargaining agents have established a pattern of
negotiating moderated wage increases, then interest arbitrators should follow that lead.
Bringing the Interest Arbitration Process under One Roof
The <strong>Commission</strong> recognized the need to establish principles/outcomes that would assist its
recommendations for interest arbitration process reform.
Recommendation 15-2: Establish the overall principles/outcomes necessary for reform to the
interest arbitration process going forward.
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