On November 29, 2022 the Ontario Superior Court of Justice declared that Bill 124 (Ontario’s public sector wage restraint legislation) was unconstitutional, void, and of no effect (discussed in our previous Communiqué). Subsequently, the Ontario Government appealed this court decision.
On February 12, 2024, a majority of the Ontario Court of Appeal found that Bill 124 is unconstitutional and invalid in so far as it applies to affected broader public sector employees who are represented in the workplace by unions (decision linked here). The Court of Appeal, however, found that Bill 124 is constitutional and valid in its application to affected broader public sector employees who are not represented in the workplace by unions.
Bill 124 and the court challenge 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 – the Protecting a Sustainable Public Sector for Future Generations Act, 2019 (the “Act”) – came into force in 2019. The Act imposed a one percent annual cap on increases to salary and compensation for employees in the broader public sector (with some exceptions) for a period of three years. The Act applied to approximately 780,000 unionized and non-unionized employees in Ontario, including employees of the Ontario public service, school boards, post-secondary institutions, hospitals, licensed not-for-profit long-term care homes, children’s aid societies, and other employees in the broader public sector.
Decision of the Lower Court
After various labour organizations (the “Applicants”) challenged the constitutionality of the Act, the Ontario Superior Court of Justice ruled that the Act infringed the Applicants’ right to freedom of association under section 2(d) of the Canadian Charter of Rights and Freedoms (the “Charter”). The Supreme Court of Canada has previously recognized that section 2(d) of the Charter includes the right to engage in collective bargaining and the right to strike. The Court found that the Act interfered with the Applicants’ ability to engage meaningfully in collective bargaining by preventing collective bargaining for wage increases in excess of one percent. Finding that the negative effects of the Act outweighed its benefits, the Court determined that this interference could not be justified under section 1 of the Charter.
Decision of the Court of Appeal
The majority opinion of the Court of Appeal, as written by Favreau J.A., agreed with the Lower Court that the Act violates the section 2(d) Charter rights of broader public sector unionized employees in Ontario and that, in this respect, it is not saved by section 1 of the Charter. The majority opinion held that the Act substantially interfered with the Applicants’ right to participate in good faith negotiation and consultation over their working conditions. The Province sought to draw parallels between the Act and other provincial and federal wage restraint legislation that had been previously found to be constitutional. However, the Court of Appeal distinguished such legislation from the Act, because:
- the Ontario Government did not engage in a significant process of bargaining or consultation before passing the Act;
- the Act significantly restricted the scope and areas left open for negotiation in the collective bargaining process;
- there was no meaningful mechanism for collective agreements to be exempted from the Act; and
- public sector collective agreements to which the Act did not apply generally provided for higher annual wage increases than 1%.
The majority opinion of the Court of Appeal also found that the Act was not saved by section 1 of the Charter because it did not minimally impair the Applicants’ right to freedom of association and because the Act’s deleterious effects outweighed its benefits.
However, the Court of Appeal found that the Act was valid in its application to employees not represented by unions in the workplace, and therefore granted the appeal to that extent. The majority of the Court of Appeal found that employees who are not represented by unions do not benefit from the same protections as their unionized counterparts under section 2(d) of the Charter since they do not bargain collectively.
Accordingly, the majority held that the Lower Court’s decision was overly broad and should be limited to a declaration that the Act is unconstitutional only in so far as it applies to unionized employees.
One Court of Appeal justice, Hourigan J.A., dissented from the majority decision with respect to unionized employees. Hourigan J.A. held that the majority opinion incautiously allows the judiciary to wade into public policy matters that should be within the exclusive realm of the legislative branch of government. The dissent concluded that the Act did not violate the Charter.
Next Steps
The Ontario Government has already announced that it will NOT appeal the Court of Appeal’s decision. In addition, while the Act is technically valid for non-unionized employees of affected broader public sector employers, the Ontario Government has announced that it will be repealing the Act in its entirety. As an interim measure for non-unionized employees, the Ontario Government will introduce regulations that will exempt non-unionized employees from the impact of the Act until it is repealed. The Court of Appeal’s decision may have significant implications for affected employers in the broader public sector with unionized employees as many employers may be obligated, pursuant to the terms of their collective agreement, to re-negotiate agreements that were negotiated while the Act was thought to be valid (although this has already been occurring since the Lower Court’s decision).
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.
