This general legal information (not legal advice) is subject to change, and there may be exceptions based on your specific circumstances. You should obtain independent legal advice before taking any action which may impact your legal rights. If you are an employee or an employer and need legal advice regarding this issue, an OA lawyer will be pleased to assist you with your situation.

On February 23, 2024, the Government of Ontario announced that it has repealed Protecting a Sustainable Public Sector for Future Generations Act, 2019 (“Bill 124”). The Government of Ontario did so in response to the recent Ontario Court of Appeal (“ONCA”) decision released on February 12, 2024, which declared Bill 124 unconstitutional.

In Ontario English Catholic Teachers Association v. Ontario (Attorney General), 2024 ONCA 101, the majority at the ONCA agreed with the Superior Court that Bill 124 is unconstitutional on the basis that it violates the collective bargaining rights of unionized workers, which is contrary to section 2(d) of the Canadian Charter of Rights and Freedoms (the “Charter“).

Background of Bill 124

On November 8, 2019, Bill 124 came into effect to limit the annual increase in public sector wages to one percent during a three-year “moderation period,” with some exceptions. While in effect, Bill 124 applied to various employers, employees, and unions in the public sector. Ten labour unions challenged the constitutionality of Bill 124, claiming it violates employees’ rights to freedom of association, freedom of speech, and equality under the Charter.

In the case of Ontario English Catholic Teachers Association v His Majesty, 2022 ONSC 6658, the Court ruled that Bill 124 was unconstitutional. The Bill had violated section 2(d) of the Charter, which grants the right to bargain collectively. Bill 124 significantly interfered with individual and collective bargaining, removing a vital bargaining issue – discussing compensation – from the table.

The Court found that Bill 124 is not a reasonable limitation to infringe on the rights of bargaining unit employees under s. 1 of the Charter. Of particular note, the Court held that Bill 124’s impact on 700,000+ unionized employees was not minimally impairing. The Government of Ontario appealed the decision.

ONCA Decision

In June of 2023, the Ontario Court of Appeal considered the appeal filed by the Government of Ontario. In a 2-1 decision, Justice Favreau, on behalf of the majority, ruled that Bill 124 was unconstitutional on the basis that:

• The passage of Bill 124 infringes upon the section 2(d) rights of unionized public sector employees in Ontario. It substantially interferes with their right to participate in fair negotiations and consultations regarding their wages
• The events leading up to the passing of Bill 124, along with its characteristics, greatly impact the capacity for bargaining unit employees to engage in collective bargaining and consultations in good faith
• Bill 124 fails to provide an effective channel for negotiating or requesting potential exemptions from the 1% cap, where appropriate, and
• The 1% cap imposed on salaries and compensation does not replicate collective agreements made in other public sector bargaining.[1]

The majority upheld the lower court’s decision that Bill 124 could not be saved by section 1 (the reasonable limits clause) of the Charter.

What Does this Mean for Unionized Employers?

This decision offers more certainty and predictability for employers during collective bargaining. It is expected that arbitral decisions granting retroactive pay increases for specific unionized public sector employees who had negotiated “re-opener” clauses in their collective agreements are likely to increase in number. Some arbitrators have already granted wage increases in several retroactive pay decisions based on the initial Superior Court decision that Bill 124 is of no force and effect. With the recent repeal, employers who bargained re-opener clauses that contemplated a repeal and/or first exhausted all avenues of appeal may now hear from their respective unions.

Bill 124’s attempt to prevent any recoup following the moderation period provides another basis for which unions may apply pressure, seeking to “catch up” for what they might perceive as lost wages due to collective bargaining while Bill 124 was in force.

While Bill 124 was in force, arbitrators in interest arbitrations regularly retained jurisdiction to re-open the issue of compensation in their decisions. Since the Superior Court decision declaring Bill 124 unconstitutional, employers have largely failed in their attempts to argue that arbitrators who had remained seized could not re-open the collective agreement. Arbitrators have routinely reverted to providing increases as they would have had they not been constrained by Bill 124.

Union news releases seemingly indicate that collective agreement re-opener language has already led many unions and employers to agree to moderate increases. Some agreements have seen increases to base salary, while others consist of one-time lump sum payments.

There is still uncertainty about what actions the Government of Ontario will take in response to retroactive increases and what measures unions will take to ensure that workers who do not have re-opener clauses in their collective agreements receive a financial remedy. It is currently unclear who will be responsible for providing funds for retroactive pay increases – whether it will be the province itself or the individual employers.

When negotiating as a result of a re-opener clause, unionized employers should keep in mind several considerations, including whether (and to what extent) their re-opener clause provides for any obligations, how they intend to fund any increases or retroactive payments, and whether there may be pay equity implications.

O’Neill Associates is proud to support students from the Bora Laskin Faculty of Law (Lakehead University, Thunder Bay) through the school’s unique Integrated Practice Curriculum (IPC) Program. The IPC, a Bora Laskin variation of the “articling” program students complete at most other law schools, matches students with law firms to work side-by-side with experienced lawyers for one full semester during the third and final year. This article was written by Nic Leblanc who will be completing his third year IPC with OA in the winter of 2024.

[1] Ontario English Catholic Teachers Association v. Ontario (Attorney General), 2024 ONCA 101 at paragraph 145.