On November 29, 2022, the Ontario Superior Court of Justice ruled[1] that Bill 124, Ontario’s public sector wage restraint legislation, is unconstitutional. As a result, the Court declared the statute void and of no effect. The provincial government has announced its intention to appeal this decision.
This development has been the subject of significant media focus and has major implications for public sector employers. Below, we review key aspects of the decision and relevant takeaways for employers going forward.
Background
Bill 124 – formally, the Protecting a Sustainable Public Sector for Future Generations Act, 2019 (the “Act”) – came into force in 2019. It imposed a three-year moderation period on salary and compensation for approximately 780,000 workers in Ontario, including employees of the Ontario public service, school boards, post-secondary institutions, hospitals and other employers in the broader public sector. During an employer’s moderation period, wages and salaries could not be increased by more than one percent per year (with some exceptions). Further, compensation, which includes salary, wages and benefits, could not be increased by more than one percent per year on average for all employees.
The decision
Various labour organizations (the “Applicants”) challenged the constitutionality of the Act, arguing that it limited the Applicants’ freedom of association, freedom of speech, and equality rights under the Canadian Charter of Rights and Freedoms (the “Charter”).
The Court found that the Act infringed the Applicants’ rights to freedom of association under section 2(d) of the Charter, which the Supreme Court of Canada has recognized includes the right to engage in collective bargaining and the right to strike. By preventing collective bargaining for wage increases in excess of 1%, the Act interfered with the Applicants’ ability to engage in collective bargaining. The Court held that, in addition to limiting the extent to which the Applicants could bargain over wage increases, the Act prevented the Applicants from trading off salary demands against non-monetary benefits or addressing staff shortages in collective bargaining. Further, the Act interfered with the usefulness of the right to strike, the independence of interest arbitration, and the overall power balance between employer and employees.
Together, these detrimental effects substantially interfered with collective bargaining. Moreover, this interference could not be justified under section 1 of the Charter. In finding that no justification for the interference was established, the Court held:
- Ontario did not demonstrate on the evidence that the economic conditions in 2019 were of a sufficiently critical nature to warrant infringing on the constitutionally protected right to collective bargaining.
- In certain cases, the Act applied to wages that were in no way connected to Ontario’s budget or deficit, such that there was no rational connection between the Act’s objectives and the wages paid to those employees.
- Ontario failed to show that it had impaired the Applicant’s Charter rights as minimally as possible. It did not explain why it could not have pursued voluntary wage restraint in its collective bargaining negotiations with public sector employees.
Accordingly, the negative effects of the Act outweighed its benefits, and the Act was declared void and of no effect in its entirety.
The Court’s decision on financial remedies for the Applicants will be rendered at a later date.
Next steps
This decision has substantial implications for employers in the broader public sector. Many unionized employers have negotiated collective agreements with clauses that re-open the agreement for further negotiation if the Act is found unconstitutional. Other unionized employers with upcoming interest arbitration hearings may have expected to present proposals based on the Act.
The Ontario government has already announced its intention to appeal the decision to the Ontario Court of Appeal. Employers should be aware that the government may seek a court order staying the Ontario Superior Court’s decision pending the outcome of the appeal. This would have the effect of delaying the declaration of unconstitutionality until the appeal is resolved.
If your organization is affected by Bill 124 and you would like to discuss the impact of these developments, please contact a member of Miller Thomson’s Labour & Employment team.
[1] English Catholic Teachers’ Assoc. v. His Majesty, 2022 ONSC 6658.
