On November 29, 2022, the Ontario Superior Court of Justice struck down the Protecting a Sustainable Public Sector for Future Generations Act, 2019 (Bill 124) in its Ontario English Catholic Teachers Assoc. v His Majesty decision, on the basis that Bill 124 infringes the right to freedom of association under section 2(d) of the Canadian Charter of Rights and Freedoms (the Charter). The Court’s decision will have a considerable impact on workplaces in the broader public sector in Ontario that are still subject to the compensation increase caps imposed by the legislation.
Bill 124 came into force on November 8, 2021, with the stated objective of ensuring “that increases in [broader] public sector compensation reflect the fiscal situation of the Province, are consistent with the principles of responsible fiscal management and protect the sustainability of public services.” The Ontario government sought to achieve that objective by limiting total compensation increases for broader public sector employees to 1% for each 12-month period within a required three year “moderation period.”
The broader public sector includes organizations that receive funding from the government of Ontario, such as hospitals, crown agencies, school boards, universities, colleges, long-term care homes, children’s aid societies, and non-profit organizations. The number of employees in Ontario impacted by Bill 124 totaled over 700,000.
Bill 124 applied to both unionized and non-unionized employers. Non-unionized employers had to begin the moderation period by January 1, 2022, at the latest, while unionized employers were required to begin the moderation period on the first day of a collective agreement reached after June 5, 2019.
While there were exceptions to the 1% cap on compensation increases, these exceptions were limited to only those prescribed in Bill 124. For example, Bill 124 allowed compensation increases beyond 1% if the increase was part of an established merit/performance pay program or if the employer had a compensation plan that permitted salary increases of greater than 1% in recognition of an employee’s length of service.
The Charter challenge
The Ontario English Catholic Teachers Association and nine other organizations argued that Bill 124 violated the Charter by limiting their members’ freedom of association, freedom of speech, and equality rights.
The Ontario government denied that Bill 124 limited these freedoms and, in the alternative, argued that if Bill 124 did infringe on any Charter rights, it is saved by section 1 of the Charter as a “reasonable limit that is demonstrably justified in a free and democratic society.”
In his decision, Justice Koehnen of the Ontario Superior Court of Justice (the Court) held that Bill 124 did not restrain freedom of speech or the equality rights protected by section 15 of the Charter. However, the Court found that Bill 124 substantially interfered with collective bargaining and violated the freedom of association rights protected under section 2(d) of the Charter. This violation could not be saved by section 1 of the Charter, which requires a decision maker to consider whether the Charter infringement can be demonstrably justified in a free and democratic society. To successfully invoke section 1 of the Charter, Ontario had to demonstrate the following:
- The objective of Bill 124 was pressing and substantial;
- There was a rational connection between the measures introduced under Bill 124 and its objective;
- Bill 124 minimally impaired section 2(d) rights; and
- The benefit of Bill 124 outweighed the negative impact of the Charter infringement.
The Court held that the Ontario government had failed to demonstrate that the economic conditions in Ontario when Bill 124 was introduced were sufficiently critical to warrant infringing on a constitutionally protected right. Specifically, he found that “budgetary considerations” did not constitute a pressing and substantial objective, Bill 124 impacted wages outside of the Ontario government’s budget (and as such was not rationally connected to the budgetary objective), and Bill 124 did not minimally impair the applicants’ section 2(d) rights.
While the Ontario government announced that it would challenge the Court’s ruling, the most immediate impact of the Court’s decision is that organizations in the broader public sector may implement compensation increases of over 1%. The decision will also have far-reaching implications for unionized workplaces in the broader public sector that are currently subject to collective agreements negotiated under the wage restraints imposed by Bill 124. Some unions negotiated “re-opener” provisions into their collective agreements in the hopes that Bill 124 may be struck down. The specific terms of those provisions may provide a basis to renegotiate compensation terms immediately and without waiting for the expiry of the current agreement. Non-unionized employees, who are not bound by a collective agreement, may seek both immediate and retroactive compensation increases. Practically speaking, the Court’s ruling creates uncertainty as employers, employees, and unions seek to find a path forward. The decision on what specific remedy, if any, should be provided as a result of the unconstitutionality declaration will be made at a future remedy hearing.
Our Dentons Canada Employment and Labour group will continue to monitor and provide updates on the impact of this significant decision. If you have any questions, please contact a member of our team.
 2022 ONSC 6658.