On August 3, 2012, the Ontario Court of Appeal released its decision in the Assn. of Justice Counsel v. Canada (Attorney General), 2012 ONCA 530 which addresses the constitutionality of the Expenditure Restraint Act, S.C. 2009, c. 2, s. 393 (the “ERA”) that limited compensation increases for approximately 400,000 federal employees. Several other challenges to this legislation are pending in other jurisdictions, and the Ontario Court of Appeal’s decision is the first appellate level decision to address this issue.

The Assn. of Justice Counsel challenge was brought by the collective bargaining unit for lawyers working for the federal government. The AJC had been engaged in wage increase negotiations with the Treasury Board Secretariat (“TBS”) to address a prevailing wage gap between federal and provincial lawyers. Whereas the ACJ was seeking wage increases in the order of 35%, the TBS’s final offer was premised upon a 2.5% salary increase for 2006-2007, 2.3% for 2007-2008 and 1.5% for each fiscal year through 2010-2011. In March 2009, the ERA came into force, and prohibited any salary increases above the amounts contained in the final TBS offer. The effect of this legislation was to nullify any hope on the part of the AJC to achieve higher wage increases, and to render any collective bargaining on salary “useless” for the five-year period of the legislation. Following the enactment of the ERA, an arbitration panel ordered wage increases to the legislated maximums under the new ERA.

The ACJ challenged the constitutionality of the ERA on the basis of the s. 2(d) of the Canadian Charter of Rights and Freedoms which protects our “freedom of association”. The ACJ argued that this right encompasses a right to collective bargaining, which right was effectively nullified by legislation which capped permissible wage increases during the employment period under negotiation.

The ACJ had been partially successful at trial. The trial judge had found that the ERA did violate s. 2(d) of the Charter, but concluded, that except for the provisions limiting salaries for 2006-2007, the legislation was justified under s. 1 of the Charter because of pressing and substantial objectives associated with the government’s need to respond to the global financial crisis of 2008.

Sharpe J.A. for a unanimous Ontario Court of Appeal emphasized that the case was governed by the Supreme Court of Canada’s most recent word on the subject, being Ontario (Attorney General) v. Fraser, 2011 SCC 20. In this case, the majority decision of McLachlin C.J. and LeBel J. (joined by Binnie, Fish and Cromwell JJ.) had interpreted earlier authorities as establishing “that bargaining activities protected by s. 2(d) in the labour relations context include good faith bargaining on important workplace issues”. They further held that: “This is not limited to a mere right to make representations to one’s employer, but requires the employer to engage in a process of consideration and discussion to have them considered by the employer.” Sharpe J.A. also emphasized the limitations of the rights recognized in Fraser. Section 2(d) only protects “the right to collective bargaining in the minimal sense of good faith exchanges” but “does not impose a particular process” and “does not guarantee a legislated dispute resolution mechanism in the case of an impasse”.

Applying Fraser to the case before him, Sharpe J.A. found that the ACJ’s rights to have their views heard and considered by the TBS in good faith were the only things protected by s. 2(d). Since their views had been heard, and since they had been considered in good faith, the Charter rights of the ACJ’s members had not been violated. Since Fraser does not recognize the existence of any right to any particular outcome or dispute resolution process, the effect of the ERA was found to be consistent with s. 2(d). Given this finding, it was unnecessary for the Court to consider whether or not the ERA was justified under s. 1 of the Charter.

This decision by the Court of Appeal will presumably have a significant impact on the other pending challenges to the ERA which are winding their way through the Courts and presumably towards a determination by the Supreme Court of Canada. The case also reflects a highly restrictive view of s. 2(d), which view appears to have been necessitated by the Supreme Court’s 2011 decision in Fraser.