Just say no to bonuses: minister

Horne urges health executives to refuse extra pay this year

Alberta Health Minister Fred Horne is ending his effort to withhold performance bonuses from Alberta Health Services executives, but will instead give those employees the option to voluntarily forgo the additional pay.

Horne said Friday he reached his decision after receiving advice from new AHS administrator Janet Davidson that the health authority has no legal standing to deny pay that is entrenched in employment contracts.

“If AHS were to withhold the payment of this component of their compensation, AHS could be considered in breach of contract,” Davidson wrote in a letter to Horne obtained by the Edmonton Journal.

“AHS is unable to unilaterally amend these provisions without breaching the terms of these agreements. These employees would be in a position to take legal action against AHS for recovery of their pay at risk and I am advised that these employees likely would be successful.”

The pay-at-risk model, which some observers call a type of bonus, calls for a certain portion of an executive’s salary to be paid only if they meet certain performance targets. A total of 99 executives were set to share $3.2 million in performance pay for the 2012-13 year, until Horne intervened earlier this month by demanding the AHS board hold back the compensation.

The board refused, saying it had to honour employment contracts, prompting the minister to immediately fire the 10-member group and hire Davidson to act in its place.

In her letter to Horne on Friday, Davidson said she learned that four executives who left AHS during the year have already received their pay at risk. As such, it would appear unfair to deny the pay to others who are eligible, she said.

“On the basis of maintaining equity among recipients of pay at risk at AHS, it would be difficult to justify providing pay at risk to those who departed the organization, but not to those who remained for the duration of the fiscal year,” she wrote.

Davidson said the best option is to award the performance pay on a voluntary basis, making clear to employees they can choose not to accept it.

Horne said he will follow Davidson’s advice. He said he was told that several AHS executives asked to have their pay at risk withheld, but the board wouldn’t allow it.

“It’s a very regrettable set of circumstances,” Horne said. “My reaction to it is that OK, there is a legal obligation to pay out that pay at risk, but people also have the legal right not to take it. They were denied that option and I’m going to make sure they have that option.”

While the minister insisted AHS executives will be free to make their own decision, questions will undoubtedly be raised about how much pressure they will face to refuse the compensation. Horne has repeatedly spoken out against the performance pay as inappropriate at a difficult economic time when doctors, teachers and other public servants are taking pay freezes.

“I see people making sacrifices everywhere on the front line of health care,” he said Friday. “Albertans have been very clear about where they stand on the issue, and the government is standing with them.”

Pressure could be especially high for 16 top executives whose compensation must be publicly disclosed, including AHS president Chris Eagle.

In 2011-12, AHS financial records show Eagle took home $88,000 of his pay at risk, on top of a $580,000 base salary. The other 15 executives on the disclosure list received between $16,000 and $61,000 in performance pay.

It’s not know what the payat-risk figures are for 2012- 13 year, since the statements have not yet been released. When they are finalized, the public will be able to see who accepted or turned down the performance pay.

Horne denied his decision was essentially a shaming exercise designed to push employees into a particular decision. He said he did not expect all 99 eligible executives would refuse the performance pay, and did not have a target in mind.

“People also have the legal right not to take it.” HEALTH MINISTERFRED HORNE

Davidson’s advice that AHS is legally obligated to award the pay at risk also calls into question whether Horne made the right decision to fire the board, since they held the same position that the bonuses had to be paid.

However, the minister insisted he has no regrets about the move, saying he fired the board because of their refusal to properly respond to his directive to look into the issue further.

“I don’t think it changes anything,” he said. “The matter is completed now.”