Ontario's Bill 124 declared unconstitutional

On Nov. 29, 2022, the Ontario Superior Court of Justice released its highly anticipated decision in Ontario English Catholic Teachers Association v. His Majesty, 2022 ONSC 6658. The Court ruled that the Protecting a Sustainable Public Sector… Act, 2019, known as Bill 124 (the "Bill"), which introduced a one per cent wage cap for public sector workers, is unconstitutional – "void and of no effect." The Bill was found to infringe upon the workers' right to freedom of association under section 2(d) of the Canadian Charter of Rights and Freedoms (the "Charter").

Bill 124

Since November, 2019, Bill 124 has restricted wage increases to one per cent per year for approximately 780,000 public sector workers in the province. Shortly after it was proclaimed into force, the constitutionality of the Bill was challenged by 10 unions within the province (collectively, the "Applicants").

The Applicants argued that the Bill unjustifiably limits the freedom of association, freedom of speech and equality rights of their members under the Charter. The Ontario Government opposed the Applicants' arguments (either it did not infringe said rights, or if it did, the legislation was a reasonable limitation on those rights).

Superior Court decision

The Superior Court accepted the Applicants' position that a governmental measure, such as legislation, will interfere with the collective bargaining process if it:

1. Prevents or denies meaningful discussion about working conditions;
2. Prohibits provisions from being dealt with in collective agreements;
3. Prevents employees from having their views heard in the context of a meaningful process of consultation and discussion; or
4. Imposes arbitrary terms on collective agreements.[1]

The Court also considered a number of factors when determining whether the introduction of a one per cent wage cap was "substantial" enough to trigger an infringement of section 2(d) of the Charter:

1. The financial impact of the wage cap;
2. The impact on trading remuneration against other issues;
3. The impact on staffing;
4. The impact on wage parity between public and private sector employees;
5. The impact on employee self-government;
6. The impact on freely negotiated agreements;
7. The impact on the right to strike;
8. The impact on interest arbitration;
9. The impact on the relationship between unions and their members; and
10. The impact on the power balance between employer and employees.[2]

The Court accepted that the Charter not only protects the right to associate, but also the right to a meaningful process by which employees can collectively bargain to address critical issues including compensation. In other words, if legislation takes a key issue for collective bargaining off the table, it interferes with the collective bargaining process. The Court found "no doubt" that the Bill amounted to substantial interference with the collective bargaining process and, therefore, a theoretical breach of the Charter.

Further, the Court did not accept the province's contention that imposing a one per cent wage cap on 780,000 employees was "minimally impairing." The Court found that the impact of the Bill was not limited to wages that the province pays directly, and refused to accept the province's argument that it is facing a financial or economic crisis that would justify such restraint. Conversely, the Court found that the province actually imposed the Bill out of fear that taking such a position in the context of collective bargaining could lead to strikes. The Court viewed this position as one which could not be demonstrably justified in a free and democratic society.[3]

In conclusion, the Court found that the Bill is unconstitutional having infringed the Applicants' freedom of association under section 2(d) of the Charter.  At the request of the parties, the Court has deferred its decision on remedies – this issue will be determined at a future hearing on a date yet to be determined.

Key takeaways for employers

Although the Superior Court's decision strikes down the Bill and has deemed the one per cent wage cap unconstitutional, the decision is subject to the appeal process. The province has already expressed an intention to appeal the decision, and it will likely seek a stay of the Court's decision pending disposition of the appeal.

While we wait for either a stay or appeal of the Court's decision, unions and employers alike are trying to determine how best to manage uncertainty at the bargaining table. Many negotiated collective agreements already include "reopener" clauses that were voluntarily agreed to or awarded at interest arbitration as a result of negotiations "under the shadow of" the Bill.  It is anticipated that unions will seek back-pay and will seek higher wages given the uncertainty going forward.

Further, in the event that the province is unsuccessful on appeal, it remains to be seen who will ultimately be responsible for funding back-pay requests – the province, or individual employers. While this issue has been deferred, we expect that this will be the most significant aspect of this litigation going forward.

Stay tuned to our Insights for further developments regarding this case.  If you would like to discuss the Ontario English Catholic Teachers Association decision further or have any questions, please contact the authors or a member of the Employment, Labour & Equalities Group.