Alberta Health Services executives will receive their salary bonuses, announced Health Minister Fred Horne on Saturday.

Horne dismissed the entire AHS board on June 12 after its members gave bonuses to 99 executives despite wage freezes and staff cuts across the system.

"The AHS board was terminated because they refused to comply with a lawful directive of the minister of health," said Horne on Saturday. "They were asked to reconsider that decision. "

Earlier this month, however, employment lawyers told CBC News Horne put the AHS board in an untenable legal situation.

The payouts are a part of the salary structure known as "pay-at-risk," which is earned based upon meeting performance targets.

The bonuses are worth an estimated $3.2 million.

AHS review confirms possibility of legal action

Saturday's decision to reinstate the bonuses was made following an investigation by current AHS administrator Janet Davidson.

"If AHS were to withhold the payment of this component of their compensation, AHS could be considered in breach of contract as pay at risk made up a part of these employment agreements," Davidson wrote in a letter to Horne dated June 26.

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

Davidson recommended pay-at-risk be paid to all eligible AHS staff — but added that staff should be given the option to refuse the bonus on a voluntary basis.

She also recommended that current employee contracts be amended to remove the pay-at-risk structure.

Current AHS contracts to be amended

In a statement to CBC News on Saturday, Horne said the province will act on all of Davidson’s recommendations, given "the potential legal consequences for refusing to do so."

"While we stand with Albertans in their opposition to the pay-at-risk model, we also recognize the litigation and liability costs of not making these payments would be an additional burden to taxpayers," he said.

All current employment contracts containing the pay-at-risk clause will now be amended to remove the controversial bonus, said Horne.

"In the future, going forward, there will be no further pay-at-risk in Alberta. That begins with this fiscal year."

AHS executives will be given opportunity to refuse payout

Horne said that staff will be given the opportunity to refuse the additional payment should they wish — an option he said the former board denied despite several employees’ offers to forego the bonus.

"It disturbed me greatly… that the former board had closed that door, and so we’re reopening that and they will be given the option to refuse the pay-at-risk," he said

"I think Albertans, generally, we’re hard-working people," Horne said. "We like to be paid a fair salary for the work that we do and there’s no reason that shouldn’t apply to health executives as well."

However Alberta NDP leader Brian Mason said Horne’s interpretation oversimplifies the situation, as AHS executives are paid according to a corporate model that guarantees employees only a portion of their salary.

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NDP Leader Brian Mason called Horne's management of the situation posturing, adding that it will hurt Albertan confidence in the health care system. (CBC)

"To now pretend that these people are not going to take half their salary is absurd," said Mason, who called it "ridiculous" that the province had executives sign the pay-at-risk contracts and then campaign to take them away, calling them "bonuses."

Horne’s management draws criticism

Mason also criticized Horne’s management of the situation.

"I don’t know what he’s doing," said Mason. "He fires the board for refusing to do something that’s illegal, that he knows they can’t do — and he fires them. And then he comes back and tells us ‘oops, I guess we can’t do that.’"

"He’s not being honest with the people of Alberta about what he’s doing," he added.

If it was Horne’s intention to simply get rid of the AHS board, he should have simply done that in the first place, Mason said.

"The minister really looks bad on this, in my opinion," he said.

"He doesn’t know what’s going on in the health system. He should have known before he took this action what the legal responsibilities were and what the situation was. He should have gotten this advice before he acted — not after."

But Horne said he was given varying answers on the legalities of the situation.

In particular, Horne said  that until Davidson’s review, he was unaware that four former employees who left AHS earlier in the fiscal year had already been given their payout.

"That further complicates the situation," he said.

You can read Davidson's recommendations as well as Horne's statement below.