The president of CUPE Local 79, which represents the city's 23,000 inside workers, said his union and the city are "still far apart on key concessions" with just hours to go before a potential strike or lockout.

The city avoided a labour disruption with its outside workers after striking a tentative deal earlier Friday with CUPE Local 416, but the employees who work inside are still facing a strike or lockout deadline at midnight. 

As of 12:01 a.m., members of Local 79 — who work in Toronto's community centres, arenas, and many of its municipal offices — could walk off the job.

"I'm not discouraged because I know that Toronto residents know it's okay to bargain to protect their jobs," Tim Maguire said Friday afternoon at a news conference. "What happens at 12:01? We'll continue to talk. We're not focussing on service disruption, we're focussing on negotiating."

Maguire said "we're far apart from the city recognizing it has to reverse the increasing instability that inside workers face."

He said a collective agreement his membership could accept would recognize that "the workers we represent are entitled to wage increases that other city employees are given."

In the event of a labour dispute, the city might redeploy some of its 4,200 managers to fill some the gaps, officials have said. But city manager Peter Wallace said last week that community centres, building permit offices, arenas and child-care programs would likely close unless both sides strike a deal.

It's unclear exactly what obstacles remain in reaching an agreement.

Union leaders say they are trying to improve job security for their members and to protect their benefits.

Mayor John Tory, however, has said there's no money in the budget for compensation and benefits packages.

"More heavy lifting remains," Tory said Friday morning. "We still have much work to do in a short period of time to get a responsible agreement with Local 79."

The city struck a tentative agreement with about 5,400 outside workers represented by CUPE 416 after negotiating through the wee hours of Friday morning, shortly after that local's strike deadline had passed. 

The city's 2012 contract with both union locals expired on Dec. 31.