Definitive Report - REPORT_NO292, March 1994

1. 146. In a communication dated 12 May 1993, the Canadian Labour Congress (CLC) submitted a complaint of violations of freedom of association against the Government of Canada (Manitoba), on behalf of the National Union of Public and General Employees (NUPGE) and the Manitoba Government Employees Union (MGEU). The Public Services International (PSI) expressed its support to the complaint in a communication dated 18 May 1993.
2. 147. The federal Government, in a communication of 30 November 1993 transmitted the observations and information from the Government of Manitoba, dated 28 October 1993.
3. 148. Canada has ratified the Freedom of Association and Protection of the Right to Organize Convention, 1948 (No. 87). It has not ratified the Right to Organize and Collective Bargaining Convention, 1949 (No. 98), the Labour Relations (Public Service) Convention, 1978 (No. 151), or the Collective Bargaining Convention, 1981 (No. 154).

A. The complainant's allegations

1. 149. The complainant organizations allege that the Public Sector Reduced Workweek and Compensation Management Act ("Bill 22"), tabled 5 April 1993, violates Convention No. 87. This legislation allows the Manitoba Government unilaterally to impose a reduced work week on the 100,000 public sector employees in Manitoba through a ten-day lay-off programme. It nullifies certain sections of collective agreements in order to allow the Government to institute its lay-off plan for all Manitoba's public sector workers. The legislation will reduce the public sector payroll by some $300 million, or approximately 4 per cent of the wages of each public sector employee.
2. 150. The complainants point out that in a recent complaint against another legislation concerning public servants (Bill 70, Public Sector Compensation Management Act) which froze Manitoba public servants' wages for a year through a one-year extension of collective agreements, the Committee on Freedom of Association regretted in its recommendations that the Government had not given priority to collective bargaining as a means of determining employment conditions of its public servants, trusted that it would refrain from taking such measures in the future, and stressed the importance of adequate consultation prior to the introduction of legislation through which the Government seeks to alter the bargaining structures in which it acts actually or indirectly as employer (284th Report, Case No. 1604, para. 325).
3. 151. Since the Government would probably submit that Bill 22 is implemented as a result of the exceptional economic and fiscal circumstances in the province, as it did with respect to Bill 70, the complainants state that the Government did not provide documentation to the provincial union to support its economic arguments.
4. 152. Bill 22, which represents the second legislative interference in public sector labour relations in the province of Manitoba during the last two years, is designed to reduce compensation of all public sector employees by approximately 4 per cent by instituting a mandatory lay-off of up to a maximum of 15 days for all employees of the provincial Government, Crown corporations, health-care facilities, municipalities, school boards, universities and colleges. The legislation also reduces the amount paid to provincial court judges, doctors, members of the Legislative Assembly and members of the Government's boards and commissions.
5. 153. The legislation, which expires on 31 December 1995, is divided into three sections: reduced work week and reduced compensation for the majority of public sector employees; reduced compensation for medical practitioners; and reduced compensation for members of the Legislative Assembly. The first part of the legislation allows employers, after consultation with the bargaining agent, to implement a maximum 15-day lay-off programme. If no agreement is reached with the bargaining unit, the employer has a unilateral right to establish and implement the lay-off programme. The days in which employees are laid off are classified in the legislation as "leaves of absence without pay". Under the second part of the legislation, total fee payments to doctors will be reduced by 2 per cent. The final part of the legislation reduces the salaries of members of the Legislative Assembly by 3.8 per cent.
6. 154. Section 3 of Bill 22 allows the legislation to prevail over all collective agreements governing the working conditions, benefits and wages of public sector employees in Manitoba. Specifically, with respect to provincial government employees, the legislation nullifies those contract clauses governing hours of work, pay practices, pay plans, union recognition and security, scope of bargaining, lay offs, bumping rights and the grievance and arbitration procedure. The legislation will also impact on future superannuation benefits for older workers because those benefits are based on the average salary of an employee's best three years of earnings. All sections of the legislation also prevail over any arbitration award or decision, therefore not allowing any independent third party interpretation of the legislation, including how it is implemented.
7. 155. Section 5(4) of the legislation requires an employer to commence consultations with the appropriate bargaining unit for the purpose of reaching an agreement on the details of the lay-off programme. If no agreement is reached between the employer and a union after 30 days of consultation, section 5(5) allows the employer to take unilateral action with a view to establishing and implementing the maximum 15-day lay-off programme. The complainants are deeply concerned about this section of the legislation, simply because it gives the employer the right to implement lay-off programmes in an unjust and unequal manner. An employer, for example, would have the right to lay off those employees whom it personally disliked during days in the middle of the week and could structure lay offs for those employees whom it personally liked on Mondays and/or Fridays, thus ensuring that those employees received long weekends. It is obvious that this legislation provides employers the opportunity to treat employees very differently and unequally depending on their views of the personal relationship with an individual employee. In those circumstances, there is no avenue to appeal specific lay-off measures if the union or individual employees feel that the lay-off programme has been implemented in a biased and inequitable manner.
8. 156. Section 12 of the legislation deems all the days on lay-off as "days of leave without pay" and "not to be a lay-off within the meaning of any other legislation, regulation or labour relations contract or award". This section of the legislation would result in the loss of two weeks of unemployment insurance benefits for those employees who are laid off on a permanent basis, or for more than 15 days, during the next 52 weeks, since under Canada's unemployment insurance system, employees must be laid off for a period of two working weeks to be eligible to unemployment insurance benefits. The Government's lay-off programme will not count as the two-week waiting period for unemployment insurance benefits.
9. 157. The complainants further submit that there was no adequate consultation prior to introduction of Bill 22. Upon learning through the press, in December 1992, that the Government considered rolling back public servants' wages, the President of MGEU requested clarification from the Minister Responsible for the Civil Service, who verbally denied such intention. Following further requests from MGEU, the Minister only mentioned the Government's "preference" not to have lay offs or legislative limitations. This correspondence was followed by a meeting on 11 January 1993 of the Civil Service Joint Council, made up of three union representatives and three Government ministers. Unable to give the public sector unions assurances about the Government's intention to legislate a public sector restraint programme, the Civil Service Minister indicated that a meeting with the Finance Minister would be required to get clarification.
10. 158. Another meeting of the Joint Council was held on 2 February 1993 which the Finance Minister attended. He indicated that the Government was looking for an undefined voluntary wage roll-back to minimize future lay offs, and informed the unions that this measure could be implemented within the terms of the current collective agreement, or the Government could bring in specific restraint legislation. MGEU representatives at the meeting indicated that they would have to consult with the union's membership before considering opening up the current collective agreement for renegotiations. The Finance Minister indicated that he would agree to give the union time to consult with its members. The President of MGEU sent a letter dated 5 February 1993 indicating his organization would respond by the end of the month.
11. 159. MGEU immediately set up a series of five province-wide membership meetings. The first two meetings took place on 9 and 10 February and the third one was set for 12 February. However, MGEU's President received a phone call at about midnight on 11 February from the Civil Service Minister, who indicated that the Government had unilaterally decided to introduce a reduced work week and that the announcement would be made on 12 February. This announcement was faxed to MGEU's offices at 12.30 p.m. on 12 February, the exact time a press conference was being held by the Finance Minister and the Civil Service Minister, announcing the Government's plan to institute a ten-day lay-off plan. Upon completion of consultations with its members, MGEU informed the Civil Service Minister, on 26 February 1993, that they did not accept a reopening of the collective agreement nor a voluntary wage roll-back.
12. 160. The complainants refer to the principle established by the Committee in that respect: "The establishment of a tripartite group to examine the question of wages and the anti-inflationary measures ... should be promoted between public authorities and employers' and workers' organizations with the general objective of achieving mutual understanding and good relations between them with a view to developing the economy as a whole or individual branches thereof, improving conditions of work and raising standards of living. In particular, the authorities should seek the views, advice and assistance of employers' and workers' organizations, in an appropriate manner in respect of such matters as the preparation and implementation of laws and regulations affecting their interests." (Digest of decisions and principles of the Freedom of Association Committee of the Governing Body of the ILO, 1985, 3rd edition, para. 651.) They submit that, by its action leading up to the introduction of Bill 22, the provincial Government showed total disregard and lack of commitment to the consultative process.
13. 161. The complainants conclude that in view of the unilateral nature of the legislation, the fact that it nullifies many contract clauses contained in public sector employees' collective agreements, and that it does not allow recourse to an independent third-party system to arbitrate on different interpretations of the legislation, Bill 22 is a blatant violation of the fundamental principles of freedom of association, as established by ILO Convention No. 87. In addition, placing the full burden of the provincial deficit and debt on public sector workers in the province is unjustified and unfair. At the very least, pirnciples of fairness would dictate that the Government attempts to negotiate and consult in good faith with the public sector bargaining agents.

B. The Government's reply

1. 162. In its communication of 28 October 1993, the Government of Manitoba submits that Bill 22 does not violate Convention No. 87, and takes issue with certain information submitted by the MGEU.
2. 163. On the first point, the Government states that Bill 22 in no way infringes the substantive provisions of Convention No. 87, since it does not restrict workers' rights to establish or form organizations of their own choosing, to draw up their own constitutions and rules, elect their representatives, organize their administration and formulate their programmes. It does not dissolve or suspend workers' organizations, infringe on workers' organizations' rights to join federations, impede their legal personality, or contravene the law of the land.
3. 164. On the second issue, the Government argues that a number of statements made by MGEU are inaccurate, misleading and/or incomplete. Once the record is corrected and clarified, it will be clear that the introduction of Bill 22 was a reasonable action, not inconsistent with ILO principles.
4. 165. The Canadian economy, including Manitoba, has recently begun to emerge from a severe and prolonged recession. Like other governments across Canada, the province of Manitoba is facing serious fiscal difficulties brought about by increasing demands in the priority areas of health, education and family services, reduced transfers from the federal Government and the heavy debt load incurred by previous administrations. In addition to these structural problems, the recent recession increased the difficult circumstances. While the economy is now moving forward, the lingering effects of the recent recession will continue to have a negative impact on provincial revenues for some time. In his 1993 budget speech, the Finance Minister indicated that all Manitobans would be affected to some extent by fiscal measures taken to remedy problems which had grown over decades.
5. 166. In meeting its priorities over the years, the Government has incurred significant debt, over 10 per cent of its expenditure being required simply to meet interest costs thereon. This large debt significantly constrains the Government's ability to respond effectively to priority needs, like health and education services. For several years the Government has faced serious limitations in its revenue, which included reduced collections by the province because of the recession and reductions in transfers from the federal Government totalling $130 million. This is in addition to further reductions of $167 million in equalization estimates as a result of a change in the methodology for calculating population.
6. 167. There is a significant lag between improved economic performance and improved provincial revenues. Revenue for 1993/94 is expected only to increase by 0.2 per cent above the 1992/93 revenue estimates. These factors resulted in a deficit for 1992/93, i.e. some $230 million higher than was budgeted. Unless the Government continued its efforts to control expenditure, the high deficits and ever-growing debt would have continued. The Government therefore instituted a variety of measures to bring expenditure in line with revenue, and reduced its programme expenditure in 1993/94 by 2 per cent.
7. 168. The province also introduced Bill 22 as a means to facilitate public sector employers' efforts to meet their budget requirements without the necessity of substantial lay offs. These measures continue the efforts of the province to live within its means. As 80 per cent of programme costs are labour costs, either directly as wages for civil servants or indirectly as funding for wages in other areas of the public sector, these measures unavoidably affect public employees.
8. 169. Bill 22 does not, as the MGEU contends, allow the Government "unilaterally to impose a reduced work week on the 100,000 public sector employees in Manitoba through a ten-day lay-off programme". The Bill does provide an innovative mechanism which will allow public sector employers to implement reduced work-week programmes after consultation with employee representatives to assist them in meeting their budget requirements without having to permanently lay off substantial numbers of employees. In addition, employers' and employees' representatives can enter into agreements on alternate methods for achieving their financial requirements.
9. 170. The legislation does not nullify any clauses of collective agreements. For example, negotiated salary increases will be granted. In the case of the MGEU, its members will receive a 2.3 per cent salary increase in September 1993.
10. 171. In order to ensure that reduced work-week programmes can be implemented fairly and equitably, the legislation does allow for some modification of the application of certain provisions solely for the purpose of implementing reduced work weeks. In the absence of such legislative assistance, a disproportionate impact would be felt by those on the lower end of the seniority scale, which in many cases are women, aboriginal, visible minority and disabled employees. The legislation allows the impact to be shared equally by all employees, including executive and excluded employees. For all purposes other than reduced work weeks the existing provisions of collective agreements remain in full force and effect.
11. 172. The legislation classifies these days off as leaves of absence without pay in order to protect employee benefits to the greatest extent possible. Many collective agreements in Manitoba allow for the continuation of benefit coverage and accrual for short term leaves of absence without pay, while benefits cease immediately upon lay off. For example, under the Government Employees' Master Agreement, vacation continues to accrue until the leave exceeds more than half of a month.
12. 173. With respect to application of the days off to particular employees, the obligation on employers remains to act fairly and reasonably in establishing schedules and procedures for determining individual days off.
13. 174. The legislation will not affect employees' entitlement to unemployment insurance benefits in the manner described in the MGEU submission. Even if the days off in the Government's programme were considered lay off days, they would not count for the unemployment insurance waiting period since they will be taken on a scheduled basis throughout the year. Employees who are laid off on a permanent basis would be required to serve a continuous two-week waiting period in any event.
14. 175. As regards MGEU's allegations on the lack of adequate consultations, the Government submits that it has demonstrated the type of broad consultation outlined in the Committee's principle quoted by the complainant (Digest, op. cit., para. 651).
15. 176. For several years, the economic and fiscal challenges facing the province have been outlined publicly in provincial budget addresses and background papers, public statements by the Finance Minister and analysis by respected third parties. The MGEU was also made aware of these difficulties during contract negotiations both with the civil service and publicly funded agencies the employees of which it represented. By late 1992 it had become clear that the fiscal challenges facing the province were continuing and that additional restraint measures were required. In response to a letter from the President of the MGEU, the Minister Responsible for the Civil Service indicated that the Government hoped acceptable measures could be agreed to by the parties. At an 11 January 1993 meeting of the Joint Union/Management Council the Minister indicated to the MGEU representatives that the province was prepared to consider viable options that they may wish to bring forward. This same offer was extended at a 2 February 1993 meeting with the Finance Minister at which he outlined in some detail the province's fiscal difficulties. He also advised the MGEU representatives that he required a response within two weeks, as the end of the 1992/93 fiscal year was fast approaching and the 1993/94 budget needed to be finalized quickly.
16. 177. In its letter of 5 February 1993 MGEU ignored this request and indicated a reply would be given by the end of February. Needing to finalize budget decisions, the Government decided to announce a proposed reduced work week programme. While the Minister was unable to reach MGEU's President until late in the evening, the day prior to the announcement, attempts had been made to reach him since early in the day but he was travelling in rural Manitoba. The Minister's letter of 12 February 1993 to MGEU indicated very clearly that the Government was "prepared to continue discussions on the possible range of options". MGEU's response of 26 February 1993 indicated it was not prepared to continue discussions.
17. 178. In its letter of 23 March 1993, the Minister outlined that, in announcing the proposed reduced work week programme the Government had not made a final decision on how it would proceed. Because of MGEU's refusal to discuss alternatives and the specific application of a reduced work week programme to its members, the Minister indicated the following: "As we have indicated previously, we do not support further substantial lay offs to meet the necessary financial targets nor do we wish to pursue a legislated reduction in rates of pay. That is why, in the absence of any reasonable alternatives put forward by the MGEU, we have determined that the reduced work week programme, which will affect all employees equally regardless of service or level in the organization, is the preferred approach. ... It is most regrettable that the MGEU has chosen not be involved in the effort to ensure the impact on employees is minimized. I will need to consult with my Cabinet colleagues on how we will proceed in light of the MGEU's refusal to enter into discussions on these issues. Our deliberations will be guided by our desire to ensure to the extent possible our actions will minimize the impact on our employees."
18. 179. The deliberations determined that the best approach would be legislation which would ensure all employees in an organization could be impacted equally regardless of seniority, that could be utilized by all public employers if they chose, which required consultation with employee representatives and which impacted collective agreements to the minimum extent possible. Bill 22 was drafted based on these principles.
19. 180. In the Manitoba system of government, introduction of a Bill into the legislature in no way signifies the consultation process is complete. A committee of the legislature meets to review each piece of legislation and interested parties are given the opportunity to make representations to the Committee on their concerns including suggesting amendments to the Bill. The Committee then refers the Bill with any amendments it deems necessary to the legislature. The Bill is then given full consideration and debate in the legislature before the final legislation is passed by the democratically elected legislature. The relevant Committee heard over 150 presentations including submissions by most, if not all, Manitoba unions whose employees might be impacted by the legislation.
20. 181. Finally, Bill 22 contains a required consultation period between an employer wishing to implement a reduced work week programme under the legislation and the representatives of the affected employees. In addition, agreements between the parties on alternative arrangements are not precluded. For example, an agreement between Manitoba hospitals and nurses was reached on a wage reduction. Also a number of Manitoba public employers have entered into agreements with employee representatives on the implementation of reduced work week programmes.
21. 182. While the Government of Manitoba can certainly understand the ILO's desire to have effective consultation, such outcomes are not possible if one of the parties, in this case the MGEU, is not prepared to enter into reasonable discussions. The Government suggests that the MGEU's actions indicate that it, not the Government, showed its total disregard and lack of commitment to the consultative process.
22. 183. The Government concludes that Bill 22 is a reasonable response to exceptional, difficult fiscal circumstances. It does not restrict employees' rights to collective bargaining; existing negotiated salary increases and benefit plans remain in effect and the provisions of collective agreements remain in full force and effect, except where some modification is necessary to implement an equitable reduced work week programme. This is accomplished within a legislated framework which limits this to a maximum of two years and which enshrines in legislation a mandatory consultation process. Not only did the Government not violate ILO Convention No. 87, it acted in a manner consistent with the broader principles of the ILO.

C. The Committee's conclusions

1. 184. The Committee notes that the allegations in this case relate to an intervention in the public sector collective bargaining process by the Government of Manitoba (Canada), which imposed to most provincial public servants a ten-day leave without pay. According to the complainant, this amounts approximately to a 4 per cent pay cut for public sector employees.
2. 185. Section 4(2) of the Public Sector Reduced Work Week and Compensation Management Act (the "Act") provides that public sector employers "may require employees to take leave without pay", not to exceed 15 days in a 12-month pay period. An employer which intends to implement such a reduced work week must serve notice of its intention to the union and to the minister in charge of labour relations (section 5(1) and (2)). Under section 5(4), a union that receives such notice must commence consultations with the employer for the purpose of reaching an agreement on the implementation of the reduced work week: number of days and dates to be taken by each employee; manner and frequency of corresponding pay deductions; any other matter considered relevant by the parties. Section 5(5) provides that, if no agreement is reached with 30 days of serving the notice, the employer may determine all these points. The agreement or the employer's decision becomes binding on the parties upon filing with the minister. Similar provisions in the Act, concerning medical practitioners and members of the Legislative Assembly, are not germane to this complaint.
3. 186. The Committee notes that, although lay-off periods are quite common in the private sector, this is the first time it is called upon to consider a scheme of compulsory reduced work week in the public sector. While agreeing with the Government that these measures do not involve violations of Convention No. 87, the Committee notes that they do raise issues as regards the principles of freedom of association, in as much as they affect the voluntary nature of collective bargaining. The Act only requires "consultations" on its implementation, and public servants have no choice but to accept the employer's decision if no agreement is reached.
4. 187. The Government invokes essentially the same fiscal and economic reasons it had put forward in Case No. 1604 (see 284th Report, paras. 286-325) to justify its actions, arguing that it had no other choice in view of the severity and the length of the recession the province is facing. The Committee then recalled in that respect that "where, for compelling reasons of national economic interest and as part of its stabilization policy, a government considers that it is not possible for wage rates to be fixed freely through collective bargaining, any restrictions should be imposed as an exceptional measure and only to the extent that is necessary without exceeding a reasonable period, and should be accompanied by adequate safeguards to protect workers' living standards" (ibid., para. 321). While the particulars of this case are different, since the restrictions in public spending are achieved through a compulsory reduced work week rather than through a wage freeze, the Committee considers that the same rationale applies.
5. 188. The Committee deplores that despite its previous calls to the Government to refrain from taking such measures, it has once again failed to give priority to collective bargaining as a means of negotiating a change in the employment conditions of public servants, and that the legislative authority felt compelled to adopt the Public Sector Reduced Work Week and Compensation Management Act, particularly in view of the fact that this Act followed immediately the previous legislative intervention which froze public sector wages for one year. The Committee is of the opinion that this action went beyond what it has previously considered as acceptable and urges the Government to take the necessary measures so that the legislation be amended accordingly.
6. 189. The Committee notes that a significant part of the arguments both in the complaint and the reply deal with the issue of consultations, a subject it commented upon in Case No. 1604 (ibid., para. 324), and which calls for some development.
7. 190. According to the complainant organization, the MGEU learned through the press, some time in December 1993, that the Government was considering rolling back public servants' wages. This was followed by two meetings, on 11 January and 2 February 1994, and an exchange of correspondence. While the MGEU was consulting its membership, its President was advised on 11 February 1993 of the Government's decision to impose a reduced work week, i.e. the day before the public announcement was made. The complainants conclude that the Government showed total disregard and lack of commitment to the consultative process.
8. 191. The Government takes a different view, arguing that the economic and fiscal difficulties facing the province were known long before to the MGEU, through budget speeches, public statements and previous bargaining rounds. At the meetings of 11 January and 2 February, the representatives of MGEU were informed that the Government was prepared to consider viable alternatives they would bring forward, but they ignored it. Needing to finalize budget decisions, the Government decided to announce a proposed reduced work week programme, and indicated in its letter of 12 February that it was prepared to continue discussions on the possible range of options. The Government considered the letter of MGEU of 26 February as an indication that they were not prepared to do so. The Government adds that the legislative committee heard over 150 presentations on the Bill, including submissions by most Manitoba unions whose members could be affected by the legislation. Finally, the Act embodies a required consultation period before a reduced work week may be implemented. It concludes that the MGEU, and not the Government, showed total disregard and lack of commitment to the consultative process.
9. 192. The Committee is struck by the apparent lack of communication which prevailed throughout this period, culminating with the MGEU's letter of 26 February informing the Government that the union would not reopen the collective agreement nor accept a voluntary wage roll-back, and the reply thereto, dated 23 March, whereby the Government stated it would proceed in the absence of any reasonable alternative proposed by the MGEU. The complainant states that the Bill was introduced "without any consultation or even the knowledge of any Manitoba public sector union", whereas the Government submits that there was adequate consultation and that the MGEU is entirely to blame for the refusal to enter into reasonable discussions.
10. 193. The Committee considers that it would serve little purpose even to attempt apportioning responsibilities for that situation. It can only note from the evidence available that the reduced work week option (as opposed to a wage roll-back or other form of compensation restraint) was mentioned for the first time on 11 February, at a time the MGEU was still consulting its membership on a "reopening of the collective agreement", and that Bill 22 was tabled on 5 April. Furthermore, no indication was given as to whether some of the views expressed by public sector trade unions during the legislative hearings following the tabling of the Bill were taken into account in the drafting of the final text, which might have helped the Committee to evaluate whether the reduced work week was only a proposal at the time it was announced publicly, as the Government alleges, or if it was a fait accompli, leaving no room for discussion.
11. 194. The Committee recalls that real, fully open and adequate consultations are particularly important in situations such as the present one, where one of the bargaining partners is also the legislative authority. Such consultations imply that they be undertaken in good faith and that both partners have all the information necessary to make an informed decision.
12. 195. The Committee also appreciates the complainant's concern that the Act may be applied in an unequal manner, since it allows employers to determine the compulsory days off without pay, in the absence of an agreement on the subject. Should a blatant case of discriminatory treatment occur, based on personal preferences or other reasons, there is no avenue of appeal, for instance, through the grievance arbitration process. The Committee suggests that the Act should provide guarantees to prevent all risks of unequal treatment.