What lies ahead now that Ontario’s Bill 124 has been declared unconstitutional?

On Monday February 12, 2024, the Ontario Court of Appeal (“ONCA”) released a 2-1 decision upholding a 2022 Superior Court decision finding Bill 124 to be unconstitutional. The Government of Ontario responded by announcing that it would not make a further appeal to the Supreme Court of Canada, and that Bill 124 would be repealed. How that repeal is crafted – and whether it amounts to a full or partial repeal - remains to be seen.  

How we got here

In June 2019, the Government of Ontario passed the Protecting a Sustainable Public Sector for Future Generations Act, 2019 (also know as “Bill 124”), which included key provisions capping wage increases for approximately 780,000 workers in the broader public sector to 1% per year for a three-year moderation period. 

Various labour unions representing employees throughout Ontario filed applications challenging Bill 124’s constitutionality, and these applications were consolidated into one matter before the Ontario Superior Court. In November 2022, that Court issued its decision finding Bill 124 unconstitutional and therefore void. The Court concluded that Bill 124 ran afoul of the protection of the freedom of association under The Canadian Charter of Rights and Freedoms, which specifically protects certain collective bargaining rights.

As the Court put it:

State action substantially interferes with collective bargaining when, among other things, it prevents or restricts subjects from being discussed as part of the collective bargaining process. 

[Bill 124] prevents collective bargaining for wage increases of more than 1%.  This restriction interferes with collective bargaining not only in the sense that it limits the scope of bargaining over wage increases, but also interferes with collective bargaining in a number of other ways.

An appeal by the Government of Ontario brought the matter before Ontario’s highest court - the ONCA – which has now upheld the Superior Court’s earlier decision.

In finding the wage restraints in Bill 124 unconstitutional, the ONCA decision noted that this finding applied specifically to unionized workers, and the legislation’s impact on non-unionized workers was not found to be unconstitutional.

The matter of the bill

With the matter of Bill 124 resolved, there is now the matter of the bill to the public sector.

Various public sector unions negotiated Bill 124 “reopener clauses” into their collective agreements, which have served as the basis for arbitration decisions awarding retroactive pay increases to members of those unions following from the Superior Court’s November 2022 decision. With the ONCA decision now released and no further appeal pending, public sector employers can expect similar claims for retroactive pay increases to continue to be litigated and resolved throughout the province.

In its September 2022 report on Ontario Public Sector Employment and Compensation, Ontario’s Financial Accountability Office (FAO) also specifically forecast the following costs and staffing issues facing the Ontario public sector in the event that Bill 124 was found unconstitutional:

• The FAO forecast that a decision finding Bill 124 unconstitutional would result in a cumulative rise in public sector wages of $8.4 billion over five years, with $2.1 billion in retroactive payments;

• In an inflation-adjusted scenario, the FAO forecast a further wage cost increase of more than $6 billion over five years; and

• The FAO also estimated that the province would need to increase staff levels by 56,974 employees by 2026-27 to maintain existing programs and meet Ontario’s existing commitments to expanding its long-term care, home care, and child care programs.

The road ahead

If Bill 124 is repealed in its entirety, public sector wages will be back on the bargaining table in future rounds of collective bargaining. This means public sector unions and employer organizations will have one more issue to bargain, and also an added degree of freedom to facilitate reaching agreement. The public trusts that public sector unions and employers will agree on the key importance of ensuring that services are delivered in a sustainable way. The task now before public sector unions and employers is to collectively bargain a sustainable path forward that balances effective service delivery with the costs likely to arise from any form of repeal of Bill 124.