Response of the Minister of Justice to the Report of the Special Advisor on Federal Court Prothonotaries' Compensation

I. Background

Prothonotaries are judicial officers of the Federal Court appointed by the Governor in Council pursuant to s. 12 of the Federal Courts Act.  They are appointed on good behaviour until age 75.  There are currently six prothonotaries who make an important contribution to the work of the Federal Court.

The Government of Canada has accepted that as judicial officers prothonotaries are entitled to the protections of judicial independence established by the Supreme Court of Canada in the PEI Judges Reference case^[1].  By Order in Council (OIC) dated June 21, 2007^[2], the Government established a process similar to that of the Judicial Compensation and Benefits Commission (the Quadrennial Commission).   

The Honourable George W. Adams was appointed Special Advisor on Federal Court Prothonotaries’ Compensation on August 31, 2007 to review and provide recommendations to the Minister of Justice respecting the salary and benefits of the prothonotaries in light of the following criteria:

1. the nature of the duties of a prothonotary;
2. the salary and the benefits of appropriate comparator groups;
3. the prevailing economic conditions in Canada, including the cost of living, and the overall economic and current financial position of the federal government;
4. the role of financial security in ensuring the independence of prothonotaries;
5. the need to attract outstanding candidates to the office of Federal Court prothonotary; and
6. any other objective criteria that the Special Advisor considers relevant.

The OIC provided that the Special Advisor should deliver his report to the Minister of Justice by May 31, 2008, and that the Minister of Justice should respond to the Report and recommendations within six months of the delivery of the report.

The Special Advisor made a broad range of recommendations for significant improvements to prothonotaries’ salary, retirement arrangements and other financial benefits, as well as changes to the overall administration of their compensation.  A complete summary of the recommendations is attached as Annex A.

II. Government Position

a)  The Economy

As with the Government Response to the Quadrennial Commission Report, also released today^[3], this Response has been delayed to allow the Government to consider the Special Advisor’s report in light of significant changes to a key criterion governing his mandate: c) the prevailing economic conditions in Canada, including the cost of living, and the overall economic and financial position of the federal government.   

The global economic situation and the financial position of the Government deteriorated significantly after the Special Advisor concluded his inquiry and submitted his recommendations to the Minister of Justice on May 30, 2008.  The deterioration of the economic outlook, its implications for Government revenues, and the need for the Government to take extraordinary action to respond to the immediate economic threat while securing Canada’s long-term growth and prosperity are outlined in Budget 2009 – Canada’s Economic Action Plan, announced on January 27, 2009.

Budget 2009 - Canada’s Economic Action Plan announced measures to stimulate the economy, protect Canadians during the global recession, and invest in long-term growth.  It also outlined measures to manage expenditures, including actions to limit discretionary spending by federal departments and agencies, and the introduction of legislation to ensure the predictability of federal public sector compensation during this difficult economic period. Legislation has now been introduced to put in place annual wage increases for the federal public administration (including senior members of the public service, public office holders and Members of Parliament) of 2.3 per cent in 2007-08 and 1.5 per cent for the following three years.

In the Government’s view, the public would reasonably expect that judges and prothonotaries should be subject to similar restraint measures.  The Supreme Court of Canada has established that it is to ensure continued public confidence in the judicial officers that their remuneration should be subject to measures affecting the salaries of all others paid from the public purse. In PEI Judges Reference, Chief Justice Lamer observed that equality of treatment “helps to sustain the perception of judicial independence precisely because judges are not being singled out for preferential treatment”.^[4]  He explained: 

In my opinion, the risk of political interference through economic manipulation is clearly greater when judges are treated differently from other persons paid from the public purse.  This is why we focussed on discriminatory measures in Beauregard.  As Professor Renke, supra, has stated in the context of current appeals (at p. 19):

. . . if judges were spared compensation decreases affecting other public sector groups, a reasonable person might well conclude that the judges had engaged in some behind-the-scenes lobbying.  The judges’ exemption could be thought to be the result of secret deals, or secret commitments to favour the government.  An exemption of judges from across-the-board pay cuts is as likely to generate suspicions concerning judicial independence as the reduction of judicial compensation in the context of general public sector reductions. ^[5]

The Government accepts that compensation of judges -- and judicial officers such as prothonotaries -- is subject to certain unique requirements that do not apply with respect to others paid from the public purse.  In particular, it is necessary to ensure that judicial compensation does not fall below the “minimum” required to protect financial security, including through erosion of compensation levels over time.  The purpose of this minimum is to avoid the perception that judges might be susceptible to political pressure through economic manipulation as witnessed in many other countries.^[6]

However, as a result of the link to the salaries of superior court judges, prothonotaries are currently protected against such erosion by annual statutory indexing, as well as the quadrennial review of judicial compensation which provides the mechanism for appropriate adjustments.

This is not the time for the kind of major enhancements contemplated by the Special Advisor’s Report.  Indeed, exempting prothonotaries from across-the-board public sector restraint measures would more likely undermine than enhance the public’s perception of their judicial independence and impartiality.  

Accordingly, the Government is of the view that prothonotaries’ salaries should continue to be fixed at 69% of a Federal Court judge’s salary.  Their financial security will continue to be protected by annual adjustments equivalent to superior court judges in Canada, a benefit to which few, if any, Canadians could aspire in these difficult economic times.   Similarly, the Government is not prepared to implement enhancements to the prothonotaries’ pension arrangements or other benefits at this time.

b) Additional Considerations

While the current state of the economy is the overarching consideration in this Response, the Government is mindful that the PEI Judges Reference case process would otherwise require a rational justification to be provided for failure to fully implement the recommendations of the Special Advisor.  We therefore turn next to discuss the Government’s concerns with some of the assumptions that underpin the Special Advisor’s recommendations, in particular in relation to salary.

i) Salary

Currently, pursuant to ss. 12(4) of the Federal Courts Act, the salary of a prothonotary is fixed by the Governor in Council and is set at 69% of the salary of a Federal Court judge.^[7]  The Special Advisor recommends that the salary of a prothonotary be increased to 80% of a Federal Court judge’s salary. This represents a 16% increase in salary, which would bring the April 1, 2008 salary of a prothonotary to $208,000.   He further recommends that this adjustment be made retroactive to April 1, 2004, which would result in an award of more than $100,000 plus interest to five of the six prothonotaries^[8]. 

The Special Advisor’s reasoning in relation to the appropriateness and continued relevance of salary comparators is problematic.   The Special Advisor accepted the prothonotaries’ position that provincial masters were the most relevant historical comparators for purposes of determining their salary levels.  Notably he relied on masters in only three of Canada’s 13 provinces and territories.

In making his recommendation, the Special Advisor rejected the Government’s position that federal public service comparators should be preferred, in particular members of administrative tribunals at the GCQ-5 and GCQ-6 levels whose adjudicative responsibilities, in the Government’s submission, are comparable to those of prothonotaries.  However, he also expressly acknowledged that successive Judicial Compensation and Benefits Commissions have accepted as the most relevant comparator the remuneration of senior public servants on the basis that they share the experience, capacity, skills and abilities of those similarly committed to a life of public service.^[9] He offers as a reason for his rejection of the relevance of federal comparators the fact that he considers the application of the federal job evaluation system^[10] problematic because “it treats prothonotaries as ordinary civil servants”.^[11]  At the same time, in defence of his recommendation of 80%, the Special Advisor observes that this is in the “general vicinity of what chair [sic] of various tribunals and military judges are paid”, without details as to why he considers these comparators, clearly functionally distinct from prothonotaries, to be preferred.

The Government also has concerns with respect to the validity of provincial masters as comparators.  The Government had argued in its submissions to the Special Advisor that the relevance of provincial masters as comparators is limited because there is no evidence that their salaries were tied to provincial judges’ salaries for anything other than administrative efficiency and convenience.^[12] In fact, the Special Advisor points out that provincial masters have had the benefit of vigorous advocacy on the part of provincial court judges seeking greater parity with federally appointed judges, based on increasing workload and jurisdiction.  Indeed he finds that masters would not have been able to independently assert this parity argument since they could not and do not equate their work to that of judges in the superior courts.^[13] However, having noted that masters' remuneration is higher than could be supported by an analysis of their functions, the Special Advisor uses the average salaries of provincial court judges and masters as a basis for recommending that prothonotaries' salary be set at 80% of a Federal Court judge's salary.
 
The Special Advisor also misconstrued the Government’s position regarding the requirement of ensuring that salaries do not fall below a minimum.^[14]  While the Government submitted that prothonotaries’ salaries have been protected from erosion by the link to judicial salaries, it accepted that this was not the end of the inquiry but that adequacy of prothonotaries’ salaries must be considered in light of all the criteria specified in the Special Advisor’s mandate, including the level of remuneration required to attract and retain outstanding candidates to the office of prothonotary.

As a result of these cumulative flaws in both assumptions and logic upon which the Special Advisor’s recommendations are based, the Government would not in any event be prepared to accept his salary recommendation.

ii) Pensions

Pursuant to ss. 12(5) of the Federal Courts Act prothonotaries are deemed to be employed in the Public Service for the purposes of the Public Service Superannuation Act (“PSSA”) and are subject to the same retirement arrangements applicable to federal public servants under this plan, which many regard as providing highly advantageous pension benefits.^[15]  

However, the Special Advisor determined that this plan is insufficient to ensure the financial security of prothonotaries.  He concluded that the proper comparators are judicial annuities not civil service plans.  In addition to using the judicial model as his paradigm, the Special Advisor favoured the richest assumptions among the range of models in place in the provinces and territories.  He recommends an arrangement that would provide for an accrual rate of 3.5% per year of service, applied to the final year of earnings, with accrual to age 75, for a maximum benefit of 70%.   Contributions would be set at 7%.  Benefits would be indexed to CPI and not integrated with CPP\QPP.^[16]  These entitlements would be fully retroactive so that all service as a prothonotary would be counted at the 3.5% accrual rate.  

Even in a period of economic stability and growth, it would be unreasonable for the Government to accept a pension recommendation that seeks to combine in one plan the most generous elements of each of the provincial and territorial judicial pension arrangements.  In fact, these various pension schemes reflect a range of maximum benefits, each calculated on the basis of a number of distinct factors, including varying accrual, contribution, and indexation rates.^[17]  

It is also worth noting that the Special Advisor incorrectly assumed that his recommended enhancements could be easily implemented through the existing plan.   This significantly underestimates the technical complexity and cost associated with implementation within the PSSA scheme.  In fact, the mechanism to implement this recommendation would be extremely complex, requiring a two-pronged approach that would address necessary adjustments to reflect both past service as well as future enhancements.  Amendments to the legislative scheme would need to be carefully crafted and assessed to achieve these objectives while taking into account potential implications for other participants in the plan.

At any rate, for the reasons indicated above in relation to salary proposals, the Government has concluded that it would not be reasonable to contemplate implementing major pension or other benefit enhancements^[18] in the current economic situation.   Rather the Government will take the opportunity to consider how the current pension arrangements might be modified to reflect the particular circumstances of prothonotaries as judicial officers, including the admittedly unique demographics of mid-career, life-time appointments.  

iii) Supernumerary Status and Associate Judges

In addition to compensation recommendations, the Special Advisor made certain other recommendations relating to the creation of supernumerary offices for prothonotaries and a change of their current title.  He also recommended transfer of responsibility for administration of their compensation to the Office of the Commissioner for Federal Judicial Affairs and modification to the manner in which resources are provided for their compensation within the federal fiscal and budgetary process.  As outlined in the Government’s submission, as a legal matter, the Special Advisor has no jurisdiction under the OIC to make recommendations with respect to matters relating to court structure and organization such as supernumerary offices or titles which are not matters of remuneration.  Similarly, the choice of which federal office should be responsible for the administration of prothonotaries’ compensation, and the process for budgeting and funding arrangements in support of remuneration, are purely policy matters for Government that are outside the mandate of the Special Advisor.  The Government is thus under no obligation to respond to these recommendations.

iv) Interest and Costs

The Special Advisor recommended that the prothonotaries should be reimbursed in full for their legal costs of participation in this process. This is not reasonable. As the Government has repeatedly said in relation to judicial legal costs in the context of the Quadrennial Commission process, there should be a financial incentive to ensure that representational costs are prudently incurred.  It is for this reason that superior court judges are only entitled to 66% of their legal costs.  The Government has already paid the prothonotaries on an ex gratia basis the amount of $50,000 to support their participation in the process.  This is in excess of 66% of their total representational costs.   No additional reimbursement is necessary.

ANNEX A

RECOMMENDATIONS OF THE SPECIAL ADVISOR ON FEDERAL COURT PROTHONOTARIES’ COMPENSATION

Salary
Salary be set for April 1, 2007, at 80 % of a (puisne) Federal Court judge’s salary of $252,000 at $201,600 and adjusted at that rate thereafter. Adjustment be retroactive to April 1, 2004.

Pension
An appropriate retirement arrangement having:

• an accrual rate of 3.5 % per year of service;
• applied to the final year of earnings;
• to age 75, for a maximum benefit of 70 %;
• contributions at 7 %;
• benefit to be indexed to CPI;
• not integrated with CPP/QPP;
• current entitlements should be grand-fathered with Public Service Superannuation Act  so that in conjunction with a supplementary RCA due difference is topped up. Proposal for full retroactivity so all service counted at 3.5 %.

Retired prothonotaries or widows
Correlative enhancements for retired prothonotaries or widows, or alternatively an appropriately sized ex gratia payment.

Sickness and disability
Elimination of 13-week waiting period (automatic salary protection); extension of benefits to age 75, or alternatively that LTD be replaced by an annuity amounting to 70% of salary to age 75.

Supernumerary Status
Consideration be given to establishing opportunity to elect supernumerary status.

Associate Judges
Consideration be given to taking the steps necessary to reflect the status of the prothonotaries as associate judges.

Vacation Entitlement, Other Leaves, Travel, etc

• harmonization of vacation entitlements to 6 weeks currently afforded to Federal Court judges;
• leave and travel arrangements to be administered in same way as for judges as proposed by Courts Administration Service submission;
• application of public service Values and Ethics Code problematic;
• appropriate judicial complaint and discipline mechanism; and
• temporary funding of positions as described by CAS needs to change.

Allowances
Non-taxable allowance of $3,000.

Interest and Costs
Full reimbursements of all legal fees and costs (“in accordance with case law”). No interest.

Periodic Review
Subsequent reviews to track the timeframes of the quadrennial commission process.

---

• ^[1] Reference re Remuneration of Judges of the Provincial Court of Prince Edward Island, [1997] 3 SCR 3.

• ^[2] P.C. 2007-1015, June 21, 2007, P.C. 2007-1316, August 31, 2007, available at http://www.prothocomp.gc.ca.

• ^[3] Available at: http://www.justice.gc.ca

• ^[4] PEI Judges, para 156.

• ^[5] Ibid., para. 158.

• ^[6] Ibid., para. 135.

• ^[7] As such, prothonotaries not only have the benefit of any quadrennial adjustment to judicial salaries but also receive automatic annual indexing as a result of s. 25 of the Judges Act.

• ^[8] The recommendation to tie prothonotaries’ salaries at 80% would result in annual increases as follows: April 1, 2004: $25,513; April 1, 2005: $26,094; April 1, 2006: $26,857; April 1, 2007: $27,720 and April 1, 2008: $28,600.

• ^[9] Report of the Special Advisor, pp.21-23.

• ^[10] The Hay job evaluation system, which is also the basis upon which DM compensation is established.

• ^[11] Report of the Special Advisor, p.55.

• ^[12] Submission of the Government of Canada to the Special Advisor on Prothonotaries’ Compensation, February 4, 2008, paragraphs 47-48.

• ^[13] Report of the Special Advisor, p.24.

• ^[14] The Special Advisor states that “… the Government appears to be treating its obligation in a process such as this as one of only paying judges and prothonotaries an acceptable minimum”, Report of the Special Advisor, p.53.

• ^[15] Under this plan, members accrue 2% of pension for each full year of service on the basis of the five best consecutive years of earnings before age 69. The Government underscored the key principle that every Canadian is primarily responsible for his or her own financial retirement planning.  Furthermore, to the degree some prothonotaries are joining the PSSA at a later age, they are by no means unique as this represents the trend in the public service more broadly.

• ^[16] Non-integration means the pension is not reduced by a standard formula when the member becomes eligible to draw CPP/QPP benefits at age 65 or begins to draw CPP/QPP disability benefits at any age.

• ^[17] For example, the Special Advisor recommended an accrual period of 20 years, with an accrual rate of 3.5%, using the average age at appointment of both current and retired prothonotaries.  But prothonotaries themselves emphasized the changing demographics of their labour pool, which is drawing upon younger candidates from the private sector.  Using the more reasonable average age of appointment of the six existing prothonotaries (45 years of age) results in an accrual period of 23.3 years with an accrual rate of 3%.   Indeed, an accrual rate of 3% is applied in a number of jurisdictions with benefits based on three years best average salary rather than the final year as recommended.

• ^[18] More specifically the Government is not prepared to implement the Special Advisor’s recommendations to extend long-term disability benefits and to provide an annual tax-free allowance of $3,000 to prothonotaries.  Nor is the Government prepared to make an ex gratia payment to the former prothonotary and the two survivors of deceased prothonotaries.  However, the Government will extend vacation entitlements to 6 weeks to all prothonotaries on the basis that they all should receive the same level of benefits immediately without executive discretion.