The Ontario Court of Appeal (“ONCA”) released its recent decision in Ontario English Catholic Teachers’ Association v Ontario (Attorney General)[1]. The majority of the ONCA ruled that the Protecting a Sustainable Public Sector for Future Generations Act, 2019, known as Bill 124 (“Bill 124”), was unconstitutional in so far as it applies to unionized employees.
Background
On November 7, 2019, the Ontario legislature passed Bill 124, which imposed a three-year moderation period on compensation, including salary rates, for both union and non-union employees in the broader public sector. Bill 124 imposed a 1% cap per year on increases to salary rates for those three years.
Ten labour organizations and unions (the “Respondents”) brought applications challenging the constitutionality of Bill 124. All applications were heard consecutively by the Ontario Superior Court of Justice (“Superior Court”) in 2022. Justice Koehnen of the Superior Court held that Bill 124 was unconstitutional as it substantially interfered with collective bargaining and violated the freedom of association rights protected under section 2(d) of the Canadian Charter of Rights and Freedoms (“Charter”) and could not be saved by section 1 of the Charter. Justice Koehnen did not accept the arguments that Bill 124 violated the Respondents’ freedom of expression (s. 2(b)) or equality rights (s. 15) under the Charter. The Ontario government appealed this decision to the ONCA, which was heard in June 2023.
Decision
On behalf of the majority of the ONCA, Justice Favreau held that Bill 124 violated the s. 2(d) rights of only unionized public sector employees in Ontario and substantially interfered with their right to participate in good faith negotiation and consultation over their working conditions. The ONCA held that Bill 124 could not be saved by section 1 of the Charter because it did not minimally impair the employees’ right to freedom of association and its deleterious effects outweighed its benefits.
To reach this decision, the ONCA started with a review of the general principles that apply to s. 2(d) of the Charter, followed by a review of other appellate decisions regarding wage restraint legislation. The ONCA reviewed similar legislation enacted in Manitoba, Quebec, British Columbia and Nova Scotia, where courts considered the legislation constitutional. The ONCA found that courts use certain indicia to assess whether the measures imposed by such legislation reach a level of “substantial interference” or whether they allow for a meaningful process of good faith negotiation and consultation.
The Supreme Court of Canada in Health Services and Support – Facilities Subsector Bargaining Assn. v. British Columbia,[2] established a two-part process, which was applied by the ONCA, for determining if a law substantially interferes with the right to collective bargaining. To find a breach of section 2(d) collective bargaining rights the Court must: (1) Assess “the importance of the matter affected to the process of collective bargaining, and more specifically, to the capacity of the union members to come together and pursue collective goals in concert”; and (2) Assess “the manner in which the measure impacts on the collective right to good faith negotiation and consultation”.
In accordance with the two-part test, there was no doubt that Bill 124 addressed matters of central importance to collective bargaining as Bill 124 related expressly to workers’ wages and compensation. However, the key issue in this case was the second part of the process, namely whether Bill 124 preserves a meaningful process of consultation and good faith negotiation. The ONCA considered several factors applied by courts in other wage cap legislation cases to reach a decision.
The first issue considered was whether the government engaged in a significant process of collective bargaining or consultation before passing Bill 124. The ONCA explained that the government was not precluded from introducing Bill 124 before the beginning of collective bargaining in the education sector and other sectors. However, the evidence demonstrated that Bill 124 was not introduced after a period of meaningful bargaining and negotiation, which could have attenuated the impact of Bill 124 on the employees’ collective bargaining rights.
Another issue considered by courts in other wage gap legislation cases was whether unions were still able to negotiate over substantial matters. The ONCA found that in this case, the broad definition of “compensation” in Bill 124 significantly limited the areas that remain available for negotiation. The 1% cap did not only apply to salaries, but also applied to any kind of benefits such as sick days, vacation days, and other benefits. The broad limitation in this case significantly affected the scope for negotiations over all areas of compensation and impeded the respondent organizations from using wages and other compensation as a bargaining chip to achieve gains in other areas. The ONCA also considered whether Bill 124 provided a meaningful process for exemption and found that although section 27 of Bill 124 provided an exemption in theory, there was no evidence that this is a meaningful channel for negotiation or collective bargaining.
As a result, the ONCA found that the circumstances leading up to the passage of Bill 124 and the characteristics of Bill 124 substantially impacted the employees’ ability to participate in good faith collective bargaining and consultation. Bill 124 also did not come after a significant or meaningful process of collective bargaining. Further, the definition of compensation was overly broad and significantly limited the areas of potential negotiation left for collective bargaining. The ONCA concluded that adding the 1% cap on salary and compensation increases did not replicate collective agreements reached in other public sector bargaining. After considering the factors above, the ONCA determined that Bill 124 substantially interfered with the employees’ ability to participate in good faith negotiation and consultation with their employers.
Once a law has been found to violate a Charter right, the government bears the onus of establishing that the law is a reasonable limit on that right. When determining whether the objective of Bill 124 was pressing and substantial, the ONCA held that the application judges’ decision showed insufficient deference to the legislature’s ability to identify policy priorities, especially fiscal and labour matters. The ONCA agreed that the objective of Bill 124 is connected to the governments objectives and that there is no rational connection between Bill 124’s objectives and its applications to workers in the electricity sector or the university sector. The ONCA also agreed that Bill 124 did not minimally impair the employees’ rights to collective bargaining under s. 2(d) of the Charter and that Bill 124’s salutary effects were not proportionate to its deleterious effects. Therefore, the ONCA held that Bill 124 could not be saved by s.1 (reasonable limits) of the Charter.
Dissenting Opinion
In Justice Hourigan’s lengthy dissenting opinion, he stated that Bill 124 was constitutional in its entirety and suggested that Bill 124 did not substantially interfere with s. 2(d) of the Charter.
Justice Hourigan held that collective bargaining had occurred under Bill 124, even though compensation increases were temporarily capped. Justice Hourigan held that employees were able to join together to pursue workplace goals, had the right to make collective representations to the employer and to have those representations considered in good faith, and had a means of recourse if the employer did not bargain in good faith.
Further, Justice Hourigan did not agree with the majority findings on the section 1 Charter analysis. Although Justice Hourigan agreed that the government had a pressing and substantial objective, which was to achieve financial stability, he found that Bill 124 had a rational connection to this objective and that it was minimally impairing. Justice Hourigan concluded that Bill 124’s salutary effects of protecting Ontario’s financial health and preserving the sustainability of public services far outweighed any deleterious effects. As a result, Justice Hourigan held that if Bill 124 breached s. 2(d), it is a reasonable limit prescribed by law and is demonstrably justified in a free and democratic society.
Takeaways
The Ontario government has since repealed the legislation by Order in Council on February 23, 2024 and various public sector workers, including education workers and teachers impacted by the wage restraint will receive retroactive salary increases as a remedy for lost wages under Bill 124. The repeal of Bill 124 also confirms that it no longer applies to both unionized
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