Manitoba Court Finds “Draconian” Wage Restraint Legislation Unconstitutional

On June 11, 2020, Madam Justice McKelvey concluded that the Public Services Sustainability Act (PSSA) violated the associational rights under s2(d) of the Canadian Charter of Rights and Freedoms and that such an infringement could not be justified. The claim was brought on behalf of a labour coalition comprised of the Manitoba Federation of Labour (MFL) and 28 unions. The PSSA imposed a four-year “sustainability period” on more than 110,000 public sector workers, during which wages and additional remuneration increases were frozen for the first two years and capped at 0.75% and 1% in years three and four. Upon proclamation, the PSSA would take retroactive effect, invalidating previous collective agreements and clawing back wages beyond its limits.

The Status of the PSSA

The PSSA became law in June 2017 but has never been proclaimed into force. As such, the Government argued that the legislation was not ripe for judicial review.

Justice McKelvey rejected the Government’s argument, as based on the plaintiffs’ significant evidence regarding collective bargaining, that the Government and other public sector employers had proceeded as if the PSSA had been in effect. It had played a significant role in labour relations in Manitoba. She stated: “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” [276].

The Duty to Pre-Legislative Consultation / Collective Bargaining

One of the issues in the case was whether a consultative process that took place between the Government, the MFL, and 10 of the plaintiff unions before the PSSA was meaningful and in good faith, and also whether a pre-legislative consultation process can even be a constitutionally adequate substitute for a bargaining process between unions and employers.

While Government said that it wished to consult with unions before legislation was enacted, it was never prepared to consider any options other than wage restraint legislation. The consultation was accordingly not meaningful.

The Constitutionality of the PSSA

Justice McKelvey was satisfied that the PSSA, even in its un-proclaimed state, substantially interfered with the freedom of association and violated s2(d) of the Charter.

First, she found that the PSSA prevents meaningful collective bargaining on monetary terms or benefits – an area central to the freedom of association and the capacity of unions to achieve a very significant common goal.

Next, the overall impact of the PSSA on the process of meaningful, good faith collective bargaining rose to the level of substantial interference. Justice McKelvey held that “[t]he PSSA operates as a draconian measure that has inhibited and dramatically reduced the unions’ bargaining power” [246]. The legislation removes monetary issues from the table, and thereby inhibits the unions’ ability to trade-off monetary terms and benefits for non-monetary enhancements, such as job security.

The collective agreements that had been concluded since the passage of the PSSA reflected only minor improvements, which demonstrated a minor degree of bargaining power. While the results of collective bargaining are not determinative in a s2(d) analysis, these outcomes illustrated the impact of the PSSA on associational activity. Moreover, most of these agreements were achieved under duress and the threat of the PSSA’s claw back provisions.

The Government’s utilization of wage restraint legislation was found to be particularly troubling in light of the bargaining history in the Manitoba public sector. In the aftermath of the 2008 financial crisis, wage freeze had been collectively bargained with trade-offs such as lay-off protection. Justice McKelvey found that it was precisely these trade-offs that Government wished to avoid through the PSSA, by taking a “strident, inflexible and rigid approach to labour negotiations” [334].

Section 1

Justice McKelvey accepted the plaintiffs’ argument that the Government did not meet even the first component of the Oakes test under s. 1 of the Charter, in that the statutory objectives of deficit reduction and fiscal stability were insufficient to establish a free-standing pressing and substantial objective. Budget consideration in the absence of a fiscal emergency, will be insufficient to justify an infringement of the Charter.  Justice McKelvey noted that neither of the financial experts who gave evidence in this case opined that Manitoba was in a situation of financial crisis. Manitoba’s state of affairs was very different than after the economic recession in 2008

With respect to minimal impairment, Justice McKelvey accepted the unions’ submission that the Government did not meaningfully consider any alternatives. Before the “consultation”, the Government had already drafted legislation, which included the two-year wage freeze. Additionally, the Government was not forthcoming with information sought by unions during the  “consultation” process, which negated the unions’ ability to meaningful participation, At no time did the Government consider a “blank slate” of options with respect to public sector cost control: The “die was cast” [404].

At the final “balancing” stage, Justice McKelvey accepted that Government’s actions will have a long-term effect and potentially chilling effect of relationships in future rounds of collective bargaining. She concluded: “The Government is facilitating popular tax revenue reduction measures on the backs of public sector workers. Proportionality does not exist.”

Conclusion

This powerful decision is a credit to the MFL and the unions who united to defend the right to meaningful collective bargaining and makes a significant contribution to the increasing recognition of workers’ rights and the importance of those rights in Charter jurisprudence.