Court Rules Wage Restraint Legislation Unconstitutional

A recent decision of the Manitoba Court of Queens Bench has found that legislation which purported to cap wage increases for unionized public sector employees infringed the Charter right to freedom of association.

Manitoba’s Progressive Conservative Party was elected in April 2016 and, shortly thereafter, Cabinet recommended adopting wage-freezing legislation modeled on legislation that had previously been used to limit increases to public sector wages in Nova Scotia. The legislation was passed within a year. The Public Service Sustainability Act (PSSA) created what it called a “sustainability period”. This meant that for the first two years following the expiration of a collective agreement no wage increases could be granted or awarded by an arbitrator. In the third year, increases were to be capped at 0.75% and 1.0% in the fourth.

The legislation received royal assent but was not proclaimed into force. Some speculated that the reason for its non-proclamation was to avoid the possibility that it would be held to be unconstitutional. However, the unions that challenged the legislation provided extensive evidence that, despite the non-proclamation of the legislation, the threat of the legislation’s ability to retroactively roll back negotiated wage increases hung over all collective bargaining tables, and was repeatedly adverted to by government and employer negotiators. Nearly all of the unions who were parties to the Charter challenge had concluded collective agreements with wage increases in line with the PSSA but indicated that their acceptance was conditional on the constitutionality of the PSSA and that they were signed “under duress”.

The constitutional challenge relied on the developing jurisprudence around section 2(d) of the Charter which guarantees freedom of association. Freedom of association has developed to include a right to collective bargaining free from substantial government interference and a right to strike. The most recent decisions from the Supreme Court are the 2015 trilogy of Mounted Police Association of Ontario, Meredith, and Saskatchewan Federation of Labour, as well as the Court’s subsequent decision in British Columbia Teachers’ Federation.  Those decisions advanced the law of freedom of association significantly in positive directions for unions. However, the Meredith decision found that wage restraint legislation imposed to address economic concerns arising out of the 2008 financial crisis was permissible in the context of the labour relations regime in place at the RCMP. Subsequently, appellate courts across the country dismissed constitutional challenges to that same federal wage restraint legislation.

A Significant Win for Freedom of Association

The Manitoba Federation of Labour case is important. It provides a clear and systematic analytical framework for dealing with legislation which freezes or limits increases on public sector wages achieved through collective bargaining.

The Court’s findings can be broken up into four parts:

1. The fact that the legislation was not proclaimed into force did not prevent the court from reviewing its constitutionality.
2. There is no duty on legislators to consult unions prior to legislating with respect to matters falling within the purview of collective bargaining. However, consultation or the lack thereof may be relevant in determining whether the legislation is justified.
3. The legislation substantially interfered with collective bargaining: monetary concerns are important concerns for union members and removing them from consideration in collective bargaining significantly compromises a unions ability to bargain on other issues.
4. The legislation could not be justified under section 1 of the Charter: general reduction in budget deficits, absent some emergency, was not a pressing and substantial objective. Additionally, the lack of consultation indicated that the government had not meaningfully explored other options which is required to meet the minimal impairment requirement of the proportionality branch of the test for justification under section 1 of the

In comparing the Manitoba legislation to the Federal legislation in Meredith, the Court noted that a significant difference between the two pieces of legislation was that the federal legislation sought to impose salary increases comparable to those that had been negotiated for comparable bargaining units in the public sector. Also, in this case, the legislation was imposed so as to have an effect on future collective bargaining rather than to provide certainty to bargaining that had been ongoing. The Court found that the enactment of the PSSA had wide-reaching consequences on labour relations and substantially interfered with a meaningful process of collective bargaining and thus infringed section 2(d) of the Charter.

Notably, the Court found that the government had failed to justify the Charter infringement at the first stage of the Oakes test. It emphasized that Courts should look with a large degree of skepticism on “dollars versus rights” controversies. The unions pointed to the fact that the government had introduced tax cuts at the same time as it pled poverty. The court found, upon a detailed review of various budgetary reports, that there was no budgetary crisis that could constitute a pressing and substantial objective. Courts rarely rely on this branch of the Oakes test to find that constitutional infringements cannot be justified. As such, this can be read as a striking indictment of legislating wage restraint for unionized employees for ideological or convenience reasons.

For the sake of completeness, the Court went on to consider the balance of the Oakes test including whether the PSSA minimally impaired the union members’ freedom of association while accomplishing its stated objective of limiting government expenditures. In determining whether the government employed the least-infringing option, the Court looked at the process that led up to the adoption of the legislation.  The government had indicated to the unions at all times prior to the passage of the legislation that this was the only option it would consider. The Court suggested that the government could have simply reduced budgets at government-funded employers and allowed bargaining to transpire in that context. The unions had gone so far as to propose less-impairing alternatives prior to the enactment of the legislation but the government had ignored their proposals.

The Court declared that the relevant sections of the PSSA violated the Charter, could not be justified and were thus of no force and effect.

Takeaways for Unions

There are significant practical lessons to be had from the unions’ success in this case in how to deal with legislated austerity measures for public sector wages.

First, it appears that the tactic of ratifying collective agreements conditionally with the proviso that it was done “under duress” can support the conclusion that collective bargaining was substantially interfered with and may allow the unions to later challenge the collective agreements, which were concluded under the threat of the legislation.

Second, the unions presented a united front with all affected public-sector unions working together to challenge the legislation fronted by the Manitoba Federation of Labour. This strategy appears to have assisted in presenting robust factual evidence and providing the Court with a complete picture of all facets of the government’s application of its policies under the legislation in negotiations with various bargaining units.

Third, while the decision confirms that pre-legislative consultation is not required for wage restraint legislation, it suggests that such consultation may assist the government in justifying any resulting infringement. It may be advisable for unions facing down impending wage-restraint legislation to make concrete alternative proposals which can be relied on later to show that the legislation was not the least rights-impairing option to address the government’s concerns.

Fourth, the unions brought forward significant amounts of expert evidence from labour relations scholars on a variety of issues including the importance of the leverage gained from being able to negotiate on monetary issues, the effect of these restrictions on the relationships between unions and their members, the impact of such legislation on the ongoing relationships between unions and management, the effect of the legislation on strike leverage, and consequences for government finances. The Court relied extensively on the expert reports provided by the union, demonstrating the importance of developing a significant evidentiary basis on both the section 2(d) and section 1 Charter issues.

This decision will hopefully chill efforts by governments to impose wage restraint through legislation. If not, it provides an effective roadmap for similar constitutional challenges to newly introduced legislation that will curtail bargaining rights.

[This article is for informational purposes only and does not constitute legal advice, which cannot be given without an assessment of your individual circumstances.]