Thinking Smaller: Ontario’s Chamber of Commerce is Calling for Arbitration Reform

The Ontario Chamber of Commerce (OCC) is calling for a reassessment of the province’s approach to interest arbitration. In a letter addressed to Premier Kathleen Wynne, Allan O’Dette, President and CEO of OCC, brings attention to the ever-increasing cost of emergency services to Ontario’s smaller municipalities, with the cost of fire and police services increasing three times over the rate of inflation annually since 2002.

Interest arbitration is a practice of contract negotiation for those that do not have the right to hold a strike or lockout. It is a legal mechanism that is usually used for essential services, such as health care workers or, in the case presented here, police and fire services. For Ontario municipalities, it is the only option of negotiation, with the system meant to serve the interests of public employees, public employers and the general public.

The current processes affect small communities that are unable to keep up with the increasingly expensive costs of their emergency services. O’Dette gives the example of Owen Sound, whose recently released municipal budget reveals that 46% of the tax dollars allocated to managing city affairs were spent on police and fire services in 2016. Greater Sudbury faces a similar reality, with 33% of tax dollars going towards police and fire services. With such a disproportionate level of funds going towards these specific areas, there is little to be spent on other municipal services and infrastructure.

“The cost escalation is unsustainable, particularly in an era of fiscal restraint generally, and especially in an environment where municipalities are greatly restricted in their options to raise new revenue,” O’Dette writes.

In response to the over-inflated, unreasonable cost of emergency services, OCC offers several suggestions to the provincial government on behalf of small Ontarian communities. Firstly, they call for interest arbitration to better reflect the capacity of Ontario municipalities’ ability to pay for increased service costs. Awards are often based on provincial emergency services, meaning that costs are reflective of tax bases greater than those of Ontario’s small communities. Instead, OCC is advocating for an arbitration system that “includes an analysis of the existing municipal tax structure and available revenue streams.” In other words, arbitrators need to think smaller, taking into account the size and income of a specific community.

Furthermore, OCC is pushing for greater efficiency and more transparency in the arbitration process. To combat ineffective, high-cost negotiations that are dragged out over excessive periods of time, OCC is pushing for decisions to be made within a 12-month timeframe.

Additionally, O’Dette argues that arbitrators should be required to publicly release a document explaining the arbitration process and the projected effects that their decision will have on the fiscal health of the community.

This is not the first time that Ontario’s arbitration process has been called into question. In 2015, the Newmarket Chamber of Commerce issued a report on the ineffective nature of on the “broken” arbitration system, and how its dysfunction is reflected in disputes with Ontario’s transit systems. The report called for reform within the system in order to “mitigate the cost increases inherent in interest arbitration,” while suggesting that arbitrators should be required to “apply local economic criteria and consider the financial impact of settlements on the municipality.”

Ultimately, OCC is advocating for responsible government spending that reflects the needs and fiscal capacities of smaller communities. It is a call to balance the physical and financial health of those outside of urban centres.