Bill 124: quashed and repealed

The Ontario government appealed the Superior Court of Ontario’s decision in respect of Bill 124, the Protecting a Sustainable Public Sector for Future Generations Act, 2019 (Bill 124 or the Act), which struck down legislation that capped public sector compensation increases. On February 12, 2024, a divided Ontario Court of Appeal largely dismissed the government’s appeal, affirming that Bill 124 violates the Charter of Rights and Freedoms in respect of unionized employees.

Background

The Ontario government enacted Bill 124 in November 2019, which imposed a 1% cap per year on compensation increases for all employees in the public sector for three years. The stated purpose of the Act was to address the province’s fiscal challenges and ensure the sustainability of public services. 

Various labour organizations challenged the validity of the Act, arguing that it infringed their right to freedom of association under section 2(d) of the Charter by undermining their right to collective bargaining. In November 2022, the Ontario Superior Court declared the Act unconstitutional, finding that it substantially interfered with the collective bargaining process, violated section 2(d) of the Charter and could not be saved under section 1 of the Charter. The government appealed the decision. 

Ontario Court of Appeal decision

The majority of the Court of Appeal affirmed the Superior Court’s reasons and conclusions, finding, among other things, that the Act removed wages and compensation as an item for negotiation in collective bargaining, and thus did not preserve a meaningful process of consultation and good faith negotiation that is guaranteed by section 2(d) of the Charter. Unlike the lower level court, which struck down the Act in its entirety, the Court of Appeal limited the declaration of unconstitutionality to the Act’s application to unionized employees.

Implications

On February 23, 2024, less than two weeks after the appellate decision, the Ontario government repealed the Act in its entirety in order to resolve the “inequality of workers” resulting from the Court of Appeal decision. Even prior to the Court of Appeal’s ruling, some public sector employers and unions have engaged in wage “re-opener” negotiations and arbitrations in response to the Superior Court’s ruling. We expect such trend to continue.

For non-unionized employees, absent a contractual right to compensation increases over the three-year period contemplated by Bill 124, the repeal of the Act does not, on its own, create an entitlement to retroactive wage increases. However, some public sector employers are voluntarily offering retroactive wage increases and/or engaging in other compensation discussions in light of the decision to be consistent with market expectations and to encourage employee retention.