In a decision dated November 29, 2022, Justice Koehnen of the Ontario Superior Court of Justice found that Bill 124, Protecting a Sustainable Public Sector for Future Generations Act, 2019 (the Act or Bill 124) substantially interfered with the applicant unions' section 2(d) freedom of association rights under the Canadian Charter of Rights and Freedoms (Charter). After determining that the violation could not be saved under section 1 of the Charter, Justice Koehnen declared the Act to be "void and of no effect."
In this FTR Now, we consider the decision and its implications for public sector employers.
Bill 124 was proclaimed into force by the Ontario government on November 8, 2019. It provided for a three-year window of salary moderation and compensation restraint measures for non-union and unionized employees employed by the Ontario government, Crown agencies, the broader public sector and a range of organizations that receive funding from the Ontario government.
For unionized employees, the Act came into force with respect to any particular bargaining unit on the expiry of a collective agreement that was in force as of June 5, 2019. If a collective agreement was in force as of June 5, 2019, the moderation period commenced (or would commence) on the day following the expiry of the collective agreement. This timing was prescribed by the Act.
Employers were provided with slightly more leeway in determining the moderation period for their non-unionized employees. Employers could select any start date for moderation between June 5, 2019 and January 1, 2022. Subject to any approved exemption, employers were required to start their moderation period by no later than January 1, 2022. The moderation period would run for three years from that date.
The Legal Challenge Brought by the Unions
Ten applications were brought to the Ontario Superior Court of Justice by a broad range of unions and labour organizations challenging the constitutionality of Bill 124.
The applicants argued that Bill 124 limited the freedom of association, freedom of speech and equality rights of their members as guaranteed under the Charter. The crux of the legal challenge focused on section 2(d) of the Charter—freedom of association. The applicants argued that the operation of Bill 124 and its mandatory wage restraint provisions "substantially interfered" with their members' right to collectively bargain.
The Ontario government denied that Bill 124 infringed on any of the above-noted rights and in the alternative submitted that if the Act did infringe on any Charter rights, it was saved by section 1 of the Charter as a reasonable limit that was demonstrably justified.
All 10 applications were heard consecutively over 10 days in September 2022.
In Ontario English Catholic Teachers Assoc. v. His Majesty, Justice Koehnen reaffirmed that section 2(d) of the Charter protects not just the right to associate but also the "right to a meaningful process in which the unions can put on the table those issues that are of concern to workers and have this discussed in good faith." He was clear that legislation which" takes issues off the table" substantially interferes with collective bargaining. In this case, that legislation was Bill 124.
Justice Koehnen then found that the breach of section 2(d) of the Charter could not be saved under section 1. To establish a justification under section 1, the government had to show a pressing and substantial objective underlying the Act, a rational connection between the Act and this objective, minimal impairment of the Charter right and that the benefit of the Act outweighs any detriment to the applicants. Justice Koehnen first determined that Ontario could not establish a pressing and substantial objective for Bill 124. He went on to consider the other elements of the test, and his findings in this respect are summarized at the start of the decision:
 With respect to rational connection, there is a rational connection between the objective and wages that Ontario pays directly. The Act, however, goes far beyond that. In some cases it applies to wages that are in no way connected to Ontario's budget or deficit. In others, like the university sector, it applies to wages that are only indirectly related to Ontario's budget but in respect of which Ontario already has other contractual protections that control Ontario's contributions.
 With respect to minimal impairment, the same considerations apply as with respect to rational connection. In addition, Ontario was free in any collective bargaining negotiation to take the position that it could not pay wage increases of more than 1%. It appears that Ontario was reluctant to take that position because it could lead to strikes. As noted, the right to strike is constitutionally protected. On this theory, Ontario was imposing a statutory limit of 1% on wage increases because it feared that taking that position at the bargaining table would lead employees to exercise their constitutionally protected right to strike. That does not amount to a reasonable limit on the right to collective bargaining that can be demonstrably justified in a free and democratic society. Although inconvenient, the right to strike is a component of a free and democratic society. Strikes bring issues to the public forefront and allow their resolution to be influenced by public opinion.
 With respect to balancing the benefits and negative effects of the Act, in circumstances where Ontario has not provided any satisfactory explanation for why it could not limit wage increases during collective bargaining negotiations, the negative effects of the Act outweigh its benefits.
As part of his section 1 analysis, Justice Koehnen also considered the line of cases presented by the government that had upheld the constitutionality of certain wage restraint legislation, including the decision of the Manitoba Court of Appeal in Manitoba Federation of Labour et al v The Government of Manitoba, which upheld provincial wage restraint legislation that was introduced in 2017 and which capped wage increases over four years at 0%, 0%, 0.75% and 1%. He found those cases to be distinguishable from his consideration of Bill 124.
Justice Koehnen concluded the Act was unconstitutional and declared it "void and of no effect." He specifically noted that given that the entire purpose of the Act was to implement the 1% on wage increases "there is no purpose served in reviewing the Act section by section."
At the request of the parties, the Court deferred the consideration of any remedy to be awarded as a result of the legislation having been in effect since June 2019 to a future hearing.
What Does This Mean for Impacted Employers?
At this moment, the Court's declaration that the Act is void and of no effect means that Bill 124 is no longer part of the law in Ontario. In other words, the law is struck down in its entirety and in its application for both the unionized and non-unionized employees to whom it applies.
Employers should keep in mind that the Ontario government has expressed an intention to appeal. In this case, the Ontario government would likely seek a stay of the decision pending the appeal. If the Court grants a stay of the decision this would pause the Court's order of unconstitutionality pending the appeal to the Court of Appeal and possibly to the Supreme Court of Canada.
Pending either any stay or appeal of the decision, broader public sector employers will want to turn their minds to a number of issues:
- For those who have deals or awards: Are you subject to any wage reopener obligations that were voluntarily agreed to or that were awarded at interest arbitration as a result of negotiations under Bill 124?
- For those for whom the Bill 124 moderation period was about to apply: What impact will this decision have on your current talks, your planned interest arbitration or your completed arbitration hearing for which an award has not yet been issued?
- For those employers with non-unionized employees: The impact of the Court's decision pending a potential stay or appeal.
It is also unknown at this time what financial remedies the applicant unions will be seeking from the Ontario government on behalf of their members. That will be determined as a result of a subsequent decision of the Court. It is not clear at this point when such a determination on remedy will be made.
As we have noted above, a number of strategic considerations will be required depending on where you are in the bargaining process and moderation period. Consider developing a plan to respond prior to any outreach from your bargaining agents and employees.
We will continue to monitor the situation closely and will provide updates as they become available.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.