• Ontario Government Has Reintroduced the Broader Public Sector Executive Compensation Act, 2014
  • September 17, 2014
  • Law Firm: Borden Ladner Gervais LLP - Toronto Office
  • On March 24, 2014, the Ontario government introduced Bill 179 which, if passed, would give the government the authority to establish new “compensation frameworks” for certain senior public sector executives and implement new accountability and transparency measures for the broader public sector (“BPS”). On April 9, 2014, the Bill went to second reading.

    When the provincial election was called, Bill 179 died on the order paper.

    Following the Ontario provincial election, the Bill was reintroduced on July 16, 2014, as Bill 8, which contains amendments to several acts, including the Broader Public Sector Accountability Act, 2010 (“BPSAA”), and creates a new statute called the Broader Public Sector Executive Compensation Act, 2014 (“BPSECA”). The government has indicated that if passed, Bill 8 will act to expand oversight of government agencies and the broader public sector.

    BPSECA applies to designated broader public sector employers, including school boards, hospitals, universities, colleges, Hydro One, the Independent Electricity System Operator, the Ontario Power Authority, Ontario Power Generation, and community care access corporations. BPSECA applies to employees and office holders who are “designated executives,” defined as persons who make at least $100,000 in compensation per year, or who could potentially receive $100,000 per year, and who are:

    • the head of an organization;
    • vice president or other executive (e.g., chief operating officer, chief administrative officer, chief information officer), regardless of title; or
    • a director of education or supervisory officer of a school board.

    Designated executives do not include full-time members of a board of directors, board of governors or board of trustees, or provosts and deans of colleges and universities.

    If enacted, BPSECA would authorize the government to make regulations establishing “compensation frameworks” that could impose compensation restraints on all designated executives, a limited class, or even a specific individual. These compensation frameworks could create limits on any aspect of an employer’s compensation plan, including salary, benefits, bonuses, or perquisites.

    In addition, BPSECA gives the government the power to issue directives to BPS organizations, requiring them to provide detailed compensation information with respect to one or more designated executives.

    Any new limit imposed by a compensation framework would not reduce current executives’ compensation as long as they remained in their current positions. However, increases to designated executives’ compensation will not be permitted to the extent that such increases would be contrary to the applicable compensation framework. Compensation restraints would further apply to individuals who became designated executives on or after the effective date of an applicable compensation framework, or who moved from one executive position to another after a compensation framework came into effect.

    Enforcement of Compensation Restraint Measures

    To ensure that BPS organizations would comply with their obligations under BPSECA, the Bill provides for a number of enforcement mechanisms:

    • New government power to require organiza­tions to submit reports to show their compli­ance with compensation frameworks. Each report must include a statement, signed by the organization’s highest ranking officer, attesting to the fact that it has complied with the applicable compensation frameworks.
    • New audit power that allows the government to appoint a public accountant to confirm an organization’s compliance with the applicable compensation frameworks.
    • New offences resulting in a fine of up to $5,000 for:
      • wilfully failing to provide report, statement or attestation under BPSECA;
      • wilfully providing a false report, statement or attestation under BPSECA; or,
      • obstructing an auditor in the performance of their auditing functions under the Act.
    • New liability for “overpayments”:
      • the executive to whom an overpayment has been made can be held personally liable for a corresponding debt to the organization; and
      • the organization that made an overpayment can be held liable for a corresponding debt to the Crown, which can be deducted from future financing.

    For example, a compensation framework might institute a hard salary cap for a supervisory officer of a school board. Exceeding that salary cap could have serious consequences for both the supervisory officer and/or the school board. The supervisory officer could be held personally liable for the debt to the school board and/or the amount could be deducted from the school board’s future funding in order to account for its debt to the government.

    Accountability Measures

    In terms of accountability measures, Bill 8 builds on existing measures under the BPSAA, and contains several amendments to the BPSAA, including:

    • Government-issued directives requiring certain BPS organizations, including school boards, to prepare and publish business plans and/or other business or financial documents specified in the directive; and
    • Government-issued guidelines with respect to how publicly funded organizations, such as school boards, must prepare and publish business plans and other financial documents.

    In addition, Bill 8 amends the Municipal Freedom of Information and Protection of Privacy Act, which applies to school boards, to require institutions to put “reasonable measures” in place to preserve records within their custody and control. The Bill also creates a new offence where a person has altered, concealed or destroyed a record in order to deny a right of access to the record or the information contained in it.

    Finally, Bill 8 amends the Ombudsman Act, expanding the Ombudsman’s powers to apply to matters related to school boards, universities and certain municipal entities. The Ombudsman would have the power to investigate complaints about a school board, make recommendations, and report on his findings. This new Ombudsman oversight could result in increased public scrutiny of school boards’ policies and practices.