Aug 13, 2020

Manitoba legislation limiting wage increases for public sector workers over four-year period violates Charter of Rights, court holds, given unjustified interference with collective bargaining

Manitoba Federation of Labour et al v. The Government of Manitoba, 2020 MBQB 92 (CanLII)

August 12, 2020

In a 228-page judgment, a Manitoba judge held that the province's Public Services Sustainability Act (Bill 28) infringed workers' rights to freedom of association under s.2(d) of the Canadian Charter of Rights and Freedoms. The 2017 legislation applied to over 110,000 public sector workers over a rolling four-year sustainability period commencing as collective agreements expired, freezing pay for two years and permitting only limited increases (0.75 and 1 percent) in the third and fourth years. Even though the legislation was not proclaimed in force, it had an acute impact on collective bargaining, effectively removing monetary issues from the scope of negotiations and reducing unions' leverage accordingly. In such circumstances, the court ruled, the legislation substantially interfered with meaningful collective bargaining and therefore infringed s.2(d). Further, the legislation was not saved under s.1 of the Charter as a reasonable limit on freedom of association. In this regard, the judge rejected the government's argument that the legislation's asserted objective, namely deficit reduction, was pressing and substantial. The government had exaggerated the size of the deficit and had also pursued measures, such as tax cuts, that ran contrary to that objective. Moreover, the legislation also represented a disproportional means of pursuing that objective, given that collective bargaining could also have resulted in savings.

The Facts:

After Manitoba passed legislation imposing limits on public sector pay increases, a group of unions brought a constitutional challenge alleging that the legislation violated workers' freedom of association, guaranteed by s.2(d) of the Canadian Charter of Rights and Freedoms.

On April 19, 2016, Manitoba's Progressive Conservative Party, led by Brian Pallister, won a majority in the provincial general election, ousting the New Democratic Party, which had governed the province since 1999. Following the Pallister government's first budget in May 2016, which projected a budget deficit of just over $1 billion, a cabinet committee was formed to consider public sector compensation. In its November 2016 Throne Speech, the government announced that it would consult with trade unions about legislated public sector wage controls. The following month, the cabinet committee approved a legislated two-year wage freeze in principle and undertook to have the legislation drafted and introduced in the Legislature by March 20, 2017.

Meanwhile, on January 5, 2017, during the first meeting of the joint union-government Fiscal Working Group (FWG), the government asserted that the public finances were in dire condition, and that it was open to suggestions as to how to achieve a balanced budget, with legislation being one possible option. Representatives of the Manitoba Federation of Labour (MFL) and other unions, unaware that legislation was being drafted, proposed to deal with wage restraint through collective bargaining, noting that unions and the government had agreed to wage freezes for government employees in 2010 and 2011, in return for guarantees relating to job security. The government did not respond to the unions' proposals, nor did it engage in meaningful consultation about the content of its proposed legislation.

In the event, the Public Services Sustainability Act (PSSA), also known as Bill 28, was introduced on March 20, 2017, and received Royal Assent on June 2, 2017. The PSSA applied to the government and its agencies, health authorities and publicly-funded health sector employers, and other public sector entities including school districts and divisions, universities, and child and family services authorities and agencies. Sections 9 to 15 concerned unionized employees. Under s.9, unionized employees were to be subject to a "sustainability period" running for four years from the expiry of any collective agreement in place on March 20, 2017 or, if no such agreement was in place on that date, from the date the first collective agreement took effect. Section 12 imposed a wage freeze for the first two years of the sustainability period, with maximum increases of 0.75 percent and 1 percent permitted in the third and fourth years, respectively. Increases to other employee benefits were prohibited under s.13, unless the cost of such improvements was offset in wage settlements. Under s.14, the parties to a collective agreement could provide for higher pay increases in the third and fourth years of the sustainability period if savings were negotiated. Section 15 provided that the PSSA prevailed over collective agreements and arbitral awards.

Although the PSSA was not proclaimed in force, its effects were felt across the public sector, with a number of employers engaged in collective bargaining adopting the pay increase limits in s.12 as their firm bargaining positions. Of the 21 agreements reached in the province's public sector after the PSSA was passed, any improvements achieved by unions in bargaining were of a minor nature. Employers and unions were also conscious that, under clawback provisions in s.28 of the PSSA, salary increases paid in excess of the limits were repayable as a debt to the employer, even where such payments were made before the PSSA was brought into force.

Despite its asserted objective of balancing the budget within eight years, the Pallister government announced a number of measures that were seemingly inconsistent with deficit reduction, including personal income tax breaks in 2018 and reduction of the provincial sales tax in 2019. The 2019 budget also provided for payment of $407 million into the Financial Stabilization Account or "Rainy Day Fund," which further increased the budget deficit. Government witnesses conceded on cross-examination that bond rating agencies, which determine the provincial credit rating, had expressed concerns that such revenue-reducing measures would lengthen the amount of time it would take to eliminate the deficit. In any event, the province's credit rating was downgraded in 2016, but was recovering by the 2019-2020 fiscal year.

The government's reporting of the budget deficit was also criticized by the provincial Auditor General. The projected budget deficit of over $1 billion in the 2016 budget was revealed to be 15 percent lower, or $846 million, in public accounts released by the Auditor General in September 2016. The Auditor General also objected to the government's refusal to include net revenues and assets of the Workers Compensation Board (WCB) and the Manitoba Agricultural Services Corporation (MASC) in the government's financial statements, which led the Auditor General to issue a qualified opinion on the financial statements for 2017-18 and 2018-19. Had the WCB and MASC amounts been included, the budget deficit for 2017-18 would have been $347 million lower, and in 2018-19 the government would have netted a surplus of $9 million. Further, if the Rainy Day Fund was considered as an asset, this would have further lowered the deficit or increased the surplus.

The government's insistence on wage restraint had affected negotiations with one public sector employer, the University of Manitoba, even before it had decided to adopt legislated wage controls. As reported in Lancaster's Collective Bargaining, May 3, 2018, eAlert No. 89, in October 2016, following conversations between its negotiators and the provincial government, the university withdrew its previous offer to the faculty association of pay raises of one percent in the first year and two percent in each succeeding year of a four-year agreement, replacing it with a revised offer incorporating a wage freeze for the first year. The university did not reveal to the faculty association that the wage freeze had been mandated by the government, and in a decision dated January 29, 2018, 2018 CanLII 5426 (MB LB), the Manitoba Labour Board held that the university's failure to disclose the government's mandate violated the employer's duty to bargain in good faith. Meanwhile, the parties ultimately reached a four-year collective agreement in August 2017, with pay raises based on the PSSA limits, after the university insisted that any amounts in excess of those limits would be clawed back under s.28 of the PSSA.

The MFL and 28 unions brought proceedings in the Manitoba Court of Queen's Bench alleging that ss.9 to 15 of the PSSA violated workers' right to freedom of association under s.2(d) of the Canadian Charter of Rights and Freedoms, and seeking a declaration that ss.9 to 15 were of no force and effect. The claim also alleged that the government's direction to the University of Manitoba requiring it to insist on a pay freeze in 2016 amounted to a further violation of s.2(d).

The Court heard expert evidence from two labour relations specialists. Dr. Robert Hebdon, for the unions, opined that freely bargained collective agreements were the best outcome as they fostered a sense of ownership among the parties. Conversely, terms imposed by statute tended to create a cynical environment that had a chilling effect on future negotiations, increasing the likelihood of bargaining impasses. Hebdon also took the view that, by excluding wages, which were normally the most important issue for unions, from the scope of collective bargaining, the PSSA rendered meaningful collective bargaining impossible as the unions' ability to bargain non-monetary improvements instead of wage increases was significantly diminished. The government's expert, Dr. Richard Chaykowski, disagreed, asserting that job security was often more important to unions than wages. As well, Chaykowski argued that the alleged chilling effect of the PSSA on future bargaining had been exaggerated as the legislation offered flexibility in the third and fourth years of the sustainability period, and normal collective bargaining would resume following the end of that period.

As reported in Lancaster's Labour Law News, October 9, 2018, eAlert No. 442, on July 20, 2018 the Court denied a motion by four of the plaintiffs for an injunction prohibiting the government from bringing the PSSA into force pending a hearing on the merits, while directing that the trial proceed on an expedited basis.

The Arguments:

The plaintiffs argued that the PSSA amounted to substantial interference with a meaningful process of collective bargaining, which was protected under s.2(d) of the Charter. Even though the PSSA was not yet in force, they pointed out, the legislation was relied on by public sector employers to curtail any pay increases in excess of the PSSA limits. Further, they claimed that the government was subject to duties to engage in pre-legislative consultation and to engage in good-faith collective bargaining before introducing legislation that would affect the content of collective agreements, and had not discharged these duties. The plaintiffs also submitted that the PSSA was not saved under s.1 of the Charter as a reasonable limit on freedom of association. In this regard, they contended, the government's assertions regarding the province's financial position did not establish a pressing and substantial justification for the PSSA, and the government had failed to consider any alternative to legislated wage controls, even though proposals had been put forward by unions before the PSSA was introduced.

The government argued that the PSSA did not infringe the right to freedom of association. In its submission, the legislation did not constitute substantial interference with meaningful collective bargaining, as negotiations on a wide range of working conditions were unaffected by the limits in the PSSA. Moreover, there was no duty on the government to consult with trade unions or bargain collectively before introducing the PSSA, as any such duty would run contrary to the constitutional principle of parliamentary sovereignty. Even if the legislation were determined to infringe the right to freedom of association, the government maintained, it was justified as a reasonable limit under s.1 of the Charter. In particular, the objective of the PSSA, which was to control the cost of public sector compensation in order to manage the deficit and contribute to provincial fiscal stability, was pressing and substantial and the legislation was minimally impairing of employees' s.2(d) rights because it avoided lay-offs, permitted bargaining on non-monetary issues, and its effects were time-limited. The PSSA did not interfere with the right to strike or union activities, the government insisted. Further, public sector workers would benefit from deficit reduction since it would ultimately lead to higher spending on health, education, and infrastructure projects. In any event, the government asserted, the plaintiffs' claim was premature as the PSSA had not yet been brought into force.

The Decision:

In a 228-page judgment, Manitoba Court of Queen's Bench judge Joan McKelvey held that ss.9 to 15 of the PSSA violated the right to freedom of association in s.2(d) of the Charter and were not saved under s.1 of the Charter.

Prematurity argument rejected

At the commencement of her analysis, McKelvey rejected the government's contention that the plaintiffs' claim was premature. The applicable test where, as was the case with the PSSA, a constitutional challenge was brought against a statute that had not been proclaimed in force, was the same as the test for mootness articulated by the Supreme Court of Canada in Borowski v. Canada (Attorney General), 1989 CanLII 123 (SCC), under which a court has a discretion to consider a matter provided that a real, concrete dispute exists between the parties. On these facts, there was a real dispute as to the constitutionality of the PSSA. Moreover, the legislation had affected collective bargaining in Manitoba's public sector even though it was not yet in force, particularly in light of the provisions permitting clawback of any pay increases that were agreed to in excess of the limits. Accordingly, it was appropriate for the Court to exercise its discretion to hear the claim. McKelvey stated:

I am satisfied that the PSSA has played a significant and substantial role in what has transpired with respect to labour relations in Manitoba since 2016. Whether it is proclaimed legislation or not, the Government and public sector employers have governed themselves in accordance with its provisions and mandated wage figures. It is clear from the evidence, both in statements made during negotiations and in the conduct of Government, that Government has proceeded as if the PSSA had been proclaimed and was in effect. It is disingenuous to suggest that Government's negotiating mandates and policies are simply that and not the PSSA sword of Damocles hanging over the unions with respect to wage restraint and the retroactivity claw back provisions. The retroactivity aspect of the PSSA has been repeatedly referred to throughout the various bargaining scenarios described in the evidence as being the omnipotent threat hovering over negotiations that would be realized with its proclamation.

... The PSSA has been enacted by virtue of Royal Assent and is no longer a bill. The PSSA is law — albeit without legal effect. The Government is effectively applying the PSSA to collective bargaining scenarios with[in] the public sector. It may reference its position as a mandate or policy; however, the content of the mandate provided to public sector employees stems from, and is consistent with, the legislation and, particularly, the threat of the retroactivity claw back provisions.

Freedom of association under s.2(d) of the Charter violated

McKelvey surveyed the jurisprudence on s.2(d) of the Charter, noting that in Health Services and Support — Facilities Subsector Bargaining Assn. v. British Columbia, 2007 SCC 27 (CanLII) (B.C. Health), reviewed in Lancaster's Human Rights in Employment, August 16, 2007, eAlert No. 90, a majority of the Supreme Court of Canada struck down B.C. legislation that nullified provisions of existing collective agreements, concluding that s.2(d) provided constitutional protection for collective bargaining. The majority held that s.2(d) is infringed where legislation constitutes "substantial interference" with meaningful collective bargaining, which, in turn, occurs where (1) the matter or right affected by the legislation is of central importance to the capacity of workers to advance their common goals; and (2) the manner in which that matter or right is affected undermines the process of good faith negotiation and consultation. McKelvey emphasized, however, that s.2(d) protected the process of collective bargaining rather than the outcomes achieved by the parties.

In Meredith v. Canada (Attorney General), 2015 SCC 2 (CanLII), reported in Lancaster's Collective Bargaining, April 8, 2015, eAlert No. 66, the Supreme Court considered a constitutional challenge by members of the Royal Canadian Mounted Police (RCMP) to the federal Expenditure Restraint Act (ERA), which limited pay increases for most federal government employees, imposing percentage increases of 1.5 percent for each of the 2008-2009, 2009-2010, and 2010-2011 fiscal years. A majority of the Court held that, although wages were of central importance to workers, the ERA, which was passed in response to a global economic crisis, capped RCMP members' pay at a level that was consistent with increases that prevailed in other collective agreements at the time. The ERA was also time-limited, and permitted negotiated agreements on other compensation-related issues. In such circumstances, the Supreme Court ruled, the ERA did not amount to a substantial interference with collective bargaining.

Applying these principles to the facts of this case, McKelvey accepted that the monetary matters governed by the PSSA were of central importance to the collective bargaining process, a point conceded by the government. As for the impact of the PSSA on meaningful, good-faith negotiations and consultation, McKelvey noted that, unlike the federal ERA, which permitted modest pay increases, the PSSA imposed a more "draconian" two-year wage freeze. Further, the ERA applied for a fixed number of fiscal years, whereas the rolling sustainability periods contemplated in the PSSA had the potential to affect collective bargaining of new agreements well into the future. The ERA wage increase limits were also consistent with prevailing outcomes in negotiated settlements at the time it was passed, whereas the same could not be said in respect of the PSSA, which was not preceded by good-faith collective bargaining. The PSSA had also eroded the unions' power to achieve improvements in working conditions since it eliminated bargaining on monetary issues and with it the ability to make monetary concessions in return for non-monetary gains. Overall, McKelvey agreed with the union's expert witness who testified that the PSSA had the effect of rendering meaningful collective bargaining nearly impossible. In such circumstances, McKelvey concluded, the PSSA substantially interfered with meaningful collective bargaining and infringed s.2(d) of the Charter, stating:

I accept Dr. Hebdon's conclusion that, "With monetary issues already predetermined, meaningful bargaining is unworkable and almost impossible"…. This constitutes substantial interference with s. 2(d) rights. Further, it is disingenuous on the part of Government to argue that it is operating by policy and mandate on monetary issues and not by virtue of this legislation. The PSSA is the legislative enactment of those mandates and policies, albeit not proclaimed. Government has the ability to set mandates and instruct public sector employers with respect to compliance. It has done so under the auspices of PSSA wage restraints. There is no question that tough mandates can be adopted, however, the process in this Province has engendered substantial interference with collective bargaining. The threat of the retroactive claw back provision exists and looms over any employer or employee that dares to bargain outside the parameters of the legislation as proclamation could transpire at any time, facilitating the impact of those provisions. ...

… The legislation prevents meaningful collective bargaining of monetary issues — an area central to freedom of association and the capacity of the association to achieve a very significant common goal. Further, the overall impact of the legislation on the process of collective bargaining rises to the level of substantial interference. …

The PSSA is a draconian measure which limits and reduces a union's bargaining power. The legislation circumvents and compresses the leverage or bargaining power available and inhibits the unions' ability to trade off monetary benefits for non‑monetary enhancements, such as protection from contracting out[,] job security, and layoffs. The PSSA has left no room for a meaningful collective bargaining process on issues of crucial importance to union memberships. There is no ability to promote representations and have them considered on a good faith basis. The right to meaningfully associate in pursuit of a fundamental and important workplace goal has been denied. It is not the "fruits" [or outcomes of bargaining] that raises the substantial interference, but it is the loss of a meaningful process. There have been only minor improvements secured through collective bargaining within the 21 agreements achieved since the passage of the PSSA. The fact that there are minor improvements is reflective of a minor degree of bargaining power. This is particularly important where consistently union memberships express wages and monetary benefits as being top priorities. The removal of an ability to bargain for those issues negates and diminishes the union's power to engage in the collective bargaining process. Robust collective bargaining on non‑monetary issues cannot transpire in such a milieu.

However, in reaching her conclusion on s.2(d) of the Charter, McKelvey held that there was no legal duty on the government to consult with parties that would be affected by legislation prior to its introduction, applying remarks to that effect in the B.C. Health decision. While noting that in British Columbia Teachers' Federation v. British Columbia, 2015 BCCA 184 (CanLII) (BCTF), Justice Donald of the B.C. Court of Appeal (whose dissenting opinion was adopted by the Supreme Court of Canada), had opined that pre-legislative consultation can, in some circumstances, replace collective bargaining if it constitutes a meaningful substitution, McKelvey held that it did not follow that there was a legal duty on the government to engage in pre-legislative consultation.

In this regard, McKelvey rejected the union's argument that either Meredith or BCTF had established a pre-legislative consultation requirement, accepting that such a duty would be inconsistent with the principle of parliamentary sovereignty, under which legislatures were free to pass any law within their constitutional spheres of competence, and reasoning:

[T]he decision in Health Services held that, "[l]egislators are not bound to consult with affected parties before passing legislation"…. I am in agreement with the [Manitoba government] that a duty to consult prior to the enactment of legislation does not exist. I do not interpret Justice Donald's reasons in BCTF to obligate the Government to engage in a consultative process before the introduction of legislation. Nor was such a position necessarily embraced by the Supreme Court of Canada when his reasons were adopted.

The Health Services decision held that a pre-legislative duty to consult does not exist. It must be acknowledged that government's consultation with a group about to be impacted by its actions is not an unusual practice. That being said, a legal duty to consult cannot be said to have been created or established. To determine otherwise could well curtai[l] any pre-legislative consultation from ever transpiring as a government would be reluctant to undertake such action if the spectre of judicial review of that process became the law.

Accordingly, I am not prepared to find a s. 2(d) rights violation because of a failure to undertake pre-legislative meaningful consultations between the unions and Government. I am satisfied … that no duty to consult on a pre-legislative basis exists in Canada. ... To hold otherwise could well promote dysfunction in the operation of the legislative process.

For the same reasons, McKelvey also held that there was no legal obligation requiring the government to engage in good-faith collective bargaining before introducing the PSSA. In this regard, she stated:

The decisions in BCTF and others, such as Dockyards Trades and Gordon, do not require government to engage in collective bargaining as a prerequisite to the introduction of legislation. Many of the same principles are applicable under this heading as were discussed under the Pre-Legislative Duty to Consult. Clearly, decisions such as Health Services and Mikisew do not create such a duty. The requirement on government to collectively bargain with unions prior to legislation would create uncertainty in the legislative process and dysfunction. This is not an area in which the courts have any jurisdiction or involvement. There is no question that collective bargaining can precede legislation. However, there is no legal duty to undertake such a course of conduct.

I am satisfied that there is no legal duty imposed on Government to engage in pre-legislative collective bargaining.

However, McKelvey noted that "[t]he duty to consult is an area which will be further considered under a s. 1 argument and analysis," asserting that "[a] failure to consult is relevant in assessing whether legislation which violates s. 2(d) can be justified under s. 1 of the Charter."

Charter violation not justified under s.1 of the Charter

Turning to justification under s.1 of the Charter, McKelvey applied the test in R. v. Oakes, 1986 CanLII 46 (SCC), first considering, whether the objective of the PSSA was pressing and substantial and, secondly, whether the means chosen to achieve that objective were proportional, which entailed determining whether (1) the means chosen were rationally connected to the objective, (2) any impairment of rights was minimal, and (3) the impact of the impairment did not outweigh the beneficial effects of the objective. Although it was "rare" for legislation to fail to meet the first part of the Oakes test, the government in the instant case had not established that the PSSA was supported by its asserted pressing and substantial objective, namely to control compensation costs in order to manage the deficit.

Addressing the issue of whether the government had established a pressing and substantial objective for the PSSA, McKelvey noted that past court decisions, including the Supreme Court of Canada's rulings in Newfoundland (Treasury Board) v. N.A.P.E., 2004 SCC 66 (CanLII), and in the Health Services case, have affirmed that mere budgetary constraints in the absence of a fiscal emergency will not be sufficient to justify an infringement of a Charter right, and that economic justifications for Charter violations will not only be scrutinized carefully by the courts, but must go beyond the usual cost control concerns and desirability of achieving balanced budgets which form the objectives of most governments. Quoting from the Newfoundland (Treasury Board) case, McKelvey stated:

The Supreme Court of Canada in Newfoundland (Treasury Board) ... held, "It is convenient at this point to look more closely at what this Court has said in the so-called 'dollars versus rights' controversy" (para. 65). Additionally, at para. 72:

"…courts will continue to look with strong scepticism at attempts to justify infringements of Charter rights on the basis of budgetary constraints. To do otherwise would devalue the Charter because there are always budgetary constraints and there are always other pressing government priorities. Nevertheless, the courts cannot close their eyes to the periodic occurrence of financial emergencies when measures must be taken to juggle priorities to see a government through the crisis. [emphasis in original]

Further confirmation of this principle was provided in OPSEU, where Justice Lederer held:

"It is only in exceptional circumstances that a breach of rights under the Charter will be justified based on economic concerns. In this case, there is no suggestion that any social program was in any proximate peril…. The impetus for restraint in wages and benefits was prudence and not any immediate fiscal emergency.

Applying these principles to the matter before her, McKelvey reasoned as follows in holding that the Manitoba government had not established that there was a pressing and substantial objective for the measures taken, based on the financial/budgetary constraints faced by it:

The Manitoba fiscal situation must be considered in the context of this case in order to determine the existence of a pressing and substantial objective. It would be an unusual state of affairs where economic and fiscal circumstances were not an issue with any province or with government in this country. In Manitoba, 55 per cent of the budget is comprised of public sector costs which grows by 200 million dollars each year, without increased compensation. It is necessary to consider whether the pressing and substantial objective of this legislation could be substantiated in the context of exceptional circumstances presented by fiscal challenges and budgetary constraints…. It is noteworthy that neither [the unions' nor the governent's] expert opined that Manitoba was in a financial crisis situation. Instead, prudence was recommended by both in terms of a fiscal policy….

[The government's expert] testified that Manitoba had a robust economy, compared to some others, and, essentially, was in the middle of the Canadian pack. Net debt had increased in all jurisdictions, which was said to be generally affected by political choices. Such choices may not always be economically sound, but are popular. [The government's expert] testified that all governments should make plans and exercise fiscal prudence with the many options that are available. Further, he opined that choices which reduce revenue serve to slow deficit reduction.

[The union's expert] testified in a similar vein…: The conclusion from looking at government deficits over time and across provinces and other jurisdictions in Canada and in the OECD is that Manitoba has managed its fiscal position responsibly and in line with other jurisdictions. There is no evidence of a fiscal crisis in Manitoba.

Moreover, examining the facts of the case before her, McKelvey remarked that the government's decision not to include the revenues and assets of the WCB and MASC in the public accounts could be characterized as "manipulation" for the purpose of inflating the deficit. The tax cuts announced in recent budgets also undermined the government's arguments. McKelvey concluded:

These areas all represent, in a substantive way, policy choices made by Government along with what might be considered as manipulation in areas such as the WCB and MASC exclusion from public accounts. Arguably, the deficit is made to appear more substantial than actually exists, along with the fact that revenues have been significantly reduced. Further, increased expenditures reflected in the budget of 2019/2020 have demonstrated spending rather than contraction. The only substantive area in which this Government has, through its policies, indicated a substantial pull back is public sector compensation

I am satisfied that the Government's stated objectives in pursuing this legislation and mandate do not support a pressing and substantial objective that would justify it pursuant to s. 1 of the Charter. The Government's reliance was on fiscal circumstances which did not constitute a crisis or emergency situation. The Government's political choices were to reduce income taxes and lower the PST, all of which reduced revenue and slowed deficit reduction. The Rainy Day Fund was significantly funded, which diverted funds that could have been utilized for deficit-reduction purposes.

… The Government's objectives in introducing the PSSA were not pressing nor substantial. As the referenced case law stipulated, budgetary considerations alone cannot normally be relied upon to support the existence of a free standing pressing and substantial objective for s.1 Charter purposes. That being said, it is rare for a court to reject [the argument] that the objective of the law is sufficiently important to justify the limitation of a Charter right. The expert testimony and other evidence at trial did not establish that Manitoba's financial circumstances were exceptionally impacted or in a dire situation. Further, the [government] did not argue that a financial crisis existed. The evidence tended to demonstrate that this province is in the middle of the Canadian provincial experience. [The government's own expert witness] likened the Manitoba situation to that of an oil tanker turning slowly: small corrective steps were required. He also opined this Province's financial situation was very different to that which existed at the time of the 2008 global crisis….

The pressing and substantial objective of the Government must be considered in the context of other policies it has adopted since 2016. … It is not for a court to mandate policy for government. However, such policy "choices" raise the question of the Government's promotion of deficit reduction positioned against its revenue reduction measures. It is necessary to weigh and evaluate the pressing and substant[ial] object[ive] of Government in the context of its actions taken both as regards the passage of the PSSA and other policies, such as violations of public accounting standards and significant funding of the Rainy Day Fund. The revenue reduction measures, including the PST reduction, also must also be considered. The ramifications of the PSSA will continue for years to come.

I am satisfied, based on all the evidence, that a pressing and substantial objective has not been established in this case. The infringement of s. 2(d) rights cannot be justified by the fiscal condition of the Province during the relevant timeframe — no evidence was presented to support the existence of a financial crisis nor exigent circumstances.

While there was no need to consider the second element of the Oakes test, McKelvey also concluded that the PSSA was not a proportional means of achieving its stated objective. Although McKelvey held that she was prepared to accept, on a balance of probabilities, that "in the very broadest sense" there was a rational connection between the PSSA and deficit reduction, since wage restraint legislation would assist in the control of public sector compensation, she noted her reservations on this point, pointing out that the government's own witnesses testified that they were never asked to undertake an analysis of the cost consequences that would result from the PSSA, or how much money would be saved, leading her to comment that "the PSSA was not based upon a sound financial analysis — one was never done." However, accepting that, on a broad basis, the government demonstrated a rational connection between a pressing and substantial objective and the means adopted by Government to achieve that objective, McKelvey found that the legislation did not represent a minimally impairing solution, particularly as the government had not, despite its assertion in meetings with the unions, given meaningful consideration to alternatives that would have been more respectful of workers' associational rights.

Reiterating again her view, expressed earlier, that consultation, while not relevant to the determination of whether there has been a breach of s.2(d) rights, "must be considered [under s.1] with respect to minimal impairment," McKelvey concluded that, in part due to the lack of meaningful consultation, the government had failed to meet its onus under the minimal impairment branch of the Oakes test as the PSSA was not minimally impairing, "travel[ling] far beyond what was reasonably necessary to procure the objectives of the legislation." McKelvey reasoned:

I am not satisfied that the Government intended to engage in meaningful consultation towards any avenue other than the legislation model. Information, when requested, was not provided, which negated the unions' ability to participate in meaningful consultation, even of the proposed legislation, which was not revealed in draft form….

Government, at no time, considered a "blank slate" of options with respect to public sector cost control, and, particularly, would not embrace collective bargaining. As indicated, collective bargaining had been utilized in the past for the purposes of negotiating wage freezes, and certainly was utilized in advance of the implementation of the ERA. The PSSA does not satisfy reasonable minimal impairment and inhibits the right to collectively bargain well beyond a minimal level. The Government failed to afford a reason why less intrusive measures were not contemplated or whether alternatives were even considered….

Given the availability of other options for expenditure reduction, such as collective bargaining, a legislative pay freeze and salary caps represented an "extreme" solution. Accordingly, McKelvey concluded:

The PSSA was not the least impairing method that was available to reduce the deficit or to satisfy the pressing objective…. The pre-legislative consultations between the unions and Government did not demonstrate a meaningful discussion of any options — even legislative options…. The unions provided an alternative that employed the collective bargaining process. The Government's mind was closed to such alternatives and only sought cost certainty for public sector compensation — collective bargaining was never an option. Further, it is arguable that the lack of provision of information was purposeful to block the search for alternative measures. The query must be made as to why collective bargaining or other recourses did not constitute viable alternatives. Collective bargaining had been successfully utilized in times of dire financial crisis. This was not such a time of crisis, but that process was not considered. Other options might have included a plan to reduce the budgets of Government-funded employers. Such a reduction would have required the employer to carefully consider monetary proposals at the bargaining table — hard bargaining could have transpired. There were alternatives, albeit none were explored.

Finally, the impact of the legislation on collective bargaining was out of proportion to its asserted salutary effects. In McKelvey's words, the government's approach amounted to "facilitating popular tax revenue reduction measures on the backs of public sector workers." In these circumstances, McKelvey asserted that "[p]roportionality does not exist," explaining:

The legislation has, in accordance with the affidavit evidence and testimony provided by many of the union witnesses, affected the relationships between the unions and its memberships, as well as the unions with the employers. Further, the memberships' negotiating priorities could not be addressed. As [the union's expert witness] has said, this Government's actions will have a long-term effect and, perhaps, create a chilling of relationships for future rounds of collective bargaining. The evidence has shown that the PSSA has substantially interfered with a meaningful process of collective bargaining for over 110,000 Manitobans. The Government is facilitating popular tax revenue reduction measures on the backs of public sector workers. Proportionality does not exist.

Accordingly, the PSSA was not saved as a reasonable limit under s.1 of the Charter.

McKelvey also held that the mandate issued by the government to the University of Manitoba in 2016, requiring it to adhere to a pay freeze in collective bargaining underway at that time, "represented a substantive disruption of the collective bargaining process" and constituted a further infringement of s.2(d).

In the result, McKelvey issued a declaration that ss.9 to 15 of the PSSA were unconstitutional and were of no force or effect. She also declared that the government's direction to the University of Manitoba regarding pay increases violated faculty members' right to freedom of association.


Manitoba Federation of Labour president Kevin Rebeck welcomed McKelvey's judgment, stating: "We said all along that this government was violating the rights of workers, and that Manitoba should allow the tried and tested process of collective bargaining to take place in the public sector…. Now, workers and employers can get back to the bargaining table … without the threat of this unconstitutional legislation hanging over their heads." Manitoba's Finance Minister, Scott Fielding, indicated that the government was reviewing the decision and may appeal. He also asserted that the decision would place added pressure on the government in the midst of the COVID-19 pandemic and would "create even deeper fiscal challenges for the government of Manitoba."

As McKelvey noted in her decision, the trial in the instant case concluded in February 2020, and therefore her judgment did not consider the impact of the COVID-19 pandemic, which emerged in March 2020, on public finances. However, shortly before her decision was issued, the government and the Manitoba Government and General Employees' Union (MGEU) agreed that, as a cost-saving measure, most Manitoba public servants would be required to take five days of unpaid leave in the 2020-2021 fiscal year, in return for a guarantee that no regular and non-seasonal departmental employees would be laid off during that time. Prior to reaching the agreement with the MGEU, the government had cautioned that, in the absence of unpaid leave, layoffs would be required.

Sections 16 to 21 of PSSA apply the same limits on pay increases to non-unionized employees, with the four-year sustainability period running from March 20, 2017 or, in the case of employees with contractual pay increases, one year after any such increase takes place. Those provisions, which, like the rest of the PSSA, have not been proclaimed in force, were not addressed in the judgment under review.

As indicated in McKelvey's judgment, the PSSA was modelled on Nova Scotia legislation bearing the same name. The Nova Scotia Public Services Sustainability Act, known as Bill 148, reviewed in Lancaster's Labour Law News, November 22, 2017, eAlert No. 422, was passed in December 2015 and brought into force more than 20 months later. It imposed a wage freeze on 75,000 public sector workers for two years, followed by increases of one percent in the third year, 1.5 percent in the fourth year, and 0.5 percent at the end of the fourth year. The constitutionality of this legislation is currently the subject of a reference before the Nova Scotia Court of Appeal.

Similarly, a Charter challenge has been launched by unions in Ontario to Bill 124, the Protecting a Sustainable Public Sector for Future Generations Act, 2019 (PSPSFGA), which imposes an annual limit of 1 percent on wages of employees of publicly funded institutions over a 3-year "moderation" period. Bill 124 was introduced in June 2019, received Royal Assent on November 7, and came into force the following day. While stipulating that, subject to the other provisions of the Act, the right to bargain collectively is continued, the Act imposes a 1 percent cap on annual increases in salary rates or increases in and compensation entitlement over three years in the provincial government-funded public sector (For further details, see Lancaster's Headlines, January 15, 2020).

Shortly before the legislation was tabled in June 2019, Treasury Board President Peter Bethlenfalvy gave a speech to the Canadian Club on April 4, 2019, highlighting the "moral imperative" of balancing Ontario's budget. The province, he claimed, was running a $15 billion deficit following 15 years of Liberal rule. He announced that the government would be consulting with public sector unions about measures to contain costs, including voluntary agreements to curtail pay increases in existing collective agreements, "trade-offs" that would reduce compensation costs, and legislative measures. On the same day, the government sent consultation notices to public sector unions and employers stating that "[w]hile no decisions have been yet made, the government is considering legislated caps on allowable compensation increases that can be negotiated in collective bargaining or imposed in binding arbitration. We wish to engage with you in good faith consultations on this option and invite your feedback." Bill 124 was introduced in the legislature 2 months later.

A press release from the Ontario Federation of Labour (OFL) following the passage of the legislation condemned its passage, stating that a constitutional challenge was "all but inevitable," with the President of the OFL stating, "[t]he agreements unions bargain on behalf of their members must be negotiated at the bargaining table, not in the legislature." Subsequently, on December 12, 2019, four unions representing teachers and education workers across the province announced the filing of a court challenge to Bill 124. In their application filed in the Ontario Superior Court on that date, the Elementary Teachers' Federation of Ontario (ETFO), Ontario Secondary School Teachers' Federation (OSSTF), Ontario English Catholic Teachers' Association (OECTA), and the Association des enseignantes et des enseignants franco-ontariens (AEFO), claim that Bill 124 violates the teachers' and education workers' constitutional rights to engage in a meaningful process of collective bargaining, contrary to section 2(d) of the Charter. The unions also allege that the legislation restricts their rights under s.2(b) of the Charter (freedom of expression) by severely restricting, and thereby rendering meaningless, their right to strike and picket their employers. Less than one week later, on December 17, 2019, a coalition of 11 more Ontario unions announced that they were joining in the legal fight to challenge Bill 124.