Opposition Leader Tim Hudak says the Liberal government has ignored calls from municipalities to restructure the system so arbitrators consider the financial impact of their decisions.
Hudak says firefighters in Stratford were awarded a 20 per cent raise that will cost the community $1.5 million, while Toronto transit workers got a six per cent hike that will cost the city $100 million a year.
The Conservatives have introduced a private member's bill that would force arbitrators to consider such factors as a local unemployment rate and tax base before awarding pay hikes.
Hudak says the bill would also require the province to compile and publish the statistics the arbitrators would have to consider when making their decisions.
The Tories also want arbitrators to make their decisions on public sector labour disputes within three months, and to explain their decisions in writing.
"The bottom line is we have to tackle the underlying things that enable government workers to get pay and benefit increases that are out of line with reality," said Hudak.
Public sector unions have "nothing to lose" by avoiding local bargaining and going straight to arbitration, he added.
"I know the public sector union bosses have been running the finances of the province for some time, and obviously they will object to this bill," said Hudak.
"But I think the average taxpayer out there _ union, non-union _ are going to say that public sector pay and benefits need to reflect private sector realities."
Mayors and municipal councils say they need the arbitration rules changed so police and firefighters get contracts based on the local community's ability to pay, not on what their colleagues get in other towns and cities.
Conservative house leader Jim Wilson's private members bill to change Ontario's arbitration system comes up for second reading debate Oct. 4.