Jan 27, 2020

Alberta arbitrator awards zero percent wage increase to nurses and teachers

United Nurses of Alberta v Alberta Health Services, Covenant Health, 2020 CanLII 2386 (AB GAA)

January 27, 2020

Background:

After the last round of collective bargaining, public sector unions in Alberta agreed to wage freezes in the first two years of their contracts in exchange for the inclusion of a wage reopener provision for the remaining 2019-2020 period, culminating if necessary in binding arbitration. However, in June 2019, Alberta's newly elected United Conservative Party (UCP) government enacted the Public Sector Wage Arbitration Deferral Act (PSWADA), postponing the right to arbitrate wage disputes until a Blue Ribbon Panel could report on the province's financial and economic situation. The Alberta Union of Provincial Employees (AUPE) commenced proceedings in the Alberta Court of Queen's Bench challenging the constitutionality of the PSWADA and applied for an injunction staying the legislation and allowing wage arbitrations to proceed as scheduled. The union's request for a stay was ultimately denied by the Alberta Court of Appeal. When the disputes relating to the nurses and teachers proceeded to arbitration in November 2019, the province, bolstered by the Blue Ribbon Panel's recommendations, changed its position on the eve of the hearings to request wage rollbacks of 3 percent in the third year for the nurses and 2 percent for the teachers.

Nurses' and teachers' wages decided at interest arbitration

In awards issued on January 10, 2020, involving three-member boards of arbitration, Arbitrator David Jones, the Chair of both boards, supported by the employer nominee in each case, refused the government's proposed rollbacks but ordered 0 percent increases for both the nurses and the teachers for the 2019-2020 contract period, concluding in the nurses' award that "no change to wage rates is justified in the third year of the current collective agreement … given the prevailing general economic conditions in the province, … the current comparative continuity and stability of nurses' employment and the absence of any relevant other public sector settlements that would indicate either an increase or a decrease to salaries," and in the teachers' award, that "it would not be in the public interest or acceptable to the general community for teachers to receive a salary increase, given the economic circumstances which currently prevail in the province, including the high unemployment rate, the absence of any comparable collective agreement settlements containing salary increases, and the non-monetary provisions which the teachers have obtained in the current collective agreement."

The Relevant Factors:

Taking as his starting point in both decisions s.101 of the Alberta Labour Relations Code, which he summarized as mandating "that the object of an interest arbitration is to determine wages and benefits which are fair and reasonable to employees and employers and are in the best interest of the public," Jones noted that section 101 provides that a board must consider the "wages and benefits in private and public and unionized and non-unionized employment", "the continuity and stability of private and public employment," and "the general economic conditions in Alberta," and may consider such factors as the terms and conditions of employment in similar occupations, the relationship between different classifications and occupations within the entity, and the qualifications, work performed, and nature of the services rendered, as well as "any other factor that it considers relevant to the matter in dispute."

The Nurses' Award:

Asserting that "the poor general state of the Alberta economy is the most compelling factor, and it weighs heavily against an increase in the nurses' wage rates at this time," Jones held that no increase was justified in the third year of the collective agreement.

Cost of living

Specifically, Jones found that increases in the cost of living did not justify a wage increase, considering that nurses' wages in Alberta remained higher than those in other provinces, their overall wage increases since 2000 (as opposed to in the period covered by the last contract) were not outstripped by cost of living increases, the nurses had secured considerable protection against layoffs in the last round of negotiations, the provincial economy continued to suffer from the effects of the last recession, and gives the continuity and stability of nurses' employment coupled with the lack of need for salary increases in order to recruit or retain nurses in Alberta.

Comparable settlements

Rejecting the employer's proposal to decrease wages by 3 percent, Jones reasoned that it was not supported by replication, the guiding principle of interest arbitration:

I reject the Employers' proposal to decrease wages by 3% effective on the date of the award. Notwithstanding the economic situation in Alberta, there is no comparable settlement, either freely negotiated or arbitrated, in Alberta or elsewhere, that resulted in rolling back salaries for the relevant time period. Even during the recession in 2015-16, the parties settled their collective agreements without a rollback in the wages (indeed, there was an increase in 2016). The fact that wages of nurses in Alberta are higher than in some other provinces does not, by itself, justify a rollback. There is a longstanding "Alberta premium" in the salary levels of many professions and occupations. To roll back wages would be a significant change to the longstanding pattern of bargaining between these parties, a "breakthrough" which would need to achieved (if it could be achieved) through negotiation or industrial action rather than interest arbitration.

By the same token, he concluded that the nurses' union had not made out the case for a 3 percent wage increase:

While other comparable settlements during the period in question would also be relevant, the fact is that there are no meaningful comparables. The five other large public sector bargaining units in Alberta are also in arbitration with respect to wage rates for 2019. Most of the 111 settlements in the Unionized Health Care and Social Assistance Sectors involving wages for 2019 were negotiated in prior years (including the six involving smaller bargaining units that include registered nurses). Of the ones which settled in 2019, only two of them involve public sector employers — the AMA (Physicians) and Workers Compensation Board (Occupational Therapist I) — and both of them settled for 0.00%. As a result, there are no comparable settlements that would justify increases to nurses' wages at this time. Other unionized employees are not generally keeping up with increases in CPI.

In my judgment, the lack of any significant settlement in the public sector increasing wage rates in 2019 is an important factor which weighs against an increase in nurses' wage rates.

Economic conditions

Jones concluded that the decisive factor was the state of the Alberta economy:

While UNA [United Nurses of Alberta] points to some growth in real GDP and GDP per capita and some increase in the Alberta Weekly Earnings Index, which would indicate some recovery from the 2015-16 recession, the overwhelming evidence is that the provincial economy has not yet completely recovered from the recession, and is not forecast to do so until some time after the end date of the current collective agreement. After starting to recover a bit in 2018, Alberta almost dipped back into a recession in the early part of 2019.… The unemployment rate in the province remains very high, both in historical terms and in comparison to the rest of Canada, and that is forecast to continue for the foreseeable future. There have been significant layoffs in the private sector, particularly in the oil and gas sector which is a major component of the Alberta economy.

In my judgment, the poor general state of the Alberta economy is the most compelling factor, and it weighs heavily against an increase in nurses' wage rates at this time.

Ability to pay

Concluding that there was no issue of inability to pay in the case before him because of the government's ability to raise taxes, Jones indicated that the balancing of competing public policy claims was a "political" one and not the function of an interest arbitration board. In this regard, he stated the following:

In reaching [my] conclusion, I want to emphasize again that I have rejected any suggestion that the Employers do not have the ability to increase wages. The issue is not whether the provincial government could (or should) increase taxes in order to increase salaries in the public sector. I also recognize the public interest in maintaining quality public institutions. However, the decision about how to balance these two objectives is political, the responsibility of the government, and not the function of an interest arbitration.

Finally, I note that the parties will very shortly be embarking on negotiating the next collective agreement, during which they can test either by agreement or after industrial action whether it would be appropriate to put in place any different result.

Union nominee's dissent

Union nominee David Williams dissented, primarily with respect to the majority's characterization of the state of Alberta's economy, with which Williams disagreed on the basis of the economic evidence presented at the hearing, which he summarized as follows:

There were differences between the experts who appeared before the Board as to the general market conditions going forward. The Alberta Government Budget … indicates the unemployment rate going forward to be: 6.5% in 2020; 6.0% in 2021; 5.5% in 2022; and 5.2% in 2023. This is contrary to the Employer's assertion that the unemployment rate was to remain high in the range of 7% or more in 2020. Similarly, using the Alberta Government Budget as guidance, real GOP going forward is projected as 2.7% for 2020; 2.9% for 2021 and 3.0% for 2022. The Employer asserted that real GDP would be low growth in 2020 and yet the Employer's expert, Mr. Antunes, when taken to the Government Budget, testified real GOP in Alberta in 2020 would be higher than the national average.

The outlook going forward is guarded but points to increasing improvement in the economy. From the evidence set out above, the clear message from the market is that wages are increasing. … As a result, the general economic conditions in Alberta do not justify a zero increase in wage grid, however, the conditions do moderate expectations about the size of such a wage increase.

Williams also disagreed with the majority's conclusions regarding comparable settlements, which he described as follows:

The Employer provided the Board with Appendix 17, listing the unionized healthcare and social assistance sector settlements. Given the time frame of our interest arbitration, the majority decision only considered settlements in the public sector in 2019 and found two, both [of] which settled for 0% increase.

If we pull the lens back a little further, and include the public and private sector unionized health care and social assistance sector settlements, we find that there were 11 settlements reached in 2019. The average settlement resulted in a wage increase of 1.32%. The median settlement resulted in a wage increase of 1.25 %. Five settlements provided wage increases of 1.75% or higher. The highest settlement was 3%. Five settlements are below 1.25%. Three of those settlements are at 1%. There are two zero increases, one in a housekeeping unit with [the International Union of Operating Engineers] at Evergreens Foundation and one for Occupational Therapists with [the Health Sciences Association of Alberta] at the [Workers' Compensation Board].

Based on this evidence, Williams concluded the following:

From the unionized healthcare and social assistance sector settlements, the majority decision concludes other unionized employees are generally not keeping up with the increases in CPl. However, the data clearly shows that unionized employees in this sector are getting wage increases. The settlements may not all keep up with CPI increases, but they do not support no wage increase at all.

The Teachers' Award:

Applying the same factors under s.101 of the Code as in the nurses' award and again acknowledging that the employer had not asserted an inability to pay, but "rather ha[d] focused on the current economic circumstances prevailing in Alberta," Jones held that no change to the salary grid for the period from April 1, 2019, to August 31, 2020 (the effective period covered by the award) was justified.

Cost of living

As in the nurses' award, Jones again concluded that increases in the cost of living did not justify a wage increase. Noting that not only did the collective agreements since 2012 not contain any provision automatically linking increases in the salary grid to increases in the cost of living, but, to the contrary, "the parties agreed to no salary adjustments in five of the previous six collective agreements, notwithstanding increases in CPI [the cost of living]," Jones reasoned as follows in concluding that the teachers had not made out a case for a 3 percent increase:

In my judgment the [Alberta Teachers' Association] has not made out the case for a 3% increase to the grid effective April 1, 2019 and a further 3% increase effective August 31, 2019.

The principal justifications for the ATA's proposal is the increase in the cost of living — whether (a) because teachers received no salary increases in five of the previous six years, or (b) because of an increase in CPI over the two years covered by this collective agreement — and the suggestion that the Alberta economy has improved.

In considering changes to the CPI, the starting point is to note that while the collective agreements in effect from 2007 to 2012 explicitly tied increases in the salary grid to increases in the year-over-year increase to the Alberta Average Weekly Earnings Index, none of the subsequent collective agreements contains a provision automatically linking increases in the salary grid to increases in CPI, even though there were undoubtedly increases in the cost of living during those years. …

Secondly, the fact is the parties agreed to no salary adjustments in five of the previous six collective agreements, notwithstanding increases in CPI; and those collective agreements contained other, non-salary provisions which were agreed to in the context of no increases to the salary grid. One cannot now unbundle the tradeoffs made by the parties in reaching those agreements.

Further, if one is to compare just salary increases with increases in CPI, it is not apparent why one would restrict that comparison to the six prior years, as opposed to (say) the entire eighteen years since 2000 during which increases in the salary grid have outstripped increases in CPI.

Comparable settlements

Observing that because teachers' salaries are set province-wide in Alberta, "intra-provincial comparisons are not possible," Jones declined to follow a recent award issued by Arbitrator Peltz in Saskatchewan awarding a 1 percent increase to the teachers effective August 31, 2019 (the last day of the collective agreement in that case), explaining that, in his view, the circumstances before the Peltz board at the time were distinguishable from the circumstances before the current board in Alberta. In this regard, Jones stated the following:

In reaching this conclusion, I have considered whether to follow Arbitrator Peltz's award granting a 1% increase to the Saskatchewan teachers on August 31, 2019 (the last day of that collective agreement). Arbitrator Peltz's award was issued a year prior to that date, and anticipated that there would be an improvement in the Saskatchewan economy in 2018 and 2019 "so it would not be surprising to see positive wage increases begin to reappear around that time". However, the present Award is being issued more than a year later, in Alberta, in light of the economic situation here, which has not improved sufficiently for there to be any trend for positive wage increases in the public sector in Alberta during the period covered by this arbitration. And teachers' salaries in Alberta remain higher than in Saskatchewan (or British Columbia or Manitoba).

Economic conditions

Turning to the economic conditions, Jones' analysis and observations echoed those in the nurses' award, in virtually identical language, leading him to conclude the following:

In my judgment, it would not be in the public interest or acceptable to the general community for teachers to receive a salary increase, given the economic circumstances which currently prevail in the province, including the high unemployment rate, the absence of any comparable collective agreement settlements containing salary increases, and the non-monetary provisions which the teachers have obtained in the current collective agreement.

Union nominee's dissent

Union nominee Leanne Chahley dissented, stating that she would have awarded a 3 percent increase to the salary grid for the year of September 1, 2019 to August 31, 2020, primarily on the grounds that, while the ATA and their members responded to Alberta's challenging economic times in 2015 and 2016 in a manner that was fair and reasonable to their employers and the public by accepting zero increases, the economic outlook evidence for 2019 and 2020 showed significant signs of improvement. Chahley summarized this evidence as follows:

The economic evidence is that now Alberta has weathered the recession of 2015 and 2016. The experts acknowledged that by 2018 the Alberta economy was again strong. Although indicators such as real GOP had not returned to the overheated levels of 2010–2014, the Alberta economy is performing well above the normal levels of developed western economies.

The experts did point out that in 2019 the Alberta economy has been quite stagnant and the growth of real GOP has fallen, with a November prediction by the Conference Board of Canada of 0.8%. However, both expert witnesses are also predicting growth of about 2.4% for 2020.

Additionally, Chahley concluded that an increase for the teachers in 2019–2020 was justified by a comparison between the wages of teachers and those of other comparable public and private sector employees, explaining as follows:

[T]he evidence set out in the document titled "Wage Settlement History of Alberta Health Services and Government of Alberta 2012 to present" filed by the ATA clearly shows that the other five large public sector bargaining units raised as the main comparators for Alberta teachers bargained increases to salaries for almost all of these years up to 2018 during which the ATA and the teachers took 0% wage adjustments. The ATA also provided additional evidence of Alberta comparators in both the public sector and the private sector who also received wage increases. Notably, there was no significant evidence of overall wage reductions in the private sector….

The teachers' real salary has lost ground to inflation by at least 5.5% (7.5% if the reduction of 0.5% per year is not included) for 2017–2020. The closest comparator groups, being the other five large Alberta public sector collective agreements[,] virtually all received wage increases for 2012–2017 when the ATA took 0% salary adjustments in all but one year. The other five comparator public sector collective agreements took 0% increases for the first two years of their current three year agreements and left the last year to negotiation, and now arbitration. The teachers left both of the two years of their collective agreement to interest arbitration. …

In my view, taking into account all of the factors set out in section 101of the Code, and all of the evidence, especially the sluggish Alberta economy and the 0% wage adjustment accepted by the five other Alberta public sector unions, it is difficult to justify a 3% salary grid adjustment for the 2018- 2019 year for teachers.

Having said that, it is still appropriate, in my view, to take into account that those other public sector unions received positive wage adjustments in years that included the recession of 2015 and 2016 when teachers accepted 0% wage adjustments in 6 of 7 years.

The parties react

Following issuance of the awards, Alberta Finance Minister Travis Toews expressed the government's satisfaction with the outcome: "These independent public sector wage arbitration outcomes reflect the current economic realities in the province. The decisions align with the crucial need to fix Alberta's spending problem and ensure the long-term sustainability of high-quality services for Albertans." He also suggested that the need for fiscal restraint remained a priority for the government and would be a focus of upcoming negotiations. He continued, "Correcting wages over time is a critical part of our government's commitment to get our fiscal house in order. Even with these decisions, fiscal restraint and discipline must continue as we enter into new collective bargaining negotiations in 2020."

For their part, the unions involved expressed dismay and frustration as their members continue to see their wages stagnate. David Harrigan, director of labour relations with the UNA, which represents more than 30,000 members, said, "We're obviously disappointed. We've already taken two years of zero and so we're not keeping up with inflation."

The reaction by the Alberta Teachers' Association was equally strong, with President Jason Schilling pointing out that teachers in Alberta have received zero wage increases in seven of the last eight years and commenting, "Members are angry and frustrated…They were hoping for better and received this." Schilling added, "Teachers have done their part in the past when they've been asked to assist with Alberta's economy. Even when Alberta was not in a recession, and we're not in a recession right now, we were taking zeros and so teachers have done their part and we're looking for some correction to that."

UNA's contract expires March 31, 2020. According to the union's website, formal bargaining commenced on January 14 and 15, 2020, with the employer proposing a four-year pay freeze and "further rollbacks throughout the current collective agreement." In contrast, UNA's opening proposal called for 2 percent raises and "some additional improvements to contract language in the agreement." The next bargaining dates have reportedly been set for January 30 and 31, 2020. The ATA's contract expires at the end of August 2020, and bargaining is expected to begin in spring 2020.

Developments in collective bargaining and arbitration involving other unions in the Alberta public sector will be reported as they occur.

Comment:

In Ontario, the Conservative government led by Premier Ford has intervened directly in collective bargaining, through Bill 124, setting a cap on annual increases of 1 percent over three years. The unions have challenged the legislation in the courts alleging a violation of the employees' rights to collectively bargain, contrary to the guarantee of freedom of association in s.2(d) of the Charter of Rights: see Lancaster's Headlines, January 15, 2020.

Read the arbitration decisions in United Nurses of Alberta v. Alberta Health Services, Covenant Health, 2020 CanLII 2386 (AB GAA), and Alberta Teachers' Association v. Teachers' Employer Bargaining Association, 2020 CanLII 2385 (AB GAA).