Canada: Employees Have The Right To Associate But Not Necessarily To Reap An Economic Benefit

On May 27, 2014, the Quebec Court of Appeal held that the constitutional protection afforded by section 2(d) of the Canadian Charter of Rights and Freedoms (the Charter) does not guarantee the economic effects of collective bargaining. Freedom of association protects the collective bargaining process, but not the wage increases deriving from that process.1

The facts

Local 675 of the Canadian Union of Public Employees (CUPE) and the Association des réalisateurs had entered into collective agreements with the Canadian Broadcasting Corporation (CBC) which came into effect on October 1, 2007 and were to end on September 26, 2010 and December 11, 2011, respectively. In CUPE's case, the collective agreement provided for three annual wage increases, namely 2.6% on October 1, 2007, 2.5% on September 29, 2008 and 2.5% on September 28, 2009. In the case of the Association des réalisateurs, the annual wage increases were 3% on December 10, 2007, 2.5% on December 15, 2008, 2,5% on December 14, 2009 and 2.5% on December 13, 2010.

In August 2007, a serious financial crisis had begun to affect industrialized nations. In the fall of 2008, the situation worsened precipitously and, for the first time since 1991, Canada was facing a negative growth outlook for 2009. In an Economic and Fiscal Statement issued on November 27, 2008, the federal government announced that its response to the crisis would focus on "strong fiscal and financial management." The approach consisted of trying to keep the country from running too large a deficit without resorting to tax hikes or otherwise adding to the fiscal burden on businesses and individuals. Accordingly, the government announced measures designed to reduce and ensure predictability of total payroll for the public sector. This was the context in which the Act to restrain the Government of Canada's expenditures in relation to employment2 (Act) came into force on March 12, 2009, which legislation capped wage increases for federal civil servants at 2.5% for 2006, 2.3% for 2007 and 1.5% for the following three years. These pay increase caps applied retroactively to collective agreements entered into prior to December 8, 2008, and also rendered inoperative any provisions contained in any subsequent collective agreement that exceeded the prescribed limits. In addition to federal civil servants, the Act also applied to all employees of the CBC. Owing to an unbelievable mix-up, it was only several weeks after its adoption that the CBC's representatives realized the effect of the Act on its employees and that the wage increases granted by the collective agreement should not have been paid.

Taking the position that the government, by subjecting their collective agreements to the Act without allowing them the opportunity of renegotiating the terms, had infringed their right of freedom of association enshrined in section 2(d) of the Charter, CUPE and the Association des réalisateurs turned to the courts seeking rulings that the various provisions of the Act did not apply to their members and that the CBC was required to abide by the agreements signed in October 2007. 

The judgment in first instance

The judge in first instance ruled that the Act infringed the right of freedom of association in that it set aside working conditions that had been duly negotiated and prohibited future negotiation of increases exceeding the prescribed limits, without consulting the unions beforehand. Compensation being one of a labour contract's most important components, the judge was of the view that the Act's effects constituted substantial interference in the collective bargaining process, in violation of section 2(d) of the Charter.

For the judge, even though the objectives sought by the Act were "pressing and substantial", including the CBC among the entities subject to the Act was not rationally connected to the objective of controlling government expenditures, and the government could cut funding to the CBC without interfering in the collective bargaining process.

The Court of Appeal ruling

Taking its cue from the Supreme Court of Canada,3 the Court of Appeal set about determining whether the Act constituted interference in the collective bargaining process and concluded that it did, since it resulted in the loss of a part of the increase in pay agreed upon and a possible lessening, in the eyes of the union members, of the value of the collective bargaining process as a mechanism for determining working conditions.

However, the Court explained that it was necessary to decide whether that interference in the collective bargaining process was substantial enough for section 2(d) of the Charter to have been breached. The Supreme Court had affirmed in Health Services4 that legislation which sets aside employment conditions in effect did not necessarily contravene section 2(d). The constitutional protection did not guarantee that an outcome would be achieved or the economic effects of that outcome; indeed, the Charter protected only the collective bargaining process, not the fruits of that process. The Court of Appeal went on to note that it was the act of unilaterally nullifying settled terms relating to issues of fundamental importance in labour relations, and excluding any possibility of future negotiation on those same issues, that gave rise to substantial interference with the right of association. In the Court's view, this was not the case here for the Association des réalisateurs and CUPE because the Act did not freeze or reduce wages, but rather capped wage increases for the period from December 2008 to March 2011. Moreover, the Act would no longer apply when it came time to negotiate the next collective agreements, nor did it stop the union and the employer, during its period of application, from agreeing to reopen the collective agreements in order to renegotiate other working conditions in light of the more limited wage increases.

Accordingly, the Court of Appeal found that there was no infringement of a protected freedom since "substantial" interference" with the right to associate freely protected by section 2(d) of the Charter had not been demonstrated.

Lastly, the Court of Appeal noted that the need to stabilize public finances in 2008 was an example of a pressing and substantial objective and that the management of a crisis of this kind and the choice of measures that were seen as appropriate was clearly within the power of the government and of Parliament. The Court of Appeal also considered that the government had chosen measures that were effective, yet whose consequences were less onerous than a wage scale progression freeze, layoffs or wage cuts, and that methods which entailed less interference with employees' freedom of association and would still allow the objectives sought to be achieved did not exist. For these reasons, the measures adopted could be justified in accordance with section 1 of the Charter.

Conclusion

This decision is in line with rulings by the Ontario Court of Appeal, the Federal Court of Appeal and the British Columbia Court of Appeal, which courts have dismissed challenges to the Act's application to members of the Association of Justice Counsel, the RCMP and the Federal Government Dockyards Trades and Labour Council.

This ruling by the Quebec Court of Appeal thus confirms that notwithstanding the decision in Health Services, and in keeping with the decision in Fraser, the boundaries within which governments must operate in determining their employees' working conditions are quite broad.

Footnotes

1 Canada (Procureur général) c Syndicat canadien de la fonction publique, section locale 675, 2014 QCCA 1068.

2 SC 2009, c 2.

3 Health Services and Support – Facilities Subsector Bargaining Assn. v British Columbia, 2007 SCC 27 and Ontario (Attorney General) v Fraser, 2011 SCC 20.

4 Op. cit., note 3.

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