Report in which the committee requests to be kept informed of development - Report No 284, November 1992

Case No 1616 (Canada) - Complaint date: 20-DEC-91 - Closed

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INTRODUCTION
A. The complainant's allegations
B. The Government's reply
C. The Committee's conclusions
The Committee's recommendations
ANNEX

595. In a communication dated 20 December 1991, the Canadian Labour Congress (CLC) presented on behalf of the Public Service Alliance of Canada (PSAC) a complaint of violation of freedom of association against the Government of Canada. The Public Services International (PSI) and the International Confederation of Free Trade Unions (ICFTU) supported the complaint in communications dated 23 December 1991 and 9 January 1992 respectively.
596. The Government of Canada sent its reply on 2 June 1992.
597. Canada has ratified the Freedom of Association and Protection of the Right to Organise Convention, 1948 (No. 87). It has not ratified the Right to Organise 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

598. In its communication of 20 December 1991, the complainant organisation alleges that the Government of Canada violated Conventions Nos. 87, 98, 151 and 154 by adopting, on 2 October 1991, Bill C-29, which became the Public Sector Compensation Act (hereunder referred to as "the Act"). To facilitate consultation, the provisions of this Act, and specifically the ones cited or referred to by the complainant and the Government, may be found in the Annex to this case.
599. The collective agreements between the PSAC and the Treasury Board, covering 155,000 federal government employees in 35 bargaining units, expired between February and December 1991. Collective bargaining for these employees is governed by the Public Service Staff Relations Act (PSSR Act). Some meetings were held in February and March 1991 but on 26 February 1991, only hours after face-to-face negotiations had commenced, the Government submitted a Budget explicitly defining the financial parameters that would govern future negotiations with the PSAC and other groups of Canadian government employees. The PSAC resolved to continue the bargaining process despite this Budget. The Government for its part asserted that future bargaining would be possible provided the PSAC agreed to the budgeting provisions. In practical terms, that effectively ended the negotiating process and led to the enactment of Bill C-29 on 2 October 1991. The Budget and the Bill were explicitly designed to end collective bargaining in the federal public sector in Canada and to establish terms and conditions of employment by decree.
600. While it acknowledged in its budget of February 1991 that pay increases granted in the federal sector had lagged behind those in the private, provincial and municipal sectors since 1984, the Government requested public sector employees to recognise the difficulties faced by all Canadians because of the recession and asked them to bear their part of the financial burden. The Government stated at the time that it opposed increases exceeding 3 per cent annually over the next three years. This ignored the fact that federal civil servants' pay had fallen significantly in real terms during the previous six years. What is more, the increase was to be granted only if offset by a reduction of 2,000 person-years for each wage increase of 1 per cent.
601. While reiterating its intention to continue bargaining with its employees, the Government made the following statement: "The Government believes it is important to maintain an effective working relationship with the public service unions, notwithstanding the demands of restraint, and it will ensure that arbitrators and conciliators are fully apprised of the employment consequences of excessive third-party awards. Should it prove necessary, however, the Government will not hesitate to use legislative means to avoid excessive wage settlements or third-party awards. Nor will the Government hesitate to use legislation to prevent work stoppages that would hinder the delivery of services to Canadians." (Budget, p. 75.) In effect, the Government told its employees that they must accept wage settlements of 3 per cent in 1991, 1992 and 1993 or the wage restraint would be imposed by law.
602. In April 1991, 62 per cent of the PSAC's members voted in favour of strike action if their negotiating teams were unable to reach collective agreements without acquiescing to the Government's preconditions. Negotiations were broken off at all the negotiation tables between the end of May and mid-June, and the PSAC applied for the establishment of conciliation boards in accordance with the PSSR Act. These boards subsequently submitted their reports, and the various bargaining units were placed in a legal strike position at the beginning of September. Throughout this period, the PSAC reiterated publicly and privately that it was willing to resume negotiations in an attempt to reach collective agreements. It continued to hold this position following the release of the conciliation board reports. Its overtures were, however, neither accepted nor reciprocated by the employer, whose position remained unchanged. In fact, on 19 June 1991 the President of the Treasury Board delivered a statement in the House of Commons that reiterated the Government's commitment to its budgetary restraint programme and modified the wage restraint programme from 3 per cent per year for three years to 0 and 3 per cent per year for two years.
603. The various conciliation boards (consisting of one employer and one employee representative and an impartial chairperson) reviewed the issues and made recommendations to the parties in an attempt to facilitate the negotiation of collective agreements. They either issued "NO BOARD" reports (implying that it was beyond their capacity to make recommendations) or concluded that the Government's wage restraint programme and bargaining posture were highly unsatisfactory. In short, the conciliation board reports supported the PSAC's positions and completely rejected those of the Government.
604. On the question of equal pay for work of equal value, an issue of paramount importance to members of predominantly female bargaining units, one conciliation board determined that the wage gap was in the 10 to 15 per cent range and recommended that the parties seriously negotiate pay equity adjustments in this round of collective bargaining. The Government refused, arguing that separate funding was available to settle complaints relating to pay equity and that such complaints should be resolved at the Canadian Human Rights Tribunal and not during negotiations. However, the Government was at the same time proceeding with court action to prevent the Canadian Human Rights Commission from dealing with the matter.
605. Following the release of the conciliation boards' reports in late August, the PSAC indicated publicly and privately that it was prepared to resume negotiations and to bargain in good faith. During this time, the PSAC and other negotiators requested on numerous occasions that a mediator be appointed. The Government consistently rejected these requests, although it had fully 18 days from the release of the first concilication board report until the beginning of the strike to reconsider its position and resume negotiations in good faith. The PSAC was left in the unenviable position of either acquiescing to the Government's ultimatum or initiating a strike. Once again, the Government demonstrated its contempt for the process of free collective bargaining. Immediately prior to the strike the Government reiterated its threat that any strike would be countered by the swift passage of back-to-work legislation. Notwithstanding the ultimatum, the threats and the intimidation, the PSAC launched a strike on 9 September 1991.
606. The following day, the PSAC lodged a complaint with the Public Service Staff Relations Board (PSSR Board) against the Government, alleging failure to bargain in good faith. The Board concluded that the Government had indeed been bargaining in bad faith: "The obligation provided under the Public Service Staff Relations Act to bargain in good faith and make every reasonable effort to conclude a collective agreement is not substantively different for this employer than it is for any other employer in any other jurisdiction in Canada. The insistence on the acceptance of conditions precedent to negotiating terms and conditions of employment at the bargaining table is incompatible with the requirement to make every reasonable effort to negotiate a collective agreement. Accordingly, the Board declares that the employer has acted contrary to section 51 of the Act and orders the employer to comply with the said provision." The Government ignored this ruling and tabled Bill C-29 on 16 September.
607. On 17 September 1991, the Government agreed to suspend the parliamentary debate on Bill C-29 and to return to the negotiating table without preconditions, and the PSAC agreed to suspend its strike. Shortly thereafter the employer made new offers which slightly modified its restraint programme by providing low-paid employees with a $500 signing bonus that would not be rolled into salary rates. This revised restraint package became the employer's new precondition. With the negotiations thus broken off, the strike resumed on 27 September. The Act came into force on 2 October and the PSAC's members were obliged to go back to work the following day.
608. The Government is no stranger to back-to-work legislation: from 1950 to the end of 1991 it passed such legislation on 25 occasions, including four in 1991. It has come to view back-to-work legislation as an integral part of the collective bargaining process. Hence, rather than encouraging the parties to a dispute to resolve the issues, the Government has indicated by its actions that it is prepared to resort systematically to legislation to end disputes, and this undoubtedly makes employers in the federal public sector increasingly reluctant to negotiate. Thus, just when the PSAC and the Canadian Government were preparing to exchange collective bargaining demands, propose contracts and establish a negotiations schedule, the Government was preparing a budget that established preconditions for bargaining, and indicated that failure by bargaining units to agree on preconditions would result in legislation imposing collective agreements and ending any legal strike action.
609. The PSSR Act provides for two methods of settling disputes: conciliation, which can lead to the exercise of the right to strike, and arbitration before an impartial third party. A small group of employees of the Medical Research Council of Canada, who are also represented by the PSAC, chose the second method by referring their dispute to an arbitration board of the Public Service Staff Relations Board. On 28 August it rendered a binding arbitration award that provided wage increases in excess of the Government's wage restraint programme. In yet another violation of ILO Conventions these increases have been rolled back since the adoption of the Act.
610. The Act extends collective agreements for 24 months. During this extension, wage rates are to be frozen until the date the collective agreement would have expired if Bill C-29 had not been adopted, and are to be increased by 3 per cent one year after that date. In addition, the Act stipulates that the extended collective agreements will "continue in force without change for the period for which the compensation plan is so extended". Thus, the Government has extended all the non-monetary provisions of collective agreements. Furthermore, section 13 of the Act aims to make wage restraints permanent; it encroaches on the normal negotiating process that should be resumed at the expiry of the extended collective agreements.
611. In order to ensure that bargaining agents observe the Act's provisions, section 14 forbids them from declaring, authorising, directing, condoning or acquiescing in strikes. It also prohibits employees from participating in a strike. The maximum fines for violating this section are as follows: $1,000 per day for employees; $50,000 per day for officers and bargaining agent representatives; $100,000 per day for bargaining agents. At the time the Act was adopted, 80,000 members of the PSAC were on strike. If the maximum fines had been imposed, the cost per day to the union and its members would have amounted to $81.5 million. Finally, the Government empowered itself to deduct the amount of the fines from the trade union dues deducted from employees' wages. Apart from the fact that such provisions are contemptible in a free and democratic society, they are also contrary to the principles of freedom of association.
612. In summary, the Government demonstrated its complete intransigence by establishing preconditions for any bargaining. As the independent PSSR Board concluded, the Government was bargaining in bad faith. Finally, having failed to convince the PSAC and an independent arbitration board to accept the wage restraint programme the Government adopted an Act that overrides the established legislative machinery for the resolution of labour disputes in the federal public sector. The Act extends collective agreements, imposes a one-year wage freeze and a one-year 3 per cent cap on wage increases, freezes other negotiated terms and conditions of employment, precludes bargaining agents from recouping the income shortfall during subsequent rounds of negotiations and imposes severe fines on bargaining agents, officers and individual members if they do not comply with the Act.
613. The PSAC attaches a long list of newspaper editorials from across Canada which, it maintains, point out that while the principle of financial restraint was generally supported, the Government's bargaining posture was widely condemned. What is most important, however, is that the Government weakened the economic position of the workers and refused to recognise their inherent right to freedom of association.
614. In its communication of 20 December 1991, the CLC points out that similar complaints have been presented against five provinces and recalls that there has been a rapid deterioration of industrial relations in the public service in Canada because the various governments are quick to adopt laws which do away with or seriously restrict collective bargaining in this sector. More than 500,000 Canadian workers have been thus deprived of their basic rights or have had their rights seriously restricted by federal or provincial legislation. According to the CLC, the Committee on Freedom of Association should send an independent mission to Canada in the coming months to obtain a full appreciation of the extent of this deterioration. It thus invites the Committee seriously to consider sending such a mission, which would be necessary for it to obtain a full appreciation of the apprehensions raised by public sector labour relations in Canada.

B. The Government's reply

615. In its communication of 2 June 1992 the Government denies the allegations of the PSAC and submits that neither the 1991 Budget nor the Public Sector Compensation Act terminated collective bargaining in the public sector. The purpose of the Budget was to implement economic restraint measures to address financial difficulties caused by a severe deficit and a heavy national debt. These circumstances required the Government, among other things, to establish temporary restraints on pay increases for its employees. The purpose of the Act was to fulfil the aims of the Budget by reducing the operating costs of government and by opening the way to set wage rates capable of reducing inflation. What is more, the temporary limitations on the right to strike in the federal public sector that the Act imposes do not violate the principles of freedom of association.
616. The Government was facing a very difficult financial situation. For example, the federal Government's deficit has stood at approximately 30 billion Canadian dollars for several years; the net debt/gross domestic product ratio is now over 60 per cent and should reach 62.6 per cent in the 1992-93 financial year; for the 1991-92 financial year interest payments on the public debt amounted to 41.5 billion dollars, or one-third of total income; what is more, the Government could not have increased taxes further without seriously eroding the competitiveness of the economy. These fiscal pressures forced the Government to make broad cuts in spending.
617. The wage restraints for federal public service employees are one of many elements of the Expenditure Control Plan introduced by the Minister of Finance in the 1990 Budget and extended to the 1991 and 1992 Budgets. This Plan affected a wide range of federal Government programmes and involved a reduction in transfer payments to Canadian provinces, thereby reducing government programme spending throughout the country; the Government also intensified efforts to reduce its operating costs. The Plan affected operating budgets, which include salaries and which make up 20 per cent of the Government's programme spending. However, the burden of reducing operating costs was shared equitably in the Government. Public service unionised employees were not singled out for restraint. For example, departmental non-salary operating and capital budgets were frozen for 1991-92 and, in the 1992 Budget, were reduced by 3 per cent from planned levels (150 million dollars per year) for the period covering the 1992-93 to 1996-97 fiscal years; the number of executives in the Government was reduced by 10 per cent; pay increases for persons in the management category of the public service, for members of the Canadian Forces and the Royal Canadian Mounted Police and for Members of Parliament were also restricted to 0 and 3 per cent over two years; and salaries for all Ministers were frozen for one year.
618. In the 1991 Budget, the federal Government, in conjunction with the Bank of Canada, announced inflation-reduction targets which are a key component of its economic policy. These targets call for year-over-year increases in the Consumer Price Index ("CPI") of 3 per cent by the end of 1992, 2.5 per cent by mid-1994 and 2 per cent by the end of 1995. As a major employer, the Government should lead from the front by ensuring that pay settlements in the public sector are consistent with these targets. The consistency of pay settlements resulting from the enactment of the Public Sector Compensation Act has influenced inflation expectations and would appear to have accelerated a downward movement in private sector pay settlements. Since the introduction of the inflation-reduction targets, significant progress has been achieved in reducing inflation. In February 1992, the year-over-year increase in the CPI was 1.7 per cent. The Government is clearly on track for achieving its targets. In the light of these circumstances, the pay-restraint programme established by the Public Sector Compensation Act - a pay freeze in 1991 and an increase of 3 per cent in 1992 - is not overly onerous. Moreover, it compares relatively favourably with total pay settlements in Canada, which fell to 2.5 per cent in the fourth quarter of 1991 and to 2.4 per cent in February 1992.
619. As regards the allegations of violation of free collective bargaining, the Act does impose restrictions with respect to compensation. However, the ILO supervisory bodies have recognised that, in certain circumstances, bargaining on conditions of compensation may be restricted (Digest of decisions and principles of the Freedom of Association Committee, 3rd edition, 1985, para. 641; 222nd Report, Case No. 1147, para. 117). In this case, the Act meets these conditions: it is an exceptional measure to address the financial difficulties described above; the restrictions established are only to the extent necessitated by the economy; and the Act affects collective agreements, with certain exceptions, for a definite period. Since the Act permits negotiations on a wide range of matters falling outside the definition of "compensation", it also contains safeguards to maintain certain terms and conditions in collective agreements that protect workers' living standards.
620. Contrary to the PSAC's allegations, the Act did not terminate collective bargaining with respect either to all pay-related matters or to any "non-monetary" matters. Section 8 of the Act stipulates that the terms and conditions of employment not related to compensation may be amended by written agreement of the parties. Among the benefits provided in collective agreements which are exempted from the definition of "compensation" are benefits provided on the recommendation of the National Joint Council, a body comprising representatives of the Government in its capacity as employer and representatives of the public service unions. Some of the benefits provided under the auspices of the National Joint Council include workforce adjustment benefits (in the event of personnel reshuffling), foreign and isolated post allowances and travel and commuting assistance. These are considered "monetary in nature". Since it permits amendments to terms and conditions not related to "compensation", section 8 also permits employees to negotiate on matters of a "non-monetary" nature. In December 1991 the Government sent letters to all public service unions specifically proposing negotiations on these questions.
621. The fact that the Act does not terminate collective bargaining in the federal public service is also evidenced by the various agreements the Government of Canada has ratified with public service unions following negotiations which took place after the Act came into force. In the autumn of 1991, the Government and public sector unions negotiated a new Workforce Adjustment Directive, which came into force on 15 December 1991; on 20 December 1991, the day the PSAC's complaint was submitted to the ILO, the Treasury Board and the PSAC executed an agreement to amend the Dental Care Plan; and on 10 March 1992 the Treasury Board and the PSAC executed an agreement to amend the PSAC Master Agreement for the purpose of complying with an order of the Human Rights Tribunal.
622. The effectiveness of collective bargaining even after the Act came into force has been confirmed by union sources. The winter 1991-92 issue of the PSAC's quarterly magazine includes the following: "The PSAC has successfully negotiated virtual ironclad job security provisions for its members who are indeterminate employees of the federal government. (...) Within days of the legislated end to the strike - which featured job security as a key issue - Treasury Board negotiators began to yield. The results? Guarantee of a reasonable job offer when any indeterminate worker is placed on the surplus list. Salary protection for as long as that worker remains in the federal public service. And restrictions on the Government's ability to contract-out our work." The PSAC deservedly takes credit for having won significant gains in job security and salary protection through collective bargaining which took place after the Act came into force. Finally, various consultations are continuing between the Government and the public service unions both within and outside the framework of the National Joint Council.
623. Finally, the Act has not affected the terms of any collective agreement that had already been ratified by the Government and a public service union prior to the 1991 Budget. In three limited instances, arbitral awards issued between 26 February 1991 (the date of the 1991 Budget) and 3 October 1991 (when the Act came into force) were modified under the Act to conform to the Government's legislative policy. This took place in accordance with the principles established by the Committee (Digest, para. 640). The Government has thus not violated ILO Conventions Nos. 98, 151 and 154, and the restrictions imposed on collective bargaining in the federal public sector conform to the standards established by the ILO.
624. Contrary to the PSAC's allegations, the freedom of workers to establish and join trade unions is not undermined by the Act in any of its provisions. Since it came into force, a new bargaining agent has requested certification to negotiate on behalf of a group currently represented by the PSAC, and in early 1991 two other employees' groups started talks with the Treasury Board with a view to reaching their first collective agreement.
625. As regards restrictions on the right to strike, the Government recalls that the Committee has taken the view in the past that the right to strike may be restricted or prohibited in the civil service or essential services in the strict sense of the term on condition that workers are provided adequate guarantees to compensate them for this limitation on their freedom of action (222nd Report, Case No. 1147, para. 116). The Act does give such guarantees. Firstly, as has already been explained, section 8 does allow limited collective bargaining. Secondly, section 22 permits the exemption of any group of employees from the effect of the Act; it thus allows for collective bargaining on all terms and conditions of employment, subject to the financial restrictions set out in the Act. Thirdly, all provisions of the Public Service Staff Relations Act which do not contravene the Act will remain in force, including provisions allowing the appointment of a mediator to help the parties in resolving all disputes which may arise during the restraint period. Fourthly, section 7(2) of the Act allows any changes in terms and conditions that are necessary to implement a new or revised classification standard.
626. The Act is an exceptional measure taken in response to very serious economic problems. The restrictions are established only to the extent necessitated by the economy. The Act affects employees for a definite term, with certain limited exceptions, and guarantees a return to normal practices when this period has elapsed. The Government therefore has not violated Article 3 of Convention No. 87. In other words, the limitations imposed by the Act on the right to strike in the federal public sector in Canada are in keeping with the standards established by the ILO. Furthermore, the Act does not contravene the Canadian Charter of Rights and Freedoms, section 2 of which states that every person has the right to freedom of association.
627. As regards the PSAC's allegations concerning the Government's conduct before and during the strike, the Government contends that the Public Service Staff Relations Board never ruled that the Government had bargained in bad faith; it simply found that the Government had not made every reasonable effort to negotiate, which is one of the three distinct requirements of section 51 of the PSSR Act (namely to meet and commence bargaining collectively, to bargain in good faith and to make every reasonable effort to reach a collective agreement). When the right to strike was suspended and the Bill introduced, the Government made an improved offer which included payment of $500 to the lowest paid workers. The offer was subsequently incorporated in the Act. However, the Government did not give way on the principle of the 0 and 3 per cent limits during a two-year period. In addition, and contrary to what the PSAC alleged, the Government did not "seize every opportunity to penalise individual workers who were in technical violation of the (...) Act". Any disciplinary action taken with respect to employees who failed to report for work during the strike has been consistent with the Public Service Staff Relations Act. Employees subject to disciplinary action enjoy the protection of the Act and of their respective collective agreements, including the right to have their grievances adjudicated by an independent third party. For its part, the Government complied with the terms of the Act during the strike.
628. With regard to the PSAC's allegations concerning pay equity, the Government stresses that the Act does not suspend equal pay for work of equal value in the public service. Equity pay adjustments of over $80 million will continue to be paid to employees. These adjustments are currently the subject of a case before the Human Rights Tribunal, which will rule on entitlements to such payments; section 7(1) of the Act, which in effect freezes most of the provisions relating to compensation, is subject to the Canadian Human Rights Act, and thus does allow for payments of current pay equity adjustments or adjustments that may be required by the Human Rights Tribunal.
629. As regards the allegations concerning the permanent nature of the restrictions imposed by the Act, the sole aim of section 13 is to avoid "catch-up" settlements at the end of the two-year period. Finally, the penalties stipulated by the Act are proportionate to the offence committed, in accordance with the Committee's accepted standards (Digest, para. 441). Furthermore, fines may only be imposed as part of a sentence handed down by a competent tribunal in accordance with the appropriate judicial procedure; as sections 15 to 17 only specify the maximum fines which may be imposed, it is for the tribunals to determine the actual fine in proportion to the offence committed in any particular case.
630. Finally, the Government maintains that the Act was required by particular circumstances and that, although it does impose certain financial restrictions, it is in no way inconsistent with Canada's commitment to respect ILO Conventions.

C. The Committee's conclusions

631. The Committee notes that the case concerns certain restrictions on collective bargaining for employees of the Canadian federal public service. They have been imposed under an Act which terminated a legal strike by these public servants and restricted pay increases during the two subsequent years to 0 and 3 per cent respectively. The Government basically maintains that this intervention was necessitated by economic difficulties and that the measures taken comply with the principles established by the ILO.
632. Before examining the substance of the complaint, the Committee wishes briefly to describe the circumstances in which it was received. In October and December 1991, the Canadian Labour Congress (CLC) presented six complaints of violation of freedom of association against the federal Government and the Governments of five Canadian provinces (Canada, Case No. 1616; British Columbia, Case No. 1603; Manitoba, Case No. 1604; New Brunswick, Case No. 1605; Nova Scotia, Case No. 1606; Newfoundland, Case No. 1607). A new complaint against Nova Scotia was subsequently lodged, but by a different complainant organisation (Case No. 1624). All these complaints relate to the postponement or freezing of public service pay increases and to restrictions on the right of employees to bargain collectively within these various jurisdictions. These measures are sometimes accompanied by a ban on strikes.
633. In the present case, the Committee has expounded in detail the observations and arguments put forward by the two parties. In particular, it has closely examined the explanations and documentation supplied by the Government on the country's fiscal and economic difficulties. There can be no doubt of the Government's conviction that the situation could only be improved by implementing legislation to curb pay increases. The complainants on the other hand are convinced that the Government's methods for solving the country's economic problems were inappropriate. As has already been mentioned in a previous case concerning various restrictive provincial laws in Canada (241st Report, Cases Nos. 1172, 1234, 1247 and 1260, para. 113), it is not for the Committee to express a view on the soundness of the economic arguments used by the Government to justify its position or on the measures it has adopted; see also the general remarks given in the report of the Study Mission (ibid., paras. 9-13 of the Annex).
634. The evidence adduced in this case clearly shows that the February 1991 Budget and the Act whereby the Government's policy was implemented have removed any real pay bargaining for public service employees in Canada. The bargaining unit of the Medical Research Council, which had opted to go to arbitration and obtained pay increases higher than the ceiling stipulated by the Act, saw those increases reduced. Bargaining units which pursued the conciliation/strike option were forced to resume work under the terms of the Act, which imposed a pay freeze on them and a subsequent 3 per cent rise, and prohibited strike action on pain of severe financial sanctions. The Public Service Staff Relations Board, an impartial body, concluded that the Government in its capacity as an employer "had insisted as pre-condition to bargaining that the bargaining agent was required to accept and agree to ... the public service compensation restraint policy as announced in the 26 February budget" (ruling of 16 September 1991, p. 7). It ruled that "the insistence on conditions precedent to negotiating terms and conditions of employment at the bargaining table is incompatible with the requirement to make every reasonable effort to negotiate a collective agreement" (ibid., p. 10).
635. As regards the economic stabilisation measures which limit collective bargaining rights, the Committee has acknowledged that when a government, for compelling reasons of national economic interest, and as part of its stabilisation policy, considers that pay rates cannot be settled freely through collective bargaining, such a restriction should be imposed as an exceptional measure and only to the extent that is necessary, without exceeding a reasonable period, and it should be accompanied by adequate safeguards to protect workers' living standards (Digest, para. 641). The Committee of Experts has taken the same view (General Survey on Freedom of Association and Collective Bargaining, 1983, para. 315).
636. The Committee notes with regard to the case in question that the Act imposes a freeze on the pay of federal employees for one year, followed by a 3 per cent increase the following year. It also observes that the Act provides for the payment of a lump sum to the lowest paid workers and, under the terms of section 7(1), maintains the provisions relating to pay equity contained in the Canadian Human Rights Act. The Committee notes finally that the Act will be in force for a limited period, and that it allows for negotiation - albeit limited - on non-monetary clauses, some of which nevertheless have monetary implications. The Committee notes for example that the PSAC has made some headway in negotiations with regard to job security and the contracting-out of work. In the light of all these circumstances, the Committee takes the view that collective bargaining in the federal public sector will be severely restricted for a two-year period, since pay increases will be imposed by the Government unilaterally. However, some provision has been made to protect the living standards of the workers, and especially of the lower paid.
637. Nevertheless, the Committee observes that the Government has resorted to such laws on several occasions, especially during recent years. In certain respects this complaint resembles Case No. 1147 (222nd Report, paras. 97-121), in which the Canadian Government had imposed 6 and 5 per cent limits on pay increases for its employees for a 24-month period. Since 1989, the Committee has had occasion to examine two complaints of this kind against the federal Government (Case No. 1438, 265th Report, railway sector; Case No. 1451, 268th Report, postal workers), and the complainant organisation alleges that there were 25 similar Acts between 1950 and 1991, four of them in 1991. This is not denied by the Government. The Committee feels obliged to point out that repeated recourse to such statutory restrictions on collective bargaining cannot fail to have a harmful and destabilising effect on labour relations if the Government intervenes frequently to suspend or halt the exercise of the recognised rights of unions and their members. Furthermore, this may undermine employees' confidence in the advantages of union membership. If the results of collective bargaining are frequently annulled by legislation, union members or potential members may conclude that there is no point in belonging to an organisation whose principal purpose is to represent them in collective bargaining.
638. In addition, the Committee cannot but emphasise the severity of the maximum penalties laid down in the Act for trade union organisations and their officers and members if they defy the ban on strikes, especially since this is defined in very broad terms and, under the terms of section 20, fines may be recovered from the membership dues deducted at source by the Government/employer. The Committee recalls that the imposition of sanctions against public servants on the grounds of their participation in a strike is unlikely to promote good labour relations.
639. The Committee regrets that the Government has not given priority to collective bargaining as a means of regulating the conditions of employment of its public servants, but rather that it felt compelled to adopt the 1991 Public Sector Compensation Act. The Government could have ensured that all objectives which should be perceived as being in the overall national interest were discussed by all parties concerned, in keeping with the principles established in the Consultation (Industrial and National Levels) Recommendation, 1960 (No. 113). Broad consultation of this kind is especially important when the Government is also the employer and may resort to legislation to alter the negotiating balance with the unions.
640. The Committee trusts that the Government will in future refrain from taking measures of this kind. It strongly hopes that, once the Act ceases to be in force, the employees concerned will once again enjoy the system of free collective bargaining established by the Public Service Staff Relations Act. In this respect the Committee draws attention to section 13 of the Act, which aims to prevent compensatory pay increases once the Act ceases to be in force. While understanding the reasoning behind section 13, the Committee recalls that, to win and retain the confidence of the parties concerned, any system of arbitration must be completely independent and arbitrators must not be bound by prior statutory criteria. The Committee urges the Government to keep it informed of developments in industrial relations in the federal public sector.

The Committee's recommendations

641. In the light of its foregoing conclusions, the Committee invites the Governing Body to approve the following recommendations:
- (a) The Committee regrets that the Government has not given priority to collective bargaining as a means of regulating the conditions of employment of its public servants, but rather that it felt compelled to adopt the 1991 Public Sector Compensation Act.
- (b) Noting, however, that the federal Government has severely restricted collective bargaining in the public service and prohibited strike action on pain of severe financial sanctions, and noting further that it has resorted to such laws on many occasions, especially during recent years, the Committee trusts that the Government will in future refrain from adopting measures of this kind.
- (c) The Committee urges the Government to revert to the normal system of free collective bargaining established by the Public Service Staff Relations Act, and in particular to a truly independent arbitration system in which the arbitrators are not bound by prior statutory criteria, and asks the Government to keep it informed of developments in labour relations in the federal public sector.

ANNEX

Extracts of the Public Sector Compensation Act
INTERPRETATION
2.(1) In this Act ... "compensation" means all forms of pay, benefits and
perquisites paid or provided, directly or indirectly, by or on behalf of an
employer to or for the benefit of an employee, except those paid or provided.
...
(c) In one lump sum payment that may be made payable: on or after the coming
into force of this Act, to or for the benefit of an employee whose rate of pay
does not exceed $27,500 and that is in an amount equal to:
(i) where the lump sum is payable to or for the benefit of an employee whose
rate of pay does not exceed $27,000-27,500; or
(ii) where the lump sum is payable to or for the benefit of an employee whose
rate of pay exceeds $27,000 but does not exceed $27,500, that portion of $500
that the rate of pay for that employee exceeds $27,000:
"compensation plan" means the provisions, however established, for the
determination and administration of compensation, and includes such provisions
contained in collective agreements or arbitral awards or established
bilaterally between an employer and an employee, unilaterally by an employer
or by or pursuant to any Act of Parliament.
...
3.(1) This Act applies to employees employed in or by:
(a) the departments of the Government of Canada or other portions of the
public service of Canada, set out in Schedule 1;
(b) the agencies, boards, commissions or corporations set out in Schedule II;
and
(c) the Senate, House of Commons or Library of Parliament.
(2) This Act applies to:
(a) the staff of ministers of the Crown and of members of the Senate and the
House of Commons;
(b) directors of corporations set out in Schedule II;
(c) the members and officers of the Canadian forces; and
(d) the members and officers of the Royal Canadian Mounted Police.
...
5.(1) Subject to section 11, every compensation plan for employees to whom
this Act applies that was in effect on February 26, 1991, including every
compensation plan extended under section 6, shall be extended for a period of
24 months beginning on the day immediately following the day on which the
compensation plan would, but for this section, expire.
...
7.(1) Notwithstanding any other Act of Parliament except the Canadian Human
Rights Act but subject to this Act, the terms and conditions of:
(a) every compensation plan that is extended under section 5 or 6; and
(b) every collective agreement or arbitral award that includes a compensation
plan referred to in paragraph (a);
shall continue in force without change for the period for which the
compensation plan is so extended.
(2) The Treasury Board may change any terms and conditions of a compensation
plan that is extended under section 5 or 6 or in respect of which section 11
applies, or of a collective agreement or arbitral award that includes such a
compensation plan, if those terms and conditions are, in the opinion of the
Treasury Board, in respect of a conversion or reclassification that is
required to implement a new or revised classification standard.
...
9.(1) Notwithstanding any other Act of Parliament but subject to section 11,
every compensation plan for employees to whom this Act applies shall be deemed
to include a provision to the effect that the wage rates in effect under the
plan on the day on which the plan would, but for section 5, expire shall not
be increased for the 12-month period immediately following that day.
(2) The wage rates in effect under subsection (1) shall be increased for the
12-month period following the period referred to in that subsection by 3 per
cent.
...
13. A provision of a compensation plan for employees to whom this Act applies
that is entered into or established at any time is of no force or effect to
the extent that it provides for an increase in wage rates that would bring
wage rates to a level that they would, but for this Act, have reached.
...
14.(1) During the period beginning on the day on which this Act comes into
force in which a compensation plan, as extended under section 5 or 6, or in
respect of which section 11 applies, is in force:
(a) no bargaining agent shall declare, authorize or direct, or condone or
acquiesce in the continuation of a strike of employees to whom the
compensation plan applies;
(b) no representative or officer of a bargaining agent shall counsel or
procure the declaration, authorization or direction of, or condone or
acquiesce in the continuation of, a strike of these employees; and
(c) no employee to whom the compensation plan applies shall participate in a
strike.
...
15. Every bargaining agent that contravenes section 14 is guilty of an offence
punishable on summary conviction and is liable for each day or part of a day
during which the offence continues, to a fine not exceeding $100,000.
16. Every representative or officer of a bargaining agent that contravenes
section 14 is guilty of an offence punishable on summary conviction and is
liable, for each day or part of a day during which the offence continues, to a
fine not exceeding $50,000.
17. Every employee who contravenes section 14 is guilty of an offence
punishable on summary conviction and is liable, for each day or part of a day
during which the offence continues, to a fine not exceeding $1,000.
...
20.(1) Any fine imposed on a bargaining agent or a representative or officer
of a bargaining agent under section 15 or 16 constitutes a debt payable to Her
Majesty in right of Canada and may, without prejudice to any other recourse
available to Her Majesty with respect to the recovery thereof, be recovered by
Her Majesty by a deduction of the amount of the fine or any portion thereof
from the amount of the membership dues that the employer of the employees
represented by the bargaining agent is or may be required, pursuant to any
collective agreement that is or may be entered into between the employer and
the bargaining agent, to deduct from the pay of the employees and to remit to
the bargaining agent.
...
22. The Governor in Council may, on the recommendation of the Treasury Board,
by order, terminate the application of this Act in respect of any employee or
group of employees to which this Act applies.