The Clashing of Wage Restraint Legislation with s. 2(d) Collective Bargaining Rights

In Ontario English Catholic Teachers’ Association v. Ontario (Attorney General), 2024 ONCA 101 [OECTA], the majority of the Ontario Court of Appeal (“ONCA” or the “Court”) upheld the Superior Court finding that Ontario’s Bill 124 (“the Bill” or “the Act”)- which places a cap on wages in the public sector–is unconstitutional in its application to unionized workers. A rigorous dissent from Hourigan J.A. emphasized the democratic importance of legislative deference and highlighted the confusion in the existing jurisprudence on collective bargaining rights. Ontario will not be appealing the decision to the Supreme Court of Canada (“SCC”). 

Background 

Throughout the years, Ontario has accumulated among “the largest subnational levels of debt in the world (OECTA, para 12).” The province has sustained an unhealthy debt to Gross Domestic Product (“GDP’) ratio, and without fiscal intervention, this ratio is projected to lead to a potential financial crisis (OECTA, paras 177-178). The government’s expenditures contribute to this growing ratio, and a large portion of these expenditures is made up of public sector compensation (OECTA, para 41). 

In 2019, in an attempt to get Ontario’s financial health back on track, Ontario implemented Bill 124, or Protecting a Sustainable Public Sector for Future Generations Act . The Bill restrained wages by imposing  a maximum 1% per year ceiling on the compensation increases of unionized and non-unionized employees in the public sector. The ceiling was in effect for a three year period during which the government was to be ‘moderating’ wage growth in an effort to remedy Ontario’s fiscal health (OECTA, paras 8-10). 

Several organizations representing broader public sector employees brought an application challenging the constitutionality of the Act, claiming that it violated their s. 2(b) freedom of expression, their s. 2(d) freedom of association, and their s.15 equality rights pursuant to the Canadian Charter of Rights and Freedoms (“the Charter”) (OECTA, para 2). The application judge rejected the applicants’ freedom of expression or equality rights claims. He did, however, find that the applicants’ freedom of association rights had been violated in a manner not saved by s.1 of the Charter. Given this finding of unconstitutionality, the judge struck the statue in its entirety (OECTA, paras 3-4). 

On appeal, Ontario made four submissions  (OECTA, para 46). First, that the application judge erred by conflating  freedom of association as a right to a substantive outcome, with the right to a fair and collective bargaining process. Second, that the application judge erred by failing to follow the existing jurisprudence on wage-restraint legislation. Third, that the application judge erred in his reasonable limits analysis. Finally, in the alternative, that the application judge’s remedy was over-broad insofar as it struck the entire statute, even as far as the statute applied to non-unionized employees who do not benefit from collective bargaining rights.

​​Favreau J.A. for the Majority of the ONCA Upholds Bill 124 as Unconstitutional 

The ONCA rejected the first three of Ontario’s arguments and accepted the fourth. In their assessment, the Court went through its own Charter analysis. Favreau J.A. started by inquiring into whether there was an infringement of unionized public sector employee’s s.2(d) collective bargaining rights. In Health Services and Support- Facilities Subsector Bargaining Assn. v. British Columbia, 2007 SCC 27 [Health Services], the SCC established that a s.2(d) is infringement is two-fold: it occurs first, when the matter targeted by the legislation is of sufficient importance to the capacity of union members to collectively bargain; and second, when the collective right to good faith negotiation and consultation is sufficiently impacted (Health Services, para 93). 

In the case at bar, Favreau J.A. found that both requirements of a s.2(d) infringement were met. First, given that the legislation was targeted at wages, the matter was of ample importance to collective bargaining (OECTA, paras 108-109). Favreau J.A. spent a large portion of his analysis on the second Health Services requirement. She looked at Ontario’s proposed precedents of wage restraint legislation and produced a list of factors that attenuated the impact of the legislation on collective bargaining rights in those precedents (OECTA, paras 95-107). Favreau J.A. then examined Bill 124 in light of these factors. Subsequently, she found that there was no meaningful consultation with the impacted groups over the implementation of the Act. There was no specification as the Act broadly referenced all kinds of compensation—including holiday pay and vacation days, not just regular wages. There was no meaningful way to seek exemption from the 1% cap in appropriate circumstances. And finally, there was no congruence between the 1% cap in the legislation, and collective agreements in other public sector bargaining (OECTA, paras 116-144). Altogether, these factors allowed the Court to distinguish Bill 124 from existing wage restraint jurisprudence and find that the Act fails to meet the second stage of the Health Services framework as it substantially interferes with good faith negotiation and consulting (OECTA, para 145). Accordingly, Favreau J.A. found that Bill 124 violated the public sector’s s.2(d) collective bargaining rights. 

Next, Favreau J.A. applied the four step test set out in R v. Oakes [1986] 1 S.C.R. 103 [Oakes] to determine whether the infringement on s.2(d) was saved by the reasonable limits set out in s.1 of the Charter. First, she found that the legislation did have a pressing and substantial objective–namely to responsibly manage Ontario’s fiscal and budgetary concerns (OECTA, paras 181-182). Second, she held that the legislation was largely rationally connected to Ontario’s objectives. However, since the province is not directly responsible for compensating employees in the energy sector and the university sector—but rather funds their employers indirectly— Favreau J.A. found, that the rational connection does not extend to these two sects (OECTA, paras 185, 193-195). The s.1 analysis ultimately tipped in favour of the respondents when Favreau J.A. found that the Act did not minimally impair collective bargaining rights at the third step. There was no need for Ontario to act expediently, so the government could have achieved the same general goals through other, less intrusive means. This ultimately means that collective bargaining rights were not minimally impaired in this case (OECTA, paras 205-212). Failing this third stage meant that the salutary effects of the Act were not proportionate to its detrimental effects at the fourth stage (OECTA, paras 221-223). Thus, the Act was not saved by the reasonable limits clause set out in s.1 of the Charter.

Having found that Bill 124 violated s.2(d) of the Charter in a manner not saved by s. 1, Favreau J.A. for the majority struck down the Act. However, contrary to the application judge’s disposition, she held that non-represented employees do not benefit from s.2(d) collective bargaining in the same way. Therefore, as opposed to striking the entire Act, only the parts that apply to unionized employees of the public sector ought to be struck (OECTA, paras 227-229).

Hourigan J.A. as an Advocate for Legislative Deference 

Hourigan J.A. would have overturned the application judge’s decision and found Bill 124 constitutional. His lengthy dissent begins with a blunt emphasis on the “separation of powers” doctrine of democratic government. He contends that courts ought to maintain the separation between the judiciary and the legislative branches by refraining from interfering with the policy choices of the legislature. Since the “Courts are public policy amateurs who lack the expertise, experience and resources to understand where a policy fits in the bigger picture… it is not the role of judges to second guess the policy choices made by governments” (OECTA, para 242). Especially when it comes to the economic regulation of scarce resources, democracy requires the courts to defer appropriate allocations to elected representatives (OECTA, paras 243-244). This argument bases the remainder of Hourigan J.A.’s dissent. 

After emphasizing the importance of legislative deference, Hourigan J.A. moved on to hold that both the past jurisprudence and and the evidence on record signal that Bill 124 did not breach the unionized public sector’s collective bargaining rights. He contended that the lower court’s and majority’s differentiation of Ontario’s proposed precedents is weak and unwarranted (OECTA, para 275). The factors that the majority derives from past wage restraint jurisprudence have never been applied as strict precedential decisions. Therefore, applying them as benchmark requirements in this case effectively imposes an obligation on the government to meet these benchmark obligations that do not exist (OECTA, paras 260-265). Accordingly, the majority and lower court bending these precedents to find a  Charter violation is an imprudent way for the judiciary to wade into matters that have exclusively fallen within the purview of the legislature in the past (OECTA, para 234). Hourigan J.A. then contends that while wage restraint presents an obvious impact on union members’ collective bargaining capacity pursuant to the first inquiry of Health Services; the evidence suggests that unions were still able to meaningfully negotiate other terms on behalf of their employees while Bill 124 was in effect. Therefore, under the second leg of the Health Services framework, Bill 124 did not result in substantial interference with s.2(d) associational rights (OECTA, para 289). 

Hourigan J.A. then contended that in the alternative, even if Bill 124 had meaningfully breached the public sector’s s.2(d) collective bargaining rights, such breach would be saved by s.1 of the Charter. In finding that the trial judge’s s. 1 analysis relied on factual and legal errors, he employed a fresh Oakes analysis. While he agreed with the majority on the pressing and substantial objective leg of Oakes, he found that the Act was entirely rationally connected to the objective with respect to its application to all public sector employees, including employees in the energy and university sectors (OECTA, paras 318, 327-328). Additionally, he found that the legislation was, in fact, minimally impairing under the third prong of Oakes. The majority’s contention that there were other, less intrusive means of reaching the objective is not supported by the evidentiary record. Bill 124 was one of the reasonable alternatives available to Ontario. At this step, Hourigan J.A. once again emphasized that the court ought to grant the legislature some leeway to create a law that falls within these alternatives (OECTA, para 331). Finally, he found that the application judge’s proportionality analysis was built on palpable and overriding errors (OECTA, para 347). If the totality of the evidence was impartially considered by the application judge, the evident conclusion would be that the salutary effects of preserving the fiscal health of Ontario outweighed any inflated detrimental effects (OECTA, para 348). Accordingly, Hourigan J.A. found, even if Bill 124 did breach the public sector’s s.2(d) associational rights, the breach was a reasonable and justifiable limit as prescribed by s. 1 of the Charter.

How Much Deference is Too Much Deference? 

Hourigan J.A’s dissent has merit insofar as it highlights the inconsistency between the majority’s decision and the existing precedents on wage restraint legislation. The majority has not effectively addressed this inconsistency. Historically, higher courts have never deemed temporary wage cap legislation unconstitutional. The majority’s attempt to distinguish Bill 124 from these precedents relies on arbitrary factors that higher courts have intentionally avoided treating as definitive in finding a s.2(d) breach. This deviation alone is sufficient to render the majority’s decision fallible. 

However, Hourigan J.A.’s strong reliance on legislative deference undermines the strength of his dissent. By stating that “courts must be careful not to exercise their power in a manner that second guesses policy decisions” (OECTA, para 239), or by declaring certain policy choices as completely “immune from judicial interference” (OECTA, para 240), Hourigan J.A. is seemingly advocating for absolute deference to the legislature when it comes to fiscal policies. This is a problematic stance. Granting absolute deference to the legislature’s fiscal policy choices shields those policies from any sort of Charter scrutiny. Absolute legislative deference gives the government a holy grail “we know better” card that they can play at any stage of a Charter analysis. This can happen at the initial inspection for a Charter violation, or at the minimal impairment step of the s.1 analysis. By alluding to legislative deference, the government can insulate their fiscal policies from adhering to Charter principles. This would ultimately give the government an avenue to enact draconian policies that undeniably violate the Charter in the name of improving financial health. 

This is not to say that absolutely no deference is owed to the legislature. Hourigan J.A. correctly notes that the legislature often has more expertise than the judiciary in allocating financial resources. Surely there is a line to be drawn between no deference and absolute deference. However, Hourigan J.A.’s strong words draw that line far too close to the absolute mark. Given that this is an appellate dissent that can persuade lower courts, Hourigan J.A. should be careful not to draw the line too close to absolute deference, particularly as doing so risks nullifying the Charter.

The Future of Bill 124

Despite Hourigan J.A.’s strong dissent, Ontario has decided not to appeal the bill to the Supreme Court of Canada, choosing instead to repeal it. Nevertheless, the merits of the dissent suggest that an appeal might have offered valuable clarification on the current s.2(d) collective bargaining jurisprudence. Additionally, given Hourigan J.A.’s firm position on legislative deference, this could have been a good opportunity for our highest court to opine on the level of scrutiny future courts ought to apply to governments’ fiscal policy choices.