Manitoba Court Finds “Draconian” Wage Restraint Legislation Unconstitutional
This case involved a constitutional challenge to The Public Services Sustainability Act (“PSSA”), brought on behalf of a labour coalition comprised of the Manitoba Federation of Labour (“MFL”) and 28 plaintiff unions. The claim alleged that the PSSA violated the plaintiffs’ right to freedom of association under s. 2(d) of the Canadian Charter of Rights and Freedoms (the “Charter”)
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.
On June 11, 2020, Madam Justice McKelvey issued her decision, concluding that the PSSA has significantly impacted the associational rights and protections of public sector employees and that such infringement could not be demonstrably justified in a free and democratic society.
As such, the parties will appear before Justice McKelvey again, at a future date, for specific remedies and damages to be determined.
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 a constitutionality review, and that all collective bargaining that had taken place since the enactment of the PSSA had simply been undertaken in accordance with Government mandates and policies and not as a consequence of the PSSA.
Justice McKelvey rejected the Government’s argument, as she was satisfied, based on the plaintiffs’ significant evidence regarding collective bargaining, that the Government and other public sector employers funded by government had proceeded as if the PSSA had been proclaimed and was in effect, and that the PSSA had played a significant and substantial 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” (para. 276).
The Duty to Pre-Legislative Consultation / Pre-Legislative 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 in the 2 months before the PSSA was introduced in the Legislature was meaningful and done 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. The plaintiffs argued that the consultation process was not done in good faith and is not a substitute for the Charter protected bargaining process in any event.
Justice McKelvey found that 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. Nor was even a varied content of that legislation likely possible. Instead, as early as 6 months before the “consultation” process began, Government was pursuing a public service sustainability model similar to unproclaimed legislation in Nova Scotia. The consultation was accordingly not meaningful. Further, she found that the government had no duty to consult or engage in collective bargaining prior to enacting the legislation.
The Constitutionality of the PSSA
Justice McKelvey was satisfied that the PSSA, even in its unproclaimed state, substantially interfered with the freedom of association and violated s. 2(d) of the Charter, based upon a contextual and fact-driven analysis of the extensive trial evidence submitted by the plaintiffs, including their labour relations expert, Dr. Hebdon.
First, Justice McKelvey 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, Justice McKelvey determined that the overall impact of the PSSA on the process of meaningful, good faith collective bargaining rose to the level of substantial interference. She held that “[t]he PSSA operates as a draconian measure that has inhibited and dramatically reduced the unions’ bargaining power” (para. 426). In particular, the legislation removes monetary issues from the bargaining table, and thereby inhibits the unions’ ability to trade-off monetary terms and benefits for non-monetary enhancements, such as job security. In this way, the right to meaningfully associate in pursuit of important workplace goals was denied.
Justice McKelvey found that 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 s. 2(d) analysis, Justice McKelvey accepted that these outcomes illustrated the impact on associational activity caused by the PSSA. Moreover, she accepted that most of these agreements were achieved under duress and the threat of the PSSA’s claw back provisions, and had been conditionally ratified, subject to the PSSA’s constitutional status (an unusual process).
Justice McKelvey found the Government’s utilization of wage restraint legislation particularly troubling in light of the evidence of bargaining history in the Manitoba public sector, which demonstrated that wage freezes had been collectively bargained with substantially the entire public service in the aftermath of the 2008 global financial crisis, albeit with trade-offs, such as layoff 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” (para. 334).
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. Applying case law that indicates that budgetary considerations alone, in the absence of a fiscal emergency, will be insufficient to justify an infringement of a Charter right, 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 the global economic recession that provided the backdrop to the Expenditure Restraint Act cases (which she distinguished).
Justice McKelvey accepted that the Government is entitled to make policy choices, but noted that those choices, including reducing income taxes and lowering the PST, served to substantially reduce the amount of revenue available to service the Manitoba deficit.
With respect to minimal impairment, Justice McKelvey accepted the unions’ submission that the Government did not meaningfully consider any alternatives other than legislation. Before “consultation” with unions commenced, 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 purported consultation process, which negated the unions’ ability to participate in meaningful consultation, even of the proposed legislation. Justice McKelvey concluded that Government, at no time, considered a “blank slate” of options with respect to public sector cost control, and, in particular, would not consider free collective bargaining, despite that wages freezes had been negotiated in the past. All of the evidence denoted early acceptance and pursuit of a Nova Scotia-like legislative wage restraint model: the “die was cast” (para. 404).
At the final “balancing” stage of the Oakes analysis, Justice McKelvey accepted that the evidence established that the PSSA affected the relationships between the unions and their members, as well as between the unions and employers. She held that the Government’s actions will have a long-term effect and potentially create a chilling of relationships in future rounds of collective bargaining. Justice McKelvey concluded: “The Government is facilitating popular tax revenue reduction measures on the backs of public sector workers. Proportionality does not exist.”
This powerful decision is a credit to the MFL and the Manitoba unions who united to defend the right to meaningful collective bargaining on behalf of their members and makes a significant contribution to the increasing recognition of workers’ rights and the importance of those rights in Charter jurisprudence.