Arbitration reform problematic: law experts, Politicians who promise to cap public sector salaries 'might be promising the impossible'

Posted Oct 4, 2012 By Derek Dunn

EMC news - City and provincial politicians are calling for arbitration reform as a way to rein in public sector wage increases.

But at least two labour law experts say changes could prove difficult to achieve or possibly result in a less desirable system.

Carleton-Mississippi Mills MPP Jack Mac-Laren and his PC party have proposed legislation to force arbitrators to factor in taxpayers' ability to pay when it comes to settlements.

MacLaren argues that a deep deficit and slow economy is proof enough that taxpayers can't afford to keep giving pay hikes to police and others deemed essential.

"It's time to stand up for taxpayers by fixing a broken system that awards unaffordable contract settlements to government union employees," MacLaren penned in a recent column.

"All arbitrators' decisions must consider specific economic and budgetary factors, like the taxpayers ability to pay, when making decisions."

West Carleton-March Coun. Eli El-Chantiry has long expressed frustration that arbitrators can force elected politicians to pay more than they want to - or campaigned on - for services.

"The thing is that arbitrators are unelected, they are appointed and they don't care.

At the end of the day he can say, 'You have the ability to pay,'" El-Chantiry said.

"It's always about increasing taxes. The 'ability to pay' is a joke."

However, Prof. Michael MacNeil in the faculty of law at Carleton University says politicians are not just elected representatives, they are employers.

That means there are laws preventing politicians from performing certain actions - regardless of whether they made campaign promises such as an annual cap on tax increases.

"If it's all based on political decisions, that completely eviscerates the rights of employees," MacNeil said, adding that tampering with an arbitrator's neutrality harms two basic rights: freedom of association and the right to collective bargaining.

That would mean - in the case of police and others considered essential and not allowed to strike - the likely rise of illegal strikes and other job actions.

"It is quite natural," MacNeil said. "Should (public) workers subsidize taxpayers? That's the counter argument."

TAX CORPORATIONS

The PC's position that government can't get money to pay for raises is difficult to accept, MacNeil said, when Ontario has the lowest corporate tax rate among members of the Organization for Economic Co-operation and Development.

The province also has a corporate tax rate lower than many European jurisdictions.

El-Chantiry, chairman of the police board, again in September asked the McGuinty Liberals to "exercise fiscal restraint" when negotiating with the OPP, because a settlement with the provincial force often sets the stage for increases among municipal forces.

Liberals recently proposed stiffer rules for arbitrators, but the PCs and NDP rejected the plan.

Even the Drummond Report contained suggestions for dealing with the process.

The former TD Bank chief economist, Don Drummond, last February released a 665-page report calling for deep spending cuts.

If not, he warned that the province will face a crippling $30-billion deficit by 2017-18.

El-Chantiry said police settlements in remote or more dangerous areas shouldn't affect deals made in Ottawa, but insists they do.

MacNeil doubts that is the case. Arbitrators are capable of rejecting irrelevant evidence.

"Arbitrators are not stupid," he said.

Prof. Kevin Banks in the faculty of law at Queen's University allowed the possibility that arbitrators may infrequently accept weak comparables.

But poor or novel decisions can go both ways.

He describes a hypothetical situation where nurses are asking for pay equity with police officers. Arbitrators, he said, are conservative and usually base decisions solely on past precedent.

That's how they develop a desirable reputation among future negotiating teams on both sides.

"They tend to have a lot of experience in labour relations," he said. "But they don't impose big changes."

He suspects an "ability-to-pay" law would be difficult to define and require a lot of evidence on behalf of governments to prove.

"It's not at all obvious how you would structure that."

Banks said the arbitration process has positives and negatives, but that it is at least a place where reasoned arguments and reasoned decisions are held.

He added that arbitrators attempt to replicate market-based labour decisions, although that can be difficult because often public employees are doing work with no private sector equivalent.

However, he echoed MacNeil's point that public workers shouldn't be left to the whim of elected politicians.

"There is a strong tradition in arbitration law that taxpayers shouldn't get public services at a discount," Banks said.

MUNICIPALITIES POWERLESS

While the province appears poised to move ahead with legislation banning strikes and freezing wages on teachers, the Charter of Rights could prevent it from sticking, Banks said.

On the other hand, he asks why the province can do it and municipalities can't?

The answer, he said, is that the province hasn't conferred those powers on the municipalities.

MacNeil and Banks agree that municipal politicians who vow to rein in spending on salary increases walk a fine line.

"I can understand why that would be a frustrating situation, one of the tools for cost containment isn't in your tool kit," Banks said. "You should know what you can and can't do before you start making promises."