Experience Notable Cases Court of Appeal upholds Bill 124 decision

Court of Appeal upholds Bill 124 decision

February 12, 2024

Majority of the Ontario Court of Appeal agrees that Bill 124 breached the constitutional right to collective bargaining

A majority of the Ontario Court of Appeal has dismissed the Government’s appeal of the Ontario Superior Court of Justice decision striking down Bill 124.

Background

As we summarized in late 2022, when the Superior Court of Justice released its decision:

The Ford Government introduced Bill 124 in June 2019. After limited debate and perfunctory committee hearings, the legislation was passed in early November 2019. It imposed a series of 3-year “moderation periods” in the form of salary and compensation caps on a variety of public sector unionized and non-unionized workplaces. During these periods, increases to both salary rates and to existing or new compensation requirements (including salary rates) were capped at 1% per year, subject to certain exceptions.

The Superior Court concluded that that Bill 124 violated s. 2(d) of the Canadian Charter of Rights and Freedoms in a way that could not be justified under s. 1 of the Charter.  The Government appealed the decision to the Court of Appeal for Ontario.

After a hearing in June 2023, the Court of Appeal released its decision on February 12, 2024.

The Court of Appeal’s decision

A majority of the Court of Apeal upheld the Superior Court’s decision.

The framework for assessing violations of s. 2(d) of the Charter in wage restraint cases

The Court of Appeal followed the framework for assessing s. 2(d) cases set out by the Supreme Court of Canada. This considers:

1. The importance of the subject matter that the government is interfering with, such that interfering with bargaining over that issue will affect the ability of unions to pursue common goals collectively.
2. The manner in which the measure impacts on the collective right to good faith negotiation and consultation.

In approaching this analysis, the Court of Appeal emphasized that every case will be a contextual and fact-specific inquiry. This was particularly important, given that the previous appellate cases that have considered wage restraint laws all stemmed from challenges to the federal Expenditure Restraint Act (“ERA”) in 2011 and all concluded that the ERA did not violate s. 2(d).

Critically, the Court of Appeal concluded that the previous wage restraint cases had not “suggest[ed] that wage restraint legislation is compliant with s. 2(d) per se if it has specified characteristics,” which was a central part of the Government’s argument defending Bill 124. Instead, the Court of Appeal held that courts should “look at the circumstances under which the legislation was passed, the content of the legislation and the impact of the legislation on collective bargaining in the particular circumstances of the case to determine whether the legislation constitutes a substantial interference.”

In particular, the Court of Appeal said that there were specific features of the ERA which led courts to find that it was constitutional including that:

• it was imposed following the 2008 economic crisis;
• it imposed wage increases similar to those in agreements reached through collective bargaining;
• it was imposed after a relatively long period of negotiation; and
• in some cases, the ERA still allowed unions to reopen collective agreement to negotiate wage increases or other important matters.

While not saying so explicitly, the Court of Appeal’s analysis clearly repudiated the approach taken by the Manitoba Court of Appeal in the 2021 Manitoba Federation of Labour decision. The Court of Appeal for Ontario disagreed with the Manitoba Court that time-limited wage restraint legislation will always be compliant with s. 2(d) of the Charter, finding instead that the there must be a contextual inquiry in each case.

Application to Bill 124

Applying these principles, a majority of the Court of Appeal upheld the trial judge’s conclusion that Bill 124 violated the right to collective bargaining in s. 2(d) of the Charter. One judge on the panel dissented.

The first step of the analysis, which assesses the importance of the matter to the process of collective bargaining, had not been challenged by Ontario. The Court of Appeal agreed with previous case law that wages and compensation are matters of central importance to collective bargaining.

The Court of Appeal went on to conclude that Bill 124 substantially interfered with the right to collective bargaining, based on the following facts:

• There was no evidence that little more could be achieved with further collective bargaining. In contrast, in many – if not most – cases, no bargaining had started before the Act was enacted. In the education sector in particular, the Court of Appeal endorsed the trial judge’s finding that “the commencement of education sector bargaining was a key consideration with respect to the timing of the Act.”
• There was no meaningful consultation with unions prior to the introduction of the legislation.
• Unlike previous wage restraint cases under the ERA, where there was scope to negotiate other substantial matters, the broad definition of “compensation” in Bill 124 – which applied to any kind of benefit or compensation that can be monetized, such as sick days, vacation days and other benefits – significantly limited the areas that remained available for negotiation. This also prevented unions from using any compensation issues as bargaining chips in negotiation.
• The provision in Bill 124 allowing the government to grant exemptions to its application was effectively illusory, with only one exemption granted, most requests going unanswered, and the absence of any clear process for evaluating requests. The Court of Appeal equally found that Ontario’s argument that unions could have struck for an exemption was not a meaningful substitute for collective bargaining.
• The wage rate set by Bill 124 was not consistent with the rates reached in collective agreements freely negotiated at the same time.

Based on these factors, the Court of Appeal found that Bill 124 substantially interfered with the affected unions’ ability to participate in good faith negotiation and consultation with their employers, and violated s. 2(d) of the Charter.

Section 1 of the Charter

The Court of Appeal also agreed with the trial judge that Bill 124 could not be saved under s. 1 of the Charter.

In considering whether the government can justify a violation of the Charter, the Court first has to determine what the government’s objective is. On this front, the Court of Appeal agreed with the trial judge that Ontario had improperly defined the objective of Bill 124.

The Government had argued that the objective of Bill 124 was “to moderate the rate of growth of compensation,” which would have made it much easier for Ontario to justify a wage restraint law. In other words, the Government had tried to use circular logic to argue that its wage restraint law was justified in order to pursue its important objective… of imposing wage restraint.

The Court of Appeal found that the Government could not define its objective in a way that simply described the way that it wanted to achieve its objective (i.e. wage restraint). Instead, the Court of Appeal agreed with the trial judge that the actual objective of Bill 124 was “the responsible management of the province’s finances and the protection of sustainable public services.” Wage restraint was the means of achieving that objective, not the objective itself.

However, the Court of Appeal still found that the Government had a “pressing and substantial objective” that could, in theory, justify the law. The Court of Appeal found that it had to give deference to the Government’s ability to pursue its priorities in financial and budgeting matters, as long as there is some basis in the evidence for the Government’s objective.

It is important to note, however, that the Court of Appeal still relied on the lack of evidence that the Government faced an urgent budgetary situation later in the s. 1 analysis, in concluding that Bill 124 was not minimally impairing of Charter rights or a proportionate response.

The next stage in the s. 1 analysis asks if Bill 124 was rationally connected to the Government’s objective of ensuring “the responsible management of the province’s finances and the protection of sustainable public services.” This is a low bar, which was generally met in this case. Still, the Court of Appeal agreed with the trial judge that there was no rational connection between Bill 124 and the objective in its application to the electricity sector, which is self-funded, or to universities, where there is no direct relationship between funding and compensation paid to employees.

The Court of Appeal found that the Government’s justification of Bill 124 failed at the next stage of the analysis, which asks whether the law is minimally impairing of the right to collective bargaining under s. 2(d) of the Charter. On this front, the Court of Appeal noted that the Government had not tried to negotiate collective agreements limiting compensation before imposing Bill 124. The Court of Appeal found that there was no evidence that negotiation would be futile, nor was there “evidence of urgency or of an imminent need to impose a cap on compensation increases, such that there was no time to achieve the desired cost savings through negotiations.”

While it had already found that the Government’s justification failed the minimal impairment stage of the analysis, the Court of Appeal also found that Bill 124 would fail the final stage of the s. 1 analysis, because its beneficial effects were not proportional to its negative effects. It noted that there was an “absence of evidence establishing a need to proceed with expediency” or without first trying to bargain wage restraint, and that:

In contrast, because of the Act, organized public sector workers, many of whom are women, racialized and/or low-income earners, have lost the ability to negotiate for better compensation or even better work conditions that do not have a monetary value.

Remedy

Finally, while the Court of Appeal upheld the trial judge’s decision striking down Bill 124, it found that the trial judge went too far in deciding that Bill 124 could not apply to unrepresented employees. Instead, the Court of Appeal held that, “given that they do not bargain collectively, [non-unionized employees] do not benefit from the same protections as their represented counterparts under s. 2(d) of the Charter.”

You can read the Court of Appeal’s decision here.