COURT FILE NO.: CV-09-375977 COURT FILE NO.: CV-09-377318

DATE: 20140212

ONTARIO

SUPERIOR COURT OF JUSTICE

BETWEEN:

The Professional Institute of the Public Service of Canada/L’Institut de la Fonction Publique du Canada, Raymond Lazzara, 72 Anne Chamney and Humayoun Akhtar

Applicants

– and –

Her Majesty in Right of Canada as represented by the Attorney General of Canada

Respondent

Fay Faraday and Adrienne Telford, for the Applicants

Kathryn Hucal, Victoria Yankou and Susan Keenan, for the Respondent

AND BETWEEN:

John Gordon, Patricia Ducharme, Megan Adam, Nick Stein, Chris Aylward, Darrell-Lee McKenzie, and Public Service Alliance of Canada

Applicants

– and –

Attorney General of Canada

Respondent

Andrew Raven and Andrew Astritis, for the Applicants

Kathryn Hucal, Victoria Yankou and Susan Keenan, for the Respondent

HEARD: October 21^st – 25^th, 31^st, November 1^st and 5^th, 2013

LEDERER J.:

BACKGROUND

[1] These applications concern s. 2 (d) of the Charter of Rights and Freedoms. It provides that “freedom of association” is protected as a fundamental right under the Canadian Constitution. The issue is how and to what extent the right applies to trade unions that represent public employees.

[2] It is generally recognized that, by October 2008, there was an economic downturn that had a significant impact, not just on the Canadian economy but across much of the globe. The Canadian government sought to respond. As part of the program that was implemented it passed the Expenditure Restraint Act,[^1] which among other things, restricted wage increases to affected employees.[^2] As a result of the position taken by the government the wage rates for the years in question were fixed. At the time these limitations were announced a number of bargaining units represented by the two applicant unions (The Professional Institute of the Public Service of Canada (“PIPSC”) and Public Service Alliance of Canada (“PSAC”)) were in the process of collective bargaining. There were other units where agreements had been reached but as a result of the passage of the Expenditure Restraint Act wage increases were “rolled back” such that they complied with the provisions in the legislation. The unions say that as a result of the imposition, through legislation, of the restriction on wages they were denied a good faith process of collective bargaining and that, as a result, their right to freedom of association was breached. Wages, after all, are a central concern of any collective bargaining process. The inability to negotiate this provision was fatal to the process. For its part the Respondent, the Attorney General of Canada, says that there was no denial of the right to freedom of association. Any process that is guaranteed is not fixed in its steps or components, it depends on the context. In this case, given the circumstances, the various bargaining units took part in appropriate negotiations. There was good faith bargaining. As the government sees it the true substance of the complaint of the unions is that they are unhappy with the outcome. The right to freedom of association does not include the right to any particular outcome or one that is necessarily satisfactory to all those taking part.

[3] The underlying issue is the nature and breadth of any limitation placed on the ability of the government to act in the face of what it perceives to be a crisis given the freedom of association.

[4] The Applicants seek a declaration that the Expenditure Restraint Act is unconstitutional and of no force and effect. It is contrary to s. 2 (d) of the Charter. The violations are not demonstrably justifiable under s. 1 of the Charter. The Applicants request that those bargaining units that were prevented from freely bargaining rates of pay during the restraint period be provided with the opportunity to do so. The Applicants seek an order that compensation be awarded in respect of wage rates that were “rolled back”. They ask that the agreements affected be reinstated along with the full compensation they provided for.

THE ECONOMIC DOWNTURN

[5] Beginning in August 2007 and peaking in late 2008 and early 2009, the world experienced a financial downturn that resulted in the most serious global recession since the great depression. It originated in the collapse of the United States housing market, but rapidly intensified and spread around the world, causing stock markets to fall, economic activity to contract, producer and consumer confidence to decline, employment to drop and major financial institutions to fail.

[6] Governments and central banks accepted that the speed and trajectory of the global economic downturn required them to respond. Governments believed that they had to act quickly to mitigate the recession and support economic recovery.

[7] These global conditions and the economic recession had a negative impact on the Canadian economy and on the fiscal position of the Government of Canada. In the private sector exports and commodity prices fell off. Consumer spending was weaker and there was reduced investment accompanied by a waning of investor confidence.

[8] Deterioration in the financial markets was so swift that in November 2008, just one month after its last report, the International Monetary Fund (IMF) issued another report further downgrading its forecasts. The IMF projection for global real GDP growth in 2009, which had already been revised down from 3.9% in July to 3.0% in October, was further reduced to 2.2% in November.[^3] In so doing, it described the economic situation as remaining “virulent” (meaning “severe or harmful in its effect”[^4]) and the economic outlook as “exceptionally uncertain”.[^5] The outlook for real GDP growth in Canada in 2009, which had already been revised down from 1.9% to 1.2% in October, was further downgraded to 0.3% in November.[^6]

[9] In a speech on October 29, 2008 the Minister of Finance observed that:

In a remarkably short period of time, the collapse of financial institutions in the U.S. and the seizing of international credit markets have taken financial markets down sharply and have resulted in a worldwide economic slowdown.

Without question, these are uncertain economic times. And after the extraordinary developments that have taken place in a matter of weeks, no one can reliably predict what will happen next.

This is the new reality Canada faces today – wild swings in financial markets, increasing attempts to keep credit flowing, and economic forecasts that have grown more pessimistic by the day.

We are entering an extremely difficult period for Canadian families, who are counting on their governments to get down to work and follow a sensible, realistic plan to protect their earnings, their savings and their jobs.[^7]

[10] In the same speech the Minister expressed confidence in the position of Canadian businesses and families to deal with the economic uncertainty:

...We have the best fiscal record in the G7. By any objective measure, in the eyes of the international community, and in the eyes of scores of economic experts, we have put Canadian families and businesses in the best possible position to deal with today’s global uncertainty.

Today it means Canada is in a much better position than virtually any other major country to withstand the economic and fiscal storms working their way around the world.

It has led to the IMF predicting Canada will have the best economic growth in the G7 next year...[^8]

[11] There is no inconsistency in these comments. They both recognize that economic circumstances were uncertain. The better position of the Canadian economy relative to those of other countries does not mean that the situation could be ignored. Moreover, it bears noting that in conditions such as those described, any Minister of the Crown would be in a delicate position. He or she would need to inform the public and respond to the state of affairs without unnecessarily upsetting Canadian citizens and exacerbating the problem.

[12] In the same speech the Minister noted that “Canada remains on track to balance its budget this year”. The government projected a surplus of $1.2 billion over the first five months of the 2008-2009 fiscal year.[^9] In an Economic and Fiscal Statement made on November 27, 2008, the Department of Finance recognized that, while the government was continuing to plan for balanced budgets, action was needed to protect the economy or further deterioration could lead to a deficit.[^10] By late January 2009, as the government was preparing its budget, the most current private-sector average economic projections for Canada indicated a 5.5% percentage point reduction in projected nominal GDP[^11] growth for 2009. This meant the government’s projected revenue loss for fiscal year 2009-2010 had increased by almost $17 billion to $25.7 billion from $8.9 billion projected in the economic statement released by the government on November 27, 2008.[^12]

[13] The Applicants are adamant that the fiscal concerns of the government were misplaced and exaggerated. It was pointed out that the Economic and Fiscal Statement projected a budgetary surplus of $800 million in 2008-2009 followed by four years of surplus. This is true but only “...[a]fter taking into account the actions proposed in this Economic and Fiscal Statement”,[^13] which is to say after accounting for any savings that would occur as a result of any wage restraint measures. Moreover, while projecting these surpluses the Economic and Fiscal Statement pointed out that there were risks to the fiscal plan it outlined. The economic situation was evolving rapidly and the full extent of the slowdown was not known. The uncertainty was marked by the range of private sector forecasts. This volatility demonstrated that while balanced budgets were planned for, deficits could not be ruled out.[^14]

[14] It was suggested that savings “from the restraint measures” would total $4.1 billion by the 2012-2013 fiscal year; an amount it was said was “...dwarfed by the projected surplus of $15.9 billion by the same fiscal year.”[^15] The $4.1 billion represents the savings from restraint on public sector compensation alone.[^16] As such these savings are part of a bigger program.[^17] I am uncertain of the source for the $15.9 billion surplus.[^18] Be that as it may, I confess I do not see the value in this kind of comparison. The projected surplus was a prediction based on assumptions of economic performance five years in the future. It could be right. It could be wrong. If, over the course of the intervening years, $4.1 billion might be saved without offending the rights protected by the Charter surely it is open to the government to make the decision to try.

[15] The same could be said of the observation that the $4.1 billion in projected savings is trivial in comparison to Canada’s GDP or that the savings from the Expenditure Restraint Act from 2007-2008 to 2015-2016 amounts to less than 1% of the federal debt in 2016 and represents an insignificant change in the federal debt/GDP ratio forecast for 2015-2016.[^19] This is the result when any small component is set up against factors that cover the economy as a whole. The government is not prevented from dealing with public sector compensation just because in relative terms the numbers seem small.

[16] At first instance, the issue is not the intention behind, the rationale for, or the relative impact of actions of the government but rather the effect of that conduct. Did the government breach the freedom of association of the Applicants? If it did the second issue in cases invoking a breach of rights under the Charter becomes pertinent. Can it be demonstrated that the breach was justified in a free and democratic society?[^20] The economic circumstances would be relevant if that issue arises.

[17] For the moment I say only that it is clear there was a global economic crisis which engaged the concern, consideration and action of the Government of Canada. Although little was said of it, I believe I can take judicial notice of the fact that the global concern attracted the interest of many governments and international organizations.

THE GOVERNMENT RESPONSE

[18] In response to what the Government of Canada understood to be an economic crisis, the federal budget of January 27, 2009 introduced $40 billion in federal stimulus measures over two years aimed at supporting the economy and creating jobs. This plan was based on three principles, namely, that stimulus spending should be:

• timely, to support private demand when it was at its weakest;

• targeted, to businesses and families most in need; and

• temporary, to avoid long-term deficits with the vast majority of the measures set to expire on March 31, 2011.[^21]

[19] It stands to reason that this commitment would have a significant impact on the budgetary balance of the Government of Canada. In 2008-2009, for the first time in eleven years, it went into deficit. In 2009-2010 the budgetary balance declined to a deficit of $56 billion.

[20] There was concern for the fiscal position of the Government of Canada. The Economic and Fiscal Statement of November 27, 2008 reviewed the government’s approach and proposals to “manage spending responsibly”.[^22] The budget tabled on January 27, 2009 “reintroduced most of the spending restraint measures proposed in the November 2008 Statement…”.[^23]

[21] Compensation costs are a significant component of government spending. For the 2008-2009 fiscal year compensation costs were approximately 37% of direct program expenditures.[^24] In October 2008, the Department of Finance asked the Treasury Board Secretariat[^25] for options to limit compensation costs within the current round of collective bargaining so as to control the growth of the wage bill.[^26] In his October 29, 2008 speech the Minister said that the “commitment to responsible fiscal management will also extend to public sector compensation”.[^27] An options paper was prepared. It considered three possible actions:

(a) population growth: imposing a staffing freeze on new hiring, not replacing departing workers, laying off employees and offering departure incentives;

(b) wage growth: suspending movement within the pay ranges, suspending promotions and suspending upward reclassification of positions; and,

(c) salary increases: freezing or limiting pay increases.[^28]

[22] The Treasury Board Secretariat advised that option (a) was not appropriate in the circumstances. Hiring restrictions, layoffs and departure incentives would not provide immediate results. They would take time and there would be additional costs attached to such an approach. Option (b) also raised concerns. The measures it included would have put the entire employee population in a salary standstill. Moreover, the pay component of promotions and other movement within existing pay ranges was provided for in existing terms and conditions of employment and in collective agreements. There would be an increase in classification grievances. Within option (c) limited wage increases were recommended rather than wage freezes or wage reductions. It was believed that freezes or reductions could not be successfully negotiated. It was hoped that limited wage increases could be achieved through the collective bargaining process.[^29]

[23] Wage restraint was referred to in the Speech from the Throne delivered on November 19, 2008,[^30] proposed in the Economic and Fiscal Statement of November 27, 2008,[^31] confirmed in the budget tabled on January 27, 2009 (entitled: “Canada’s Economic Action Plan”)[^32] and found in the Expenditure Restraint Act as follows:[^33]

Despite any collective agreement, arbitral award or terms and conditions of employment to the contrary, but subject to the other provisions of this Act, the rates of pay for employees are to be increased, or are deemed to have been increased, as the case may be, by the following percentages for any 12-month period that begins during any of the following fiscal years:

• (a) the 2006–2007 fiscal year, 2.5%;

• (b) the 2007–2008 fiscal year, 2.3%;

• (c) the 2008–2009 fiscal year, 1.5%;

• (d) the 2009–2010 fiscal year, 1.5%; and

• (e) the 2010–2011 fiscal year, 1.5%.[^34]

It should be said that it was only with the introduction and passage of the legislation that the 2006-2007 fiscal year was included in the restraint period.

[24] The Expenditure Restraint Act prohibited the restructuring of pay rates ensuring the restraint.[^35] It prohibited any increase in the amount or rate of additional remuneration, including allowances, bonuses, differential, premium, lump sum or any payment to employees that was similar to such payments.[^36] It permitted the government to recover any amounts paid to employees in excess of the rates prescribed.[^37] Under its terms the Expenditure Restraint Act prevailed over any collective agreement or arbitral award made or entered into after it came into effect.[^38]

[25] Contrary to what had been proposed in the Economic and Fiscal Statement, the legislation did not remove or limit the right to strike.[^39] The Expenditure Restraint Act did not preclude the entitlement of any employee to incremental increases, including any based on the attainment of further qualifications or the acquisition of further skills. It did not affect merit or performance increases, in-range increases, performance bonuses or similar forms of compensation.[^40] For collective agreements that were entered into or arbitral awards that were made before December 8, 2008, the wage increase limits did not apply for the 2006-2007 and 2007-2008 fiscal years.[^41] There were exceptions made for four bargaining units.[^42]

[26] The Budget Implementation Act, 2009, which contains the Expenditure Restraint Act, was introduced in Parliament on February 6, 2009. It received Royal Assent on March 12, 2009.

THE EVOLUTION OF THE APPLICABLE LAW

[27] “Freedom of association” is one of four “fundamental freedoms” protected by s. 2 of the Canadian Charter of Rights and Freedoms:

Everyone has the following fundamental freedoms:

(d) freedom of association[^43]

[28] The understanding of the breadth and substance of this freedom has changed. This is particularly so where the right has touched on trade unions. In 1987, five years after the promulgation of the Charter, the Supreme Court of Canada dealt with three such cases. They were released simultaneously and became known as the “Labour Trilogy”. They took a narrow view of the right that was protected by s. 2 (d). Trade unions could be restricted in their right to bargain by wage controls.[^44] They could be denied the right to strike[^45] or, having gone on strike, could be ordered back to work[^46] all without infringing on the right protected by s. 2 (d) of the Charter. In 1990, in PIPSC v. NWT (Commissioner) the Supreme Court added that the freedom of association does not include the right to collective bargaining.[^47] In short there was little recognition that the freedom of association represented anything more that the right of persons to gather together in the effort to protect their individual rights. The association itself had no rights.

[29] In dissent Chief Justice Dickson did not accept this narrow description of the right:

There will, however, be occasions when no analogy involving individuals can be found for associational activity, or when a comparison between groups and individuals fails to capture the essence of a possible violation of associational rights…. The overarching consideration remains whether a legislative enactment or administrative action interferes with the freedom of persons to join and act with others in common pursuits. The legislative purpose which will render legislation invalid is the attempt to preclude associational conduct because of its concerted or associational nature.[^48]

[30] While acknowledging that when a collective was denied a right made available to individuals, it could be inferred that the intention of the legislature was to prohibit the collective activity, the reasons of Chief Justice Dickson proposed that this was not the only foundation for the freedom of association. Chief Justice Dickson introduced the possibility that the association could have rights of its own that were protected by the Charter.

[31] The signal that a broader perspective was in the offing came a decade later. Agricultural workers were excluded from the Ontario Labour Relations Act. As a result they were not protected against dismissal, or other reprisals, that could occur as a result of joining a union. Employers did not have to bargain with groups attempting to represent them and there was no right permitting them to strike. They sought recognition in the legislation. Without the protection it provided they were not able to associate and make collective representations to their employers. In Dunmore v. Ontario (Attorney-General)[^49] this was found to be unconstitutional. In some circumstances the freedom of association should be extended to protect activities that are inherently collective in nature. They cannot be exercised by individuals acting alone. Drawing on the dissent of Chief Justice Dickson in the Alberta Reference[^50] the court observed:

…[T]he collective is “qualitatively” distinct from the individual: individuals associate not simply because there is strength in numbers, but because communities can embody objectives that individuals cannot. For example, a “majority view” cannot be expressed by a lone individual, but a group of individuals can form a constituency and distill their views into a single platform. Indeed, this is the essential purpose of joining a political party, participating in a class action or certifying a trade union. To limit s. 2(d) to activities that are performable by individuals would, in my view, render futile these fundamental initiatives. At best, it would encourage s. 2(d) claimants to contrive individual analogs for inherently associational activities, a process which this Court clearly resisted in the labour trilogy…[^51]

[32] This case began the development of a broader understanding of the boundaries of the freedom of association. It signalled less deference to governments in the setting of labour relations policy. The province of Ontario responded to the decision in Dunmore v. Ontario (Attorney-General). It passed the Agricultural Employees Protection Act.[^52] This legislation extended a number of rights and protections associated with union membership to agricultural workers.[^53] Agricultural workers commenced a fresh challenge. They claimed their rights under s. 2 (d) continued to be impinged. The legislation did not include the duty to “bargain in good faith” (a requirement found in the Ontario Labour Relations Act[^54]) or the right to strike. It did not include mechanisms to resolve an impasse in bargaining. In Fraser v. Ontario (Attorney General)[^55] the application was dismissed. The court found that s. 2 (d) of the Charter did not encompass the right to strike or to bargain collectively.[^56] Before Fraser could proceed to the higher courts, the Supreme Court of Canada released another decision important to this evolution.[^57]

[33] Health Services and Support—Facilities Subsector Bargaining Assn. v. British Columbia[^58] is, if not seminal, an important case and one on which the applicant unions rely. The health care system in British Columbia faced challenges. The demand and cost had been increasing. The growth rate of health care costs was three times that of the provincial economy. The provincial government was struggling to provide health care services to its citizens. It characterized the state of affairs as a “crisis of sustainability” in the health care system.[^59] The province passed the Health and Social Services Delivery Improvement Act.[^60] This legislation substantially changed the relationship between the employees (union members) and the employers (hospitals and others designated by regulation including those receiving a substantial amount of funding from the Ministry of Health):

Only Part 2 of the Act is at issue in the current appeal (see Appendix). It introduced changes to transfers and multi-worksite assignment rights (ss. 4 and 5), contracting out (s. 6), the status of employees under contracting-out arrangements (s. 6), job security programs (ss. 7 and 8), and layoffs and bumping rights (s. 9).

Part 2 gave health care employers greater flexibility to organize their relations with their employees as they see fit, and in some cases, to do so in ways that would not have been permissible under existing collective agreements and without adhering to requirements of consultation and notice that would otherwise obtain. It invalidated important provisions of collective agreements then in force, and effectively precluded meaningful collective bargaining on a number of specific issues. Section 10 invalidated any part of a collective agreement, past or future, which was inconsistent with Part 2, and any collective agreement purporting to modify these restrictions. In the words of the Act, s. 10: ‘Part [2] prevails over collective agreements’….[^61]

[34] The Supreme Court of Canada set aside its own ruling in PIPSC v. NWT (Commissioner).[^62] There it had determined that s. 2 (d) of the Charter did not protect a right to bargain collectively. In Health Services the Supreme Court reconsidered the question. Building on Dunmore and the dissent of Chief Justice Dickson in Alberta Reference[^63] the court concluded:

The preceding discussion leads to the conclusion that s. 2 (d) should be understood as protecting the right of employees to associate for the purpose of advancing workplace goals through a process of collective bargaining.[^64]

[35] The parties were required to bargain in good faith:

...[T]he employees’ right to collective bargaining imposes corresponding duties on the employer. It requires both employer and employees to meet and to bargain in good faith, in the pursuit of a common goal of peaceful and productive accommodation.[^65]

[36] The right was to a process of collective bargaining but not to a particular bargaining model and not to a particular or desired result:

…[T]he right is to a process, it does not guarantee a certain substantive or economic outcome. Moreover, the right is to a general process of collective bargaining, not to a particular model of labour relations, nor to a specific bargaining method. …[^66]

[37] With the decision in Health Services the Supreme Court of Canada recognized that the freedom of association includes the right of a collective to gather together and to pursue its own, as opposed to only individual, goals.

[38] By the time Fraser proceeded to the Court of Appeal the decision in Health Services had been released. The Labour Trilogy had been reversed. The right to collective bargaining was protected. The issue was whether the Agricultural Employees Protection Act violated s. 2 (d) of the Charter by failing to provide agricultural workers with sufficient statutory protections to enable them to exercise their freedom to organize and their right to bargain collectively.[^67] The court concluded that the right to collective bargaining “…is not a hollow right….[It] is meant to support a meaningful process”:[^68]

At a minimum, the following statutory protections are required to enable agricultural workers to exercise their right to bargain collectively in a meaningful way: (1) a statutory duty to bargain in good faith; (2) statutory recognition of the principles of exclusivity and majoritarianism; and (3) a statutory mechanism for resolving bargaining impasses and disputes regarding the interpretation or administration of collective agreements.[^69]

[39] The Court of Appeal, relying on Health Services, attempted to clarify the substance of the right to collectively bargain.

[40] The case proceeded to the Supreme Court of Canada.[^70] The appeal was granted. The Court of Appeal had gone too far. In defining the minimum requirements of collective bargaining it had incorrectly understood Health Services to incorporate into the constitution “a full blown Wagner system of collective bargaining.”[^71] The Supreme Court confirmed that the right to collectively bargain “...does not guarantee a particular model of collective bargaining or a particular outcome.”[^72] The right that is protected by s. 2 (d) of the Charter “...is the right to associate to achieve collective goals”. The right to collective bargaining is not itself included in the freedom to associate; rather it derives from the need to ensure that government action does not make it impossible to achieve collective goals and thereby to trench on the freedom the Charter protects. “It is in this derivative sense that s. 2 (d) protects a right to collective bargaining”:[^73]

Health Services affirms a derivative right to collective bargaining, understood in the sense of a process that allows employees to make representations and have them considered in good faith by employers, who in turn must engage in a process of meaningful discussion.[^74]

[41] What these cases demonstrate is that at this point, in a difficult evolution, the freedom of association includes the freedom of the collective to act to achieve its goals. In the labour context, where those associational rights are impinged on, this includes as a derivative of the freedom to associate, the right to bargain collectively. It does not protect the right to bargain collectively independent of a breach of associational rights. It does not protect any right to a specific process or any steps or components that could be part of such a process. It does not include the right to a particular outcome. The right to bargain collectively comes into play where it protects against a breach of the freedom to associate that would otherwise occur. It is in those circumstances that employees must be able to make representations to the employers and the employers are obliged to consider them in good faith. They must engage in meaningful discussion.[^75]

THE PROCESS IN THIS CASE

(a) Introduction

[42] The process that ended with the passage of the Expenditure Restraint Act began with the speech made by the Minister of Finance on October 29, 2008. He indicated that responsible fiscal management included public sector compensation:[^76]

We all recognize that public sector employees work hard for Canadians, and that they must be adequately compensated. It is in the public interest that public sector compensation be determined responsibly in a manner that does not add to pressure on businesses that are already feeling the pinch of an economic slowdown.[^77]

[43] What was the process that led from the speech to collective agreements that included the wage rates contained in the Expenditure Restraint Act? To the applicant unions, the answer is straight forward. There was none. The wage rates for the years in question were imposed on them. To the extent that anyone spoke to them it was to tell them what the government had decided. There were bargaining units with contracts that would soon expire. They were told what the wage term of any new contract would be. To the extent there was any discussion there was no good faith consideration of any other option. For some bargaining units contracts that had already been made were changed (“rolled back”) without the opportunity to make any meaningful representations.

[44] The federal public service is made up of:

• the “core public administration” being the departments and agencies listed in Schedule I and IV of the Financial Administration Act,[^78]

• “separate agencies” listed in Schedule V of the Financial Administration Act, and

• other portions of the federal public administration designated by the Governor-in-Council.

[45] Treasury Board is the employer of the “core public administration”. On behalf of Treasury Board, the Treasury Board Secretariat[^79] negotiates the terms and conditions of employment with the applicable bargaining agents. Generally, the “separate agencies” conduct their own negotiations with the agents that represent their unionized employees. They receive their authority to sign a collective agreement from the Governor­-in-Council. Any agreement must be in accordance with mandates that are approved by the President of Treasury Board.[^80] The exception is the Canada Revenue Agency. It conducts its own negotiations. At the time it did so without any mandate imposed by Treasury Board.[^81] Crown corporations are responsible for their own human resource requirements and conduct their own collective bargaining.[^82]

(b) Core Public Administration

(i) PSAC

[46] It is worthwhile to observe that not all the bargaining units represented by these two unions share the complaint that their freedom of association or their derivative right to collectively bargain was breached. The PSAC represented five bargaining units in the core public administration.[^83] On October 31, 2008, two days after the speech given by the Minister, a senior representative of Treasury Board contacted the national president of the PSAC. Was it possible to initiate senior-level discussions in an attempt to reach collective agreements before the upcoming Economic and Fiscal Statement, expected in late November? The proposal was driven by the direction Treasury Board received from the Department of Finance that, in light of the deteriorating economy, its bargaining mandate would be reduced. PSAC agreed to meet. Initially a wage increase of 2% for each of the four years under discussion was offered by Treasury Board. On November 16, 2008, this offer was reduced to 1.5% per year. PSAC took issue with the change, at least insofar as it affected 2007-2008. On November 17, 2008, the representatives of Treasury Board advised that they had obtained a new mandate and amended the offer to 2.3% for 2007-2008. The economic increase in each subsequent year was limited to 1.5%.

[47] On November 18, 2008, Treasury Board issued a public statement that final offers had been sent to all federal public service bargaining agents. For the years to which it referred, the rates of pay in these offers were equal to those that had been proposed to PSAC the previous day. For those years these were the rates ultimately included in the Expenditure Restraint Act. At this time, the first mention was made of the government plan to introduce wage restraint legislation.

[48] The press release was inaccurate. PSAC had not been sent the offer. Nonetheless, PSAC accepted the proposed wage increase subject to the finalization of a separate issue relating to one of its five core public administration bargaining units.

[49] In the Speech from the Throne, on November 19, 2008, the government advised that legislation directed to public sector compensation would be forthcoming. Under the heading, “Ensuring Sound Management”, it said:

Our government is also committed to responsible fiscal management of public sector compensation, and will table legislation to ensure sustainable compensation growth in the federal Public Service.[^84]

[50] With one exception[^85] the core public administration bargaining units represented by PSAC reached collective agreements with Treasury Board on November 23, 2008.[^86] The next day PSAC issued a press release commending these tentative agreements.[^87] The agreements were ratified on January 23, 2009.[^88] The unit that stood apart sought additional remuneration. Wage rates were a key issue.[^89]

[51] The process of negotiation with this unit went back at least until April 27, 2007.[^90] By that day proposals dealing with matters other than pay had been exchanged. The employer’s pay proposal was tabled during bargaining sessions held April 28-30, 2008. It reflected pay increases of 1.5% for each of 2007-2008 and 2008-2009, and 1.2% for each of 2009-2010 and 2010-2011.[^91] These were below the levels that ultimately found their way into the Expenditure Restraint Act. By August 12, 2008, the negotiators for this bargaining unit had refused to sign off on matters agreed to at the “lead table”, something they had said they would do, and had not tabled a pay proposal. The Treasury Board Secretariat requested that a mediator be appointed.[^92] Mediation was held October 8-10, 2008 but there was little progress. The negotiators for the bargaining unit had still not tabled a pay proposal.[^93] Further negotiations took place from November 20-23, 2008.[^94] The bargaining unit advised it was seeking a wage increase of 13.5% to be effective June 22, 2011.[^95] The mediator canceled the previously scheduled December session. He did not believe any progress would be made.[^96] PSAC referred the matter to arbitration on November 27, 2008.[^97] The arbitration was held July 6 and 7, 2009, following the enactment of the Expenditure Restraint Act.[^98] For those years included in the restraint period, the increases requested were consistent with those provided in the Expenditure Restraint Act. For the year immediately following, PSAC sought an increase of 13.5%.[^99] An arbitral award was made on September 24, 2009. It applied the increases in rates of pay set out in the Expenditure Restraint Act. The arbitrator did not award the 13.5% sought for the additional year.[^100]

[52] It was submitted by counsel for PSAC that the success of the negotiations involving the four bargaining units demonstrate that where the government was prepared to bargain in good faith agreement was possible. The opposite could also be said. Where a bargaining unit insisted on wages beyond those proposed by the government an agreement was not possible.

(ii) Core Public Administration: PIPSC

[53] The negotiations between the core public administration bargaining units represented by PIPSC did not go as well. There were six such units.[^101] No collective agreements were made with respect to these units prior to the end of 2008. With one exception[^102] collective bargaining had begun in 2007. Four of the five that had been involved in negotiations received a pay proposal from the employer before October 2008; the fifth received a proposal at a bargaining session that took place on September 30, 2008 and October 1, 2008. They all got offers before the election (which took place on October 14, 2008) and before the paper outlining the options available to the government was commissioned by the Department of Finance.[^103] The offers for four of the five were all lower than the amounts that found their way into the Expenditure Restraint Act.[^104] For the fifth no numbers representing the offer appear to have been provided in the record before the court.[^105]

[54] Each of the five had multiple negotiating sessions.[^106] Prior to the Speech from the Throne on November 19, 2008, three of the five held mediations.[^107] No agreements were reached.

[55] Counsel for PIPSC made particular reference to one of the five bargaining units.[^108] The concern was that this unit had requested arbitration in April 2008. The arbitrator was agreed to in August or September 2008 and the arbitration took place between January 31, 2009 and February 2, 2009. This was before the Expenditure Restraint Act was introduced. While the Speech from the Throne, the final offer and the Economic and Fiscal Statement had made clear that the government would legislate wage restraints for the years from 2007 to 2011, the arbitration still proceeded because wages for the 2006-2007 fiscal year had not been agreed to and remained to be determined. The arbitration award was released on March 23, 2009. This was after the Expenditure Restraint Act had been passed extending the restraint period back an additional year. As counsel for PIPSC sees it, this is an example of the imposition of a restraint without notice and without any opportunity for the bargaining unit to respond. It should be said that, like the others, this bargaining unit had an ongoing process. Proposals had been exchanged on August 25, 2006. This included an exchange of pay proposals.[^109] The parties had had bargaining sessions in December 2006, January 2007, March 2007 and August 2007[^110] and mediations in December 2007 and March 2008.[^111] It bears observing that while the Award makes note of the passage of the legislation, this does not appear to be the rationale behind the refusal of the arbitrator to award the increases sought by the bargaining unit:

In sum, in the absence of cogent current data demonstrating significant recruitment and retention problem, this board has no statutory mandate to engage in either restructuring or economic increases aimed at avoiding speculative future recruitment and retention problems.[^112]

[56] The sixth bargaining unit[^113] is described by PIPSC as not having received a wage proposal by the time the government announced its intent to introduce wage restraint legislation.[^114] Counsel for the Attorney General acknowledged that “...the parties did not have the opportunity to discuss wages at length before the crisis hit...” and assesses this failure as attributable to the late start in the negotiations involving this bargaining unit.[^115] The final offer that was delivered, on November 18, 2008, was received by this bargaining unit. It took part in the process that continued.

[57] An effort was made to fast-track the negotiations between Treasury Board and the core public administration bargaining units represented by PIPSC. This “central table” negotiation took place from November 25- 27, 2008. It included the representatives for all of the core public administration bargaining units of PIPSC. One representative of PIPSC says that Treasury Board made clear that it was unable to agree to anything other than the wage increases in the “final offers” delivered on November 18, 2008. Accordingly: “The main stumbling block was Treasury Board’s refusal or inability to move beyond the wage increases contained in the final offer.” It is on this basis that this PIPSC representative says that: “We felt like the government had put a ‘legislative gun’ to our heads”. The principal problem was that the government would not move on the wage offer that had been made. The representative goes on:

[PIPSC] was attempting to engage the Employer in the normal ‘give and take’ of the collective bargaining process. Unfortunately, the Employer was not prepared or able to participate in this process. Despite amendments to the PIPSC counter-proposal, Treasury Board negotiators took the position on numerous occasions that they were unable to agree to anything other than the proposed wage increases set out in the final offers that had been delivered to PIPSC.[^116]

[58] The factum of PIPSC picks up on this and says: “While the Treasury Board had made concessions with a number of PSAC’s bargaining units, it refused to advance on any issues of long-standing concern to the [PIPSC].”[^117] This is a bald statement. None of the PSAC agreements, which it lauds, contained any provision with respect to wages other than what was found in the “final offers” and in the Expenditure Restraint Act. No examples of the “issues of long standing” or “simple non-monetary proposals” are provided.[^118] The Affidavit of another of the PIPSC representatives agrees that “...the negotiations fell apart as it was clear that Treasury Board was not prepared to offer anything other than the wage increases contained in its final offers” but also suggests that the first two days of the central table discussions “...were spent exchanging non-monetary proposals.”[^119]

[59] The material from the Attorney General provides more information.

[60] On November 25, 2008, PIPSC presented a counter-proposal to the employer that included terms regarding workforce adjustment, grievance procedure, pay administration, their harassment clause and proposed new clauses for dependant contractors and expedited adjudication. The proposal also included items of interest unique to each of the particular bargaining units.[^120] On November 26, 2008, PIPSC accepted the employer’s proposal on the duration of the collective agreement and economic increases. This proposal included numerous items of interest to the specific bargaining units.[^121]

[61] The parties were able to reach agreements on several issues including a one-time vacation leave entitlement, leave for labour relations matters, check-off clause, pay notes and the definition of a reasonable job offer and some language in relation to workforce adjustment.[^122]

[62] The central table negotiations continued on November 28, 2008. The parties reached agreement on a revised grievance procedure. The parties continued discussions on the inclusion of the terminable allowance in basic pay for one of the bargaining units[^123] after the central table, but in the end no agreement was reached.[^124]

[63] Despite the discussions reviewed and the agreements reached, PIPSC determined it had no interest in continuing with the negotiations. The Treasury Board Secretariat did extend the timeframe for concluding agreements, which had initially been set for November 27, 2008, to December 8, 2008.

[64] Nonetheless, as of that date no agreement had been finalized on behalf of any of the core public administration bargaining units represented by PIPSC.

[65] It is difficult to understand how it can be said that there was no process offered to the unions by the government. The issue remains whether the process is sufficient to satisfy the freedom of association protected by s. 2 (d) of the Charter. While more will be said about this later, for the moment, I note that the concern of the unions is that they were unable to engage the government in discussions about wage rates. That is the demonstration of the absence of a process on which they rely.

[66] On November 27, 2008, in concert with the release of the Economic and Fiscal Statement the Minister of Finance addressed the House of Commons. He made reference to the “unprecedented deterioration in economic and financial systems around the world”.[^125] He expressed concern for Canadian taxpayers and outlined a number of programs directed to reducing government spending. The Minister referred to the impact of the growth of public sector pay. In the speech he confirmed that legislation would be introduced and explained the restraint on wages that was being proposed:

We cannot ask Canadians to tighten their belts during tougher times without looking in the mirror. Canadians have a right to look to government as an example. We have a responsibility to show restraint and respect for their money...

Today our government is eliminating the $1.75 per vote taxpayer subsidy...

Our government expects to save over $15 billion over the next five fiscal years under the new expenditure management system...

As indicated in last week’s Speech from the Throne, the government is also introducing legislation to ensure predictability in federal public sector compensation. Our government values the contribution and hard work of our public servants. They must be fairly compensated for their work on behalf of Canadians. They must receive equitable compensation for the work they do on behalf of Canadians. We must bear in mind that their work is also paid for by Canadians.

We will introduce legislation to ensure that pay for the public sector grows only in line with what taxpayers can afford as the economy slows down. This legislation would put in place annual public service wage restraints of 2.3% for 2007-08 and 1.5% for each of the following three years. This restraint would also apply to members of Parliament, Senators, cabinet ministers and senior public servants. The legislation would also temporarily suspend the right to strike through 2010-11.[^126]

[67] This was restated in the Economic and Fiscal Statement released on the same day, November 27, 2008:

Responsible fiscal management also means that public sector wage increases must be affordable. Since the beginning of the year, wage growth in the public sector has been beating that of the private sector. The Government believes that more moderate growth in public sector compensation is appropriate in the current circumstances. Recognizing these circumstances, some of the largest public sector bargaining agents have shown leadership by signing tentative settlements that provide reasonable wage increases for their members and are affordable for the Government.

As indicated in the Speech from the Throne, the Government is introducing legislation to ensure predictability of federal public sector compensation during this difficult economic period.

The legislation puts in place annual wage increases for the federal public administration, including senior members of the public service as well as Members of Parliament, Cabinet Ministers and Senators, of 2.3 per cent in 2007-08 and 1.5 per cent for the following three years, for the groups in the process of bargaining for new agreements. For groups with collective agreements already covering 2008-09, the 1.5% would apply for the remainder of the three-year period starting at the anniversary date of the collective agreement. In addition, the legislation would suspend the right to strike on wages through 2010-11.[^127]

[68] The federal budget (Canada’s Economic Action Plan), tabled on January 27, 2009, set out the wage restraints that would be legislated across the federal public sector for the period between the 2006-2007 fiscal year and the 2010-2011 fiscal year. It will be evident that this pulled the restraint period back one year (2006-2007) from that referred to in the Economic and Fiscal Statement of November 27, 2008.[^128] The Expenditure Restraint Act was introduced and given first reading on February 6, 2009 and received Royal Assent on March 12, 2009.

[69] In the period following the presentation of the budget, each of the six core public administration bargaining units, represented by PIPSC, came to agreements with their employer. In two cases this occurred as a result of, or following mediation that took place after the Expenditure Restraint Act was in force,[^129] in one case the parties entered into an agreement after the legislation was in effect but following a mediation that had taken place in May 2008,[^130] in two cases the agreement followed an arbitration[^131] and in one case the parties came to their own agreement.[^132] Suffice it to say, in each case the wage rates were consistent with those found in the Expenditure Restraint Act.

(c) Separate Agencies

[70] The record with respect to separate agencies is not as clear. The position taken with respect to these employers is more general. Little was said about the specific treatment of the particular bargaining units. The unions hold to the position that the announcement of, commitment to and passage of wage restraint, without advice, consultation or any meaningful discussion were actions which breached their freedom of association. The government would not discuss or consider any change to the rates of pay announced in the Economic and Fiscal Statement of November 27, 2008 and incorporated into the Expenditure Restraint Act. The legislation foreclosed the process of collective bargaining. Employees were prohibited from bargaining increases to rates of pay above those set out in the legislation.

[71] For the government’s part, the Attorney General says that on November 13, 2008, the Secretary of Treasury Board and various officials from Treasury Board and the Secretariat met with heads of the separate agencies to discuss the financial crisis and its implication for the government.[^133] At these meetings, the Secretary advised the heads of these organizations that because the compensation reserve had been substantially reduced, they would be responsible for ensuring that measures were taken to meet new fiscal parameters. The separate agencies were encouraged to meet with the bargaining agents representing their employees.[^134] In the days following the tentative agreements between the core public administration bargaining units of PSAC and Treasury Board (November 23, 2008)[^135] the union negotiators were engaged in discussions with a number of other federal public sector employers.[^136] These negotiations intensified once the Economic and Fiscal Statement was tabled:

So what I know is that there were discussions that took place and once the fiscal update was tabled that there were discussions taking place across the entire spectrum of the public sector. We had negotiators talking to negotiators from separate agencies across the map, but the specific number I have no clue.[^137]

(i) PSAC

[72] The negotiations of each of these bargaining units were at different stages with many outstanding issues yet to be addressed. In some cases, the parties had yet to exchange an initial list of demands.[^138] Between November 24, 2008 and November 27, 2008, prior to the enactment of the Expenditure Restraint Act, all of the bargaining units in the separate agencies represented by PSAC, except the Canada Revenue Agency, had reached negotiated agreements consistent with the wage increase limits subsequently implemented in the legislation.[^139] The following agreements were reached:

(1) Parks Canada: PSAC represented one bargaining unit. PSAC negotiated a tentative agreement on November 25, 2008. It was signed on March 17, 2009. It covered the period from August 5, 2007 to August 4, 2011. PSAC issued a news release on February 13, 2009, indicating that this agreement “... contain[s] no concessions” and indicating that the union had achieved “significant breakthroughs” including a national rate of pay for the GL and GS classifications, and language relating to the use of contractors and consultants that would help avoid layoffs.[^140]

(2) Canadian Food Inspection Agency (CFIA): PSAC represented one bargaining unit. PSAC negotiated a tentative agreement on November 26, 2008, signed on May 5, 2009, and covering the period from January 1, 2008 to December 31, 2011.[^141]

(3) Canadian Security Intelligence Service (CSIS): PSAC represented one bargaining unit. PSAC reached an agreement on November 24, 2008, signed February 10, 2009, which covered the period from February 10, 2007 to February 9, 2012.[^142]

(4) Communications Security Establishment (CSE): PSAC represented all unionized workers. PSAC negotiated an agreement on November 26, 2008, signed May 10, 2009, which covered the period from February 10, 2008 to February 9, 2012.[^143]

(5) National Capital Commission (NCC): PSAC represented all unionized workers. PSAC negotiated an agreement on November 26, 2008, signed April 1, 2009, covering the period from January 1, 2008 to December 31, 2011.[^144]

(6) Office of the Superintendent of Financial Institutions (OSFI): PSAC represented one bargaining unit. PSAC negotiated an agreement on November 26, 2008, signed June 11, 2009, and covering the period from April 1, 2008 to March 31, 2011.[^145]

(7) Statistical Survey Operations (SSO): PSAC represented two bargaining units. PSAC was able to reach agreements on November 26, 2008, signed April 16, 2009, and covering the period from December 1, 2007 to November 30, 2011.[^146]

(8) Social Science and Humanities Research Council (SSHRC): PSAC represented two bargaining units. PSAC negotiated agreements on November 27, 2008, signed July 9, 2009, and covering the period from April 1, 2007 to March 31, 2011.[^147]

(9) Canadian Institutes of Health Research (CIHR): PSAC represented one bargaining unit. PSAC reached an agreement on November 27, 2008, covering the period from August 1, 2009 to July 31, 2011.[^148]

(10) Office of the Auditor General (OAG): PSAC represented two bargaining units. PSAC was able to negotiate agreements on November 26, 2008, signed April 3, 2009, which covered the period from April 1, 2007 to September 30, 2010.[^149]

[73] The evidence of the Attorney General suggested that PSAC represented one bargaining unit of the Canada Revenue Agency. Of the 36 bargaining units, within the separate agencies,[^150] this is the only one that was not, at the time, in negotiation.[^151] It had concluded a collective agreement. This agreement provided for increases of 2.5% per year, for each year, from 2007 to 2010. The increase for 2009-2010 was reduced to 1.5% as a result the enactment of the Expenditure Restraint Act. Contrary to the view expressed by counsel for the Attorney General, it seems that PSAC represented a second bargaining unit of the Canada Revenue Agency.[^152] The situation was the same. The parties had reached an agreement on October 24, 2007. It included increases of 2.5% for each of 2007, 2008 and 2009. The increase for 2009 was reduced to 1.5% as a result of the enactment of the Expenditure Restraint Act. This reduction introduces the second concern expressed by the applicant unions as demonstrating a breach of their freedom of association through a breach of their right to collectively bargain. An agreement bargained for and entered into was unilaterally amended such that a wage increase was “rolled back”.

[74] The second of the two bargaining units was relied on by PSAC as a demonstration of the absence of any process. The National President of the bargaining unit, upon being informed in mid-November of the pending legislation, became concerned that it could be used to reopen the collective agreement.[^153] Over the course of the following two weeks she spoke, on two occasions, to the Commissioner of the Canada Revenue Agency and expressed her concern. She was told the Commissioner had heard nothing but would advise her if he did. She sent him three emails. A copy of one of them was sent to the Assistant Commissioner who provided the same advice. The National President sent an email to the Prime Minister and a copy to the Minister of National Revenue.

[75] Parliament was prorogued following the government’s economic statement and prior to the legislation being introduced. On January 9, 2009, the National President again wrote to the Minister and, on January 14, 2009, to the Commissioner. She was given the same answer. He had heard nothing and would tell her if he did. On January 28, 2009, the day after the budget was delivered she wrote the Minister asking for clarification because the issue of rolling back wages had not been directly addressed. The National President said she “...was not informed of this matter until after the legislation in question was introduced.”[^154] This may be so but the email she sent to the Prime Minister said: “...[y]ou have indicated that your party plans to table legislation that...Rolls back negotiated and signed Collective Agreements...”[^155] She also said that, despite her efforts to raise the issue, the government did not consult with any representative of PSAC prior to introducing the legislation.[^156]

[76] PSAC represented two bargaining units at the Office of the Auditor General.[^157] One of the two applied for decertification which took place on December 1, 2010.[^158] The parties disagree on the reason for this. PSAC says that this occurred as a result of the legislation and the decision of Treasury Board to reject a number of previous agreements negotiated between the parties.[^159] The Attorney General relied on the Application for Revocation of Certification. It suggests something different. It says that the reason for the application was a lack of information, communication and cooperation on the part of PSAC.[^160] Nothing in these reasons will turn on this difference.

[77] In the end it would seem that the complaints of PSAC with respect to its representation of “separate agencies” is restricted to its representation of one bargaining unit of the Canada Revenue Agency and the one bargaining unit it continues to represent at the Office of the Auditor General. (The summary with which I was provided[^161] suggested there are two bargaining units of the latter agency involved. The record demonstrates that one has been decertified. The Attorney General says that they both came to negotiated agreements in November 2008.[^162] I am unable to explain what seems like an inconsistency. Nothing turns on it.)

(ii) PIPSC

[78] PIPSC represents 13 out of 36 bargaining units in separate agencies. Nine of those bargaining units reached negotiated agreements with their respective employers in November 2008. All agreements were consistent with the Expenditure Restraint Act. The remaining four bargaining units reached collective agreements or got an arbitral award over the course of 2009.[^163]

[79] One of the four was a bargaining unit within the Canada Revenue Agency. A tentative agreement was reached on March 4, 2009. It was rejected by the members of the bargaining unit. A new agreement was made on September 15, 2009. It was signed on November 6, 2009. Two affidavits of participants in the negotiations were included in the record: one by the “Chief Negotiator” involved on behalf of the Canada Revenue Agency[^164] and the other by the President of the Bargaining Unit who was also the Chair of its bargaining team.[^165] A review of these affidavits provides some insight as to why collective bargaining can be difficult.

[80] The parties first met on September 14, 2007. They exchanged proposals on non-salary items.[^166] The union representative deposed that, on that day, three subcommittees were struck.[^167]

[81] They met again on October 2 and 3, 2007, to further elaborate and discuss their proposals.[^168] The union representative says this meeting was not to include salary-related issues.[^169] The agency negotiator advised that the employer would not be in a position to respond to the bargaining agent’s proposal until all the bargaining unit demands, including the salary proposal, were known. A rough outline of what the salary proposal would likely include was provided by the union representative with a commitment to provide a comprehensive pay plan at a later date.[^170]

[82] The parties met again on November 27, 2007. This is the day the agency negotiator says the three subcommittees were put in place.[^171] The agency negotiator asked when the monetary package would be presented and was advised it would likely be in January 2008.[^172]

[83] The formal negotiations did not continue until April 1-3, 2008. The union representative indicated that their negotiating team was frustrated by the unwillingness of the Canada Revenue Agency to respond to critical issues of substance.[^173] He omits to mention, what he evidently knew, that the original Chief Negotiator for the Canada Revenue Agency had withdrawn for medical reasons. A new one had to be found and prepared. On March 4, 2008, the union representative had attended a meeting with the new Chief Negotiator, where the subject of the renewed negotiations was reviewed. The new Chief Negotiator was surprised when, during the April negotiations, the union expected the agency to respond to the demands that had been made.[^174]

[84] The parties met again in early May 2008. The union representative indicates that, at that time, the agency responded to most of the union’s non-salary-related proposals.[^175] During the afternoon of May 8, 2008, the union tabled its pay proposal for the first time.[^176]As the agency negotiator understood it, the proposal sought to cover a two-year period. The cumulative effect would have resulted in a 30% increase in the annual base salary of the bargaining unit. He says the union advised that the rationale for the economic demands would be provided at a later date.[^177] The union representative describes the proposal as representing annual monetary increases, the addition of accelerated increments, restructuring of pay rates for consistent 3% increments and the removal of increments at the bottom of the pay scales. He says the proposal included a lump sum payment and an adjustment to the basic pay level.[^178] Whether, taken together this amounts to 30%, over a two-year period, is something I cannot divine. In his affidavit the union representative does explain that the adjustment to the base salary was to compensate for salary freezes of the 1990’s which, he says, eroded salaries relative to the private sector.[^179] Whether this was said in the meeting is not clear and whether it represents an introduction to the rationale the agency negotiator was looking for is not apparent.

[85] The agency negotiator advises that, on May 28, 2008, the parties signed off on all the undisputed articles.[^180] The union representative says by that time there had been no real progress in bargaining and, as a result they requested the appointment of a mediator.[^181]The agency negotiator was, again, surprised. He says this was premature given the progress that had been achieved for this stage of the negotiations. He notes that the union had still not presented its rationale for its economic demands.[^182]

[86] A mediator was appointed. The mediation commenced on September 23-25, 2008. The agency negotiator says that on September 25, 2008, the union provided the rationale for its pay proposal.[^183] The mediation continued on November 18, 2008. The union representative says that the agency negotiator had promised to respond to all outstanding issues but did not present a pay offer and that no progress was made on any issues.[^184] The agency negotiator says that, at that time, the parties agreed that there were a few issues which were not contentious and could be addressed.[^185]

[87] On November 19, 2008, the agency negotiator presented a final offer. The wage increases were consistent with the final offers that had been sent to other union bargaining agents and with what was subsequently included in the Expenditure Restraint Act.[^186] The agency negotiator says he never received a formal response. He was advised that the offer was rejected when he saw a posting on the bargaining unit website with a picture of its president tearing up the offer.[^187] For his part the union representative (the President of the bargaining unit) says the bargaining team considered the offer insulting.[^188]

[88] On November 24, 2008, the PIPSC filed 17 bad faith bargaining complaints including one against the Canada Revenue Agency.[^189] The union representative says that sometime between November 25 and November 27, 2008 he advised a representative of the Canada Revenue Agency that the bargaining unit was willing to return to negotiations if the monetary, as well as non-monetary issues, would be discussed. He was told that the final offer could not be changed. He understood that the Canada Revenue Agency was bound by the proposed wage restraint legislation.[^190]

[89] During February 2009 discussions recommenced. On March 4, 2009, which is to say after the Expenditure Restraint Act was passed, the first tentative agreement was arrived at. This is the one that was rejected.[^191] The parties continued on until the second tentative agreement was made and ratified.

[90] With this history in mind it is not difficult to see why those representing the government proposed expedited proceedings and why, given its concern for what it accepted was an economic crisis that demanded action, it considered utilizing legislation. Whether all of this demonstrates a breach of the freedom to associate is something that will come later in these reasons.

[91] The complaints of PIPSC include all thirteen of the “separate agencies” it represents. They all entered into agreements but, as they see it, under circumstances where there was an absence of proper collective bargaining and a breach of their freedom of association.

(d) Crown Corporations

[92] Crown corporations to which the Expenditure Restraint Act applies are listed in Schedule 1 to that legislation.[^192] The applicant unions take the same position with respect to these employers as they did in dealing with the separate agencies. The enactment and reliance on the legislation prevented collective bargaining and denied the members of the affected bargaining units their right to it. Even less was said about the specific treatment of the particular bargaining units.

[93] On November 17, 2008, the Secretary of Treasury Board, the Associate Secretary and the Assistant Secretary of Expenditure Management met with the heads of the Crown corporations to discuss the direction the government would be taking as a result of the financial crisis. Like the separate agencies, Crown corporations were encouraged to meet with the bargaining agents representing their employees.[^193]

(i) PSAC

[94] PSAC represented ten bargaining units at Crown corporations.[^194] Four have complaints arising from a rollback of wages that were part of collective agreements made in advance of the economic downturn being taken into account as part of the negotiations:

• The Canada Council for the Arts had negotiated a five-year contract with one of its bargaining units. It had been signed on October 16, 2006 and included increases of 2.5% for both the 2009 and 2010 fiscal years. The restraint measures reduced these agreed wage increases to 1.5%.[^195]

• The National Arts Centre had negotiated agreements with two of its bargaining units. Both were signed on August 7, 2008. The first provided for 2.5% increases for both the 2009 and 2010 fiscal years. These were reduced to 1.5% by the Expenditure Restraint Act. The second provided for an increase of 2.5% for the 2009 fiscal year. This was cut to 1.5% as a result of the passage of the legislation.[^196]

• The Museum of Nature had negotiated a collective agreement which was signed on November 10, 2006. It included a 2% increase for the 2009 fiscal year. This increase was reduced to 1.5%.[^197]

• The National Gallery of Canada had agreed to a four-year contract which included a 2.5% wage increase for the 2009 fiscal year. The restraint measures reduced this agreed upon increase to 1.5%.[^198]

[95] The rollback provisions in the Expenditure Restraint Act required affected employers to recover any wages in excess of those allowed that had already been paid out to employees as part of the implementation of their collective agreements.[^199]

[96] There are two other bargaining units made up of employees working at Crown corporations represented by PSAC and included in the complaints it is making. One represents employees at the Museum of Civilization and War and the other employees at the Museum of Science and Technology.

(ii) PIPSC

[97] PIPSC represented five bargaining units at Crown corporations.[^200] Two of the five had reached agreements in advance of the economic downturn being taken into account as part of the negotiations:

• The Canadian Commercial Corporation had reached an agreement in November 2007. It was signed on February 25, 2008. The wage increases agreed to were 2.9% for each of the 2009-2010 and 2010-2011 fiscal years. The restraint measures reduced these agreed wage increases to 1.5%.[^201]

• The Canadian Museum of Nature had reached an agreement covering the period from October 1, 2006 to September 30, 2010. The copy in the record was signed on January 18, 2010, although it was said to have been made in 2006. It was treated by the parties on the basis that the agreement was made prior to December 8, 2008. The increase for 2009-2010, agreed to be 2.5%, was reduced to 1.5% as result of the coming into force of the Expenditure Restraint Act.[^202]

[98] There are three other bargaining units made up of employees working at Crown corporations represented by PIPSC and included in the complaint it is making. One represents employees at the Canadian Museum of Civilization, the second represents employees at the Canadian Tourism Commission and the third represents employees at the Museum of Science and the National Gallery of Canada.

(e) Senate and House of Commons

[99] The Expenditure Restraint Act includes as employees those employed by the Senate and the House of Commons and a variety of associated staff and offices.[^203]

(i) PSAC

[100] PSAC represents three bargaining units of employees of the Senate or House of Commons that are referred to in the summary page provided by its counsel. They are included in the complaint.

(ii) PIPSC

[101] PIPSC represents a bargaining unit made of employees of the House of Commons and another made up of employees of the Senate. They are included in the complaint.

(f) The Complaint

[102] The complaint is that by adopting the wage restraints found in the Expenditure Restraint Act, without any meaningful discussion, the federal government has denied the unions the right to advance the goals of their association. This has breached their freedom of association as protected by s. 2 (d) of the Charter of Rights and Freedoms. The impact manifests itself in three ways reflective of the past, the present and the future:

1. the past: Collective agreements that were made following proper collective bargaining were reopened and the wage rates that had been agreed to were unilaterally altered without consultation or discussion. Wage terms were “rolled back”.

2. the present: Negotiations that were ongoing at the time the government moved to restrain wages were interrupted. The terms concerning pay including limiting increases, prohibiting restructuring and the introduction of “additional remuneration” were imposed without hearing or considering representations made on behalf of the association.

3. the future: It was proposed that the impact of the Expenditure Restraint Act will go on after the restraint period ends. The legislation says that no collective agreement made after it comes into effect can compensate for the wages not received as a result of the restraint. In this way the effect of restraint will never be corrected. It will go on forever.[^204]

ANALYSIS

[103] The position taken on behalf of the two unions is founded on the proposition that the freedom of association includes the absolute right to collective bargaining. If your right to bargain collectively is breached your freedom of association is denied. To take this position they rely on Health Services. In doing this they fail to give due regard to Fraser. In response to the ruling from the Court of Appeal, the Supreme Court of Canada refined what can be taken from Health Services. The right to bargain collectively is not absolute; it is derivative.

[104] The fundamental, if obvious, limit to the freedom of association is that it is only associational rights that are protected. If four friends want to play golf and are refused because they wish to play together, when everyone else is permitted to play, it is their notional right to associate that is being breached. On the other hand if the four friends cannot play together because playing golf is forbidden to everyone, the attack is not on the association but on the right of any individual to play golf.[^205]

[105] How does that affect this case?

[106] The actions taken by, or on behalf of, the government were not pointed solely at the members of these or any unions. It is the federal public sector as a whole that was the subject of the wage restraint that was put in place.[^206]

[107] In his speech on October 29, 2008, the Minister of Finance recognized the contribution of all public sector employees not just those who belong to unions. It was compensation for the entire public sector that required responsible determination.[^207]

[108] The Speech from the Throne, delivered on November 19, 2008, referred to the responsible fiscal management of public sector compensation. It was not restricted to the pay packages of union members. The legislation to be tabled was to ensure sustainable growth, in compensation, in all of the federal public service.[^208]

[109] In his speech, to the House of Commons, that accompanied the Economic and Fiscal Statement, on November 27, 2008, the Minister of Finance indicated that the legislation to be introduced would address the compensation of the “federal public sector” and “our public servants”. There was no reference to unions or union members. Rather the speech made clear that the impact of the legislation was to apply more broadly (“members of Parliament, senators, cabinet ministers and senior public servants”).[^209]

[110] The Economic and Fiscal Statement repeats this. It describes the legislation as limiting increases in the compensation of the “federal public administration”. The Statement acknowledges the leadership of “some of the largest public sector bargaining agents”. This is leadership of the public sector, all of it, not only those employees that are part of a union. It reflects how the restraints will work for those who are subject to a collective agreement (“For those with collective agreements...”). This demonstrates the restraints will apply to those whose employment is covered by a collective agreement as well as others.[^210]

[111] Only three pages of the federal budget (“Canada’s Economic Action Plan, Budget 2009”) were included in the record.[^211] Nonetheless, there is evidence that it set out the wage restraints that would be legislated across the federal public sector [the emphasis is mine].[^212]

[112] The Expenditure Restraint Act is part of the Budget Implementation Act.[^213] It applies to employees who are employed by those parts of the federal public administration named in Schedules I and IV to the Financial Administration Act and to the separate agencies named in Schedule V.[^214] These Schedules list departments of the government (Schedule I), boards, agencies, tribunals and commissions that represent “[p]ortions of the core public administration” (Schedule IV) and separate agencies (Schedule V). The Expenditure Restraint Act also applies to the employees of Crown corporations and public bodies named in its own Schedule 1. These Schedules are lists of employers. The Expenditure Restraint Act applies to all their employees not only those who belong to a union. It also applies to employees of the Senate and the House of Commons, as well as members of both houses of Parliament and their staffs, the Library of Parliament, the office of the Senate Ethics Officer and the office of the Conflict of Interest and Ethics Commissioner.[^215]

[113] The section of the Expenditure Restraint Act which outlines the effective increases to rates of pay (s. 16) indicates what the increase will be for each year in the restraint period and makes clear they will apply “despite any collective agreement...” These rates of pay are to apply to union members as well as all the other employees of the federal public service. The legislation applies to Members of Parliament much as it does to others. For the fiscal year 2009-2010 their increase is limited, as it is for all employees, to 1.5%. For the following three years, which is to say up to two years after the end of the restraint period they are to receive no increases.[^216]

[114] The Attorney General refers to the Expenditure Restraint Act as applying to “virtually all individuals paid salaries by the federal government”[^217] and to “almost all employees in the federal public service: unionized employees, non-unionized employees, [Governor-in-Council] appointees and elected officials.”[^218] During his cross-examination of the Senior Vice-President, Policy Branch of the Public Service Commission, counsel for PIPSC reviewed some numbers which, though incomplete, present a partial comparison of the number of unionized employees in relation to the total of all federal public service employees:

• In the Core Public Administration and the separate agencies there are 226,500 unionized employees, out of a total of 275,300.

• The RCMP is included as employees under the Expenditure Restraint Act.[^219] The RCMP has a process of collective bargaining. If the RCMP is added to the “unionized employees”, because whatever protection s. 2 (d) of the Charter offers to collective bargaining extends to it,[^220] there would be 250,100 “unionized employees” out of a total of 298,900.

• The Expenditure Restraint Act applies to the officers and non-commissioned members of the Canadian Forces.[^221] They do not have a right to collective bargaining. If they are added there would be 250,100 “unionized employees” out of a total of 392,500.[^222]

[115] No reference was made to the employees of Crown corporations, to the members of the Senate or the House of Commons, their staffs, or the associated agencies referred to in the Expenditure Restraint Act. I cannot say how these additional employees would affect this relationship.[^223] What is clear is that the Expenditure Restraint Act applies to, and affects the wages of, many more than just unionized employees. To put it another way, I do not accept the proposition that the federal public service is “overwhelmingly unionized”.[^224]

[116] This is not like Health Services where the legislation at issue was directed solely at unionized health sector employees and their collective agreements. In that case the targeted activity was the associational activity of the unions. Here the impugned limits on the increase to wages apply to a broad spectrum of employees of the federal public sector: unionized employees, non-unionized employees, Governor-in-Council appointees and elected officials. What is targeted is not the associational activity but across the board increases in wages.

[117] The error in the submissions of the union is that they conflate the right to collectively bargain into the freedom of association. They mistake the former as included in the latter. This is the same analysis made by the Court of Appeal in Fraser. It was rejected by the Supreme Court of Canada. The submission ignores the injunction that the right to collectively bargain is a derivative right. It only arises, as a right, if the freedom of association would otherwise be impinged on.

[118] This is made clear in Mounted Police Association of Ontario v. Canada (Attorney General). [^225] It considered the freedom of association of members of the RCMP. The question was whether they were denied the freedom because the applicable legislation prescribed a model of collective bargaining that did not allow for their chosen representatives to take part. The Court of Appeal reviewed the concept of “derivative rights”. It began with Ontario (Public Safety and Security) v. Criminal Lawyers’ Association[^226] where the court “...introduces the term ‘derivative right’ to Charter jurisprudence.”[^227] This was in the context of the freedom of expression. In Mounted Police Association of Ontario v. Canada (Attorney General) the court said that:

...[I]t is clear that a derivative right to disclosure of information is not a “stand alone” right. Instead, the right arises only in circumstances where it is a “necessary precondition” to the exercise of the fundamental freedom itself. McLachlin C.J.C. and Abella J. describe the derivative right, in para. 30, as one that “may arise”.[^228]

[119] In Fraser (and before it Dunmore) other workers were able to act together; only agricultural workers were not. It was the association, not their individual interests, that was attacked by the actions of the Government of Ontario. The same is not true here.

[120] In this case associational rights were not breached. The impact of the impugned government action was not directed at the association but at all employees of the federal public service as defined in the Expenditure Restraint Act. There is no impact on the association that can be distinguished from the effect the legislation has had on others. To return to the analogy with which this analysis began: the government wanted to stop “almost all [federal] employees” from playing golf (getting increases beyond those found in the Expenditure Restraint Act). The unions want this treated as if the prohibition is directed solely at their desire to collectively bargain.

[121] On this alone the application must fail.

[122] There is another reason why the understanding that any right to collective bargaining is derivative, and not absolute, is determinative of the issues in this case.

[123] Section 2 (d) protects against “substantial interference” with associational activity:

. .. It protects only against “substantial interference” with associational activity, in accordance with a test crafted in Dunmore by Bastarache J., which asked whether “excluding agricultural workers from a statutory labour relations regime, without expressly or intentionally prohibiting association, [can] constitute a substantial interference with freedom of association” (para. 23)....[^229]

and

This observation about how “qualitatively” different activities exist was aimed at explaining why certain activities which did not have an individual analogue must be protected in order to protect the freedom to form an association. The disposition in Dunmore turned on whether the lack of protection for agricultural employees was a “substantial interference”.[^230]

[124] It is the freedom of association to which the test of “substantial interference” applies. In Fraser, Dunmore and Health Services, “substantial interference” is referred to in relation to collective bargaining.[^231] This is because in those cases reliance on the derivative right arose. In Dunmore and Fraser no association was possible. In Dunmore, this was a result of the exclusion of agricultural workers from the applicable legislation and in Fraser, because with the new legislation, the employers refused to engage in even the most rudimentary discussions with their employees.[^232] In Health Services the legislation at issue was directed at the unions and undermined the fundamental nature of their relationship with the employers. This should not detract from the proposition that it is not the substantial interference with the right to collective bargaining per se but the interference with the freedom of association that is the issue.

[125] In Fraser the Supreme Court of Canada equated “substantial interference” with associational activities to the “substantial impossibility” or “impossibility” of pursuing collective goals:

....[L]egislation (or the absence of a legislative framework) that makes achievement of this collective goal substantially impossible, constitutes a limit on the exercise of freedom of association.[^233]

and

The effect of a process that renders impossible the meaningful pursuit of collective goals is to substantially interfere with the exercise of the right to free association, in that it negates the very purpose of the association and renders it effectively useless.[^234]

[Emphasis in the original].

[126] The unions point out that care should be taken in applying any standard that is founded on the idea that something is “impossible”:

In his submissions in Fraser, the Respondent repeatedly emphasized the word “impossible”, arguing that it creates an overall threshold. In my opinion, the Respondent’s focus in this regard is too narrow.

The word “impossible” must be taken in the context of other words such as “meaningfully” and “effectively”, and the phrase “good faith”. If legislation makes it possible for employees to make collective representations that are ineffective or not meaningful, or if representations are possible but government action demonstrates a lack of good faith, a breach of subsection 2(d) of the Charter will still have occurred.

In my opinion, the Supreme Court’s use of the word impossibility does not constitute a paramount consideration or a threshold. Rather, it is part of the overall test set out and applied in Fraser.[^235]

[127] The impact of the analysis is that where there has been no substantial interference in the freedom of association (where the pursuit of collective goals has not been rendered “effectively impossible”), the derivative right to collective bargaining does not arise:

Second, “collective bargaining” under s. 2(d) is a derivative right. A government employer is obligated to engage in “collective bargaining” under s. 2(d) only when the employees are able to claim the derivative right under s. 2(d). They are able to claim that derivative right upon showing that the exercise of the fundamental freedom of association is “effectively impossible”. Only where the “core protection of s. 2(d) . . . to act in association with others to pursue common objectives and goals” (Fraser, at para. 25) cannot be meaningfully exercised does the derivative right arise. As s. 2(d) does not constitutionalize minority unions, the test of “effective impossibility” is applied to the workers at large and not to any particular combination of workers.[^236]

[128] The question becomes whether, independent of any prospective right to collective bargaining, there has been “substantial interference” with the freedom of association. In this case, that issue becomes whether imposing, through legislation, a rolling back of wage increases for one, or in some cases two years by 1%[^237] or holding back prospective increases by .3% for the 2006-2007 fiscal year, .5 % for the 2007-2008 fiscal year and 1.3% for each of the remaining three years of the restraint period constitutes “substantial interference” with the freedom of association.[^238] The fundamental premise of the submissions made by the unions was that the right to collective bargaining was an absolute right included in the freedom of association. The submissions with respect to whether there was substantial interference dealt with the perceived lack of a proper process of collective bargaining. To my mind the demonstrated interference (the 1% rollback or the notional .3%, .5% and 1.3% reductions) set in the context of an economic crisis, requiring the government to respond quickly, is not so substantial that it renders the freedom of association “substantially or effectively impossible” however those terms are defined. On this understanding the derivative right to collective bargaining would not arise and, based on the absence of “substantial interference” the applications would be dismissed.

[129] Before going further it seems appropriate to give some thought to the impact of what the unions are proposing. They suggest there is an absolute right to collective bargaining. This suggests that even in a crisis, if some policy or other government action otherwise applicable to all Canadians touches on their collective goals, the policy could not be implemented or the action taken, at least insofar as the union members are concerned, without the completion of a full process of collective bargaining.

[130] In this case the single PSAC bargaining unit, belonging to the core public administration that did not come to an agreement consistent with the wage increases imposed by the Expenditure Restraint Act, sought an increase of 13.5%.[^239] The PIPSC bargaining unit from the Canadian Revenue Agency, as understood by the government, asked for an increase over two years that totalled 30%.[^240] Both units took part in lengthy, if unsatisfactory negotiations. In both there was an impasse. They requested arbitration.

[131] As the Expenditure Restraint Act requires, the arbitrators awarded the increases permitted by the legislation. The PSAC unit attempted to use the arbitration to overcome the impact of the restraint period by seeking an award of the 13.5% increase in the year following the end of the restraint period. The arbitrator refused.

[132] It is the position of the unions that absent the right of the negotiators to agree to, and arbitrators to impose, increases beyond those in the Expenditure Restraint Act their freedom of association was breached. What this means is that where a collective agreement is affected the legislature is to be by-passed in favour of a collective bargaining process. This introduces what was referred to in the opening paragraphs of these reasons as the underlying issue in this case: the limits on the ability of the government to act, in the face of a crisis, given the freedom of association.[^241] The true substance of the complaint is the inability of the unions to change the result.

[133] This is inconsistent with what the Supreme Court of Canada said in Fraser. The ruling of the Court of Appeal was that the right to collective bargaining included “...a statutory mechanism for resolving bargaining impasses...”.[^242] The Supreme Court of Canada rejected the idea that there is a right to a dispute resolution mechanism:

Further negotiation may be possible after the constitutionally protected phase of the process of bargaining has concluded but that possibility, a remote one on the facts of this case, does not expand the scope of the protected right. Fraser makes clear that s. 2 (d) has limits: it does not guarantee any dispute resolution process after the parties have reached an impasse and it does not guarantee any particular outcome.[^243]

[134] There is no right to a collective agreement based on the collective bargaining process:

Rothstein J. argues that the distinction drawn in Health Services between substantive and procedural rights is unworkable. Again, we must disagree. In our colleague’s view, the procedural right to collective activity under 2 (d) would impinge on the substantive right to a concluded collective agreement rejected in Health Services. However, substantive impact does not invalidate a procedural right. All procedures affect outcomes, but that does not mean that all procedural rights are unworkable. The Charter may protect collective bargaining and not the fruits of that process.[^244]

[135] If I am wrong and, in this case, any right of the unions to bargain collectively arose, the question remains whether the process that took place satisfied or trenched on the fundamental freedom to associate.

[136] In considering whether the supposed right to collective bargaining has been breached, the applicable analytical approach is found in Health Services. The Supreme Court of Canada established a two-part test to determine whether the right to collective bargaining has been substantially interfered with:

• First, how important is the matter affected to the collective bargaining process and capacity of union members to come together and pursue collective goals;

• Second, is the manner in which the measure impacts the collective right to good faith negotiations?[^245]

[137] I begin by repeating that: “The inquiry in every case is contextual and fact-specific.”[^246] The context in which the events took place is important to any consideration of the adequacy of the process. It should be borne in mind as the inquiry starts.

[138] For the purposes of this application, the context reflects the economic concerns of the time. It is difficult to conceive that the government could have ignored or failed to respond to the economic downturn. As noted at the outset of these reasons, it was regarded as the most serious recession since the 1930’s. In considering the context, factors to be taken into account include: (a) the unprecedented nature of the financial crisis, (b) the rapid decline of the economy and (c) the potential for serious impacts on all Canadians. The government saw it as a crisis in the economy.

[139] I turn to the two questions to be asked in considering whether the right to collective bargaining has been substantially interfered with. The substance of the first question has been explained:

Turning to the first inquiry, the essential question is whether the subject matter of a particular instance of collective-bargaining is such that interfering with the bargaining over that issue will affect the ability of unions to pursue common goals collectively...

[140] and, further in the same paragraph:

...Interference with collective-bargaining over matters of lesser importance to the union and its capacity to pursue collective goals in concert may be of some significance to workers. However, interference with collective-bargaining over these less important matters is more likely to fall short of discouraging the capacity of union members to come together and pursue common goals in concert. Therefore, if the subject matter is of lesser importance to the union it is less likely that the s. 2 (d) right to bargain collectively is infringed. The importance of an issue to the union and its members is not itself determinative...[^247]

[141] The matter in this case is compensation. It is the position of the unions that the Expenditure Restraint Act undermined the essential integrity of the collective bargaining process. It eliminated their right to collectively bargain compensation for five years. As the unions see it, wages are central to all collective agreements and are of fundamental importance to the working lives of wage labourers. Wages are a key to leverage in negotiations with an employer. A union may leverage a lower wage proposal in exchange for some other benefit to bargaining unit members. By taking “wages off the table”, the Expenditure Restraint Act prevented union members from bargaining a defining term of their employment contract.[^248]

[142] PIPSC goes so far as to suggest that: “There can be no doubt that the [Expenditure Restraint Act] falls afoul of the first inquiry on substantial interference with freedom of association.”[^249] The argument appears to be that the Expenditure Restraint Act addresses wages and ipso facto substantially interferes with collective bargaining. The situation is not as clear as this suggests.

[143] It is not a given that wages are intrinsically at the centre of every collective bargain. When giving evidence in support of a bad faith bargaining complaint that arose in the context of these negotiations a negotiator for PIPSC told the Public Service Labour Relations Board that:

...[M]oney was not a key issue in the negotiations, although it was important. He testified that this was clearly expressed to the employer. The key issues for the PIPSC included career development, job security and contracting out.[^250]

[144] The Director General of the Labor Relations and Compensation Directorate at the Canada Border Services Agency, at the same hearing testified that:

...[S]ome of the employer’s key objectives in the round of bargaining were a different minimum for callback pay, limitations on reimbursements for travel while on overtime and the electronic format for the collective agreement as the default form of distribution.[^251]

[145] The approach the unions take begins with the announcement of the actual increases to be imposed by legislation. This took place with the publication of the “final offers” on November 18, 2008. It was confirmed on November 27, 2008, with the release of the Economic and Fiscal Statement. It is on this basis that the unions say that wages were “taken off the table”. This ignores what happened earlier. To put it differently, it ignores the overall context in which these events took place. Negotiations had been going on for some time. In some cases they began as early as 2006; in most during 2007.

[146] Association of Justice Counsel v. Attorney General of Canada[^252] considered whether, in the face of the Expenditure Restraint Act, the right of a group of government lawyers to bargain collectively had been breached causing their rights under s. 2 (d) of the Charter to be denied. The legislation “took wages off the table” but that, standing alone, did not amount to an infringement of s. 2 (d). You have to look further to see if there was a meaningful process:

...[T]he validity of the Expenditure Restraint Act must be assessed on the basis of whether, at the time it was enacted, the parties had had the opportunity for a meaningful process of collective bargaining.[^253]

[Emphasis added].

[147] In this case, as late as November 16, 2008, the PSAC expressed concern when the offer for 2007-2008 was reduced to 1.5%. The next day it was raised to 2.3%.[^254] The one PSAC unit, in the core public administration, that did not come to an agreement before the legislation was passed had received a pay proposal in April 2008. For three of the four years it included, the offer was less than the increases found in the Expenditure Restraint Act.[^255] For five of the six core public administration bargaining units represented by PIPSC, negotiations had been ongoing for over one year. Pay proposals had been exchanged. There was a succession of sessions set aside to bargain. For four of these bargaining units the increases in the Expenditures Restraint Act were more than was in the earlier proposals. For the fifth no numbers were provided in the record.[^256]

[148] It may be that the ability to deal with wages was constrained by the context of the times but they were not finally determined until the final offers were received on November 18, 2008. These final offers and the bargaining sessions that took place indicate a meaningful process in the face of a significant economic downturn. Ultimately, when confronted with a crisis, ongoing processes have to be brought to a conclusion.

[149] Insofar as leverage is concerned it is not that accommodation was not made to the bargaining units as negotiations went on. When the PSAC entered into the agreements it made with respect to four of the five bargaining core public administration units it acted for, it publicized the results through press releases which made clear that the bargaining was difficult, that as a result of the economic circumstances expectations were adjusted and that the negotiations were successful. Significant improvements were negotiated in a number of areas of long-standing concern to the membership.[^257]

[150] The core public administration bargaining units, represented by PIPSC, received benefit improvements that were negotiated despite the fact that no agreements were entered into prior to the Economic and Fiscal Statement that made public the wage limitations that were to be included in the Expenditure Restraint Act .[^258] This included the bargaining unit that only received the final offer made on November 18, 2008.[^259]

[151] There were five bargaining units that received exceptions on account of their specific circumstances. These exemptions enabled these groups to receive compensation significantly in excess of the limits imposed by the Expenditure Restraint Act, as follows:

• Border Services group: it was allowed to adopt a new wage grid, including a minimum across-the-board increase of 19.5% for Border Services Officers over a four-year agreement.[^260]

• Operational Services group: it was allowed to adopt a national rate of pay which effectively increased the average pay for the group by 6.8% in addition to the wage increases set out in the legislation.[^261]

• Ships’ Officer group: it was allowed to retain wage restructuring and sums in lieu of vacation leave in excess of the limits found in the legislation.[^262]

• RCMP: its members were allowed to obtain adjustments to service pay.[^263]

• The Law Bargaining group: it required an exemption to allow for the harmonization of the pay structure and other terms and conditions of employment for its members.[^264]

[152] The right to strike which was proposed to be removed was retained.[^265]

[153] All of this is indicative of a meaningful process. The unions did not get a result they found satisfactory but the process responded to some of their concerns. The fact that wages were “taken off the table” was not used by the government to freeze every other component of the negotiations. The problem for the unions is that they believe they could have gotten more if the process had been allowed to run its course; in particular, they could have received higher wages. This suggests that it is not the process that is at the root of their concern, it is the result. What Fraser makes clear is that whatever it is that receives protection under s. 2 (d), it is not the guarantee of a result.[^266] In the context of this case wages were not central to the process. They were not so important that fixing the increases substantially interfered with the freedom of association.

[154] This is underscored by the decision of the Court of Appeal of British Columbia in Federal Government Dockyard Trades and Labour Council v. Canada (Attorney General).[^267] A bargaining agent and Treasury Board were unable to come to an agreement. There was an unsuccessful mediation. An arbitration took place in December 2008. The award of the arbitrator was released on January 20, 2009, before the Expenditure Restraint Act was introduced in Parliament. The award included an increase in wages of 5.2%, effective as of October 2006, and allowed and provided for wage increases for 2006 through 2009 that were within the limits subsequently imposed by the legislation. Because the award was made after December 8, 2008,[^268] the increase of 5.2% remained in excess of what the Expenditure Restraint Act allowed. The legislation nullified that part of the award. The bargaining agent challenged the legislation saying it was an impermissible infringement of its freedom of association. The Court of Appeal made the following statements:

My conclusion that the arbitration source of the nullified term is of no import to the question of a s. 2(d) breach in this case, does not mean, however, that the Act infringes s. 2(d). The question is whether the Act can reasonably be seen as impermissibly preventing the protected associational activity. With respect, I do not see this issue the same way as did the judge; I do not see the term in issue of such weight, and the Act’s treatment of the subject of the wage increase so draconian, as to substantially interfere with the protected process and render the Act a breach of s. 2(d), if it interferes at all.[^269]

and

The 5.2% wage increase in issue is certainly valuable to the employees represented by the Council. Its nullification, however, in my view, is not antithetical to associational activity. The term is not so essential to the structure of the collective agreement, nor future restrictions on bargaining so durable, that its loss can be said to evidence impermissible interference with the protected process...[^270]

[155] This case confirms that in the context of the Expenditure Restraint Act wages were not so important that the wage limitations it contains demonstrate a substantial interference with collective bargaining.

[156] Again it is worthwhile to consider the impact of what the unions seek. In the end a meaningful process is one that would have allowed negotiations to go on without the legislative imposition of wage increases. Failing successful negotiations, the process would go on to some form of resolution not impeded by the passage of the Expenditure Restraint Act. As they see it wages are so important to the process of collective bargaining that any attempt to interfere with this prospective term would be a breach of the right to bargain collectively. If this is correct wages must always be set by an independent process. This is an invitation to by-pass the legislature which would be removed from a significant area of government policy and responsibility. It cannot be that the freedom of association is intended to entirely exclude the government in this way.

[157] The second question requires the determination of whether the legislative measure or government action respects the duty to consult and negotiate in good faith. Where the right to bargain collectively applies (where associational rights are breached), it 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.” What is guaranteed is a “meaningful process”. The parties are required “...to meet and engage in meaningful dialogue”.[^271]

[158] The problem with the position of the unions is that it has a too narrow conception of the process involved. It centres entirely on the issue of wages and only after the November 18, 2008 announcement of the final offer. It was from that point on the government representatives indicated they could do nothing more than stand by what was in the final offer and the Expenditure Restraint Act. The implication of this is that the right to collective bargaining can be said to apply to the treatment of one term of the prospective agreement, over a limited part of the negotiation process. There is nothing in the cases dealing with the freedom of association that would support this idea. It is the process taken as a whole, both in the range of issues discussed and over the entire time period taken up that is to be meaningful.

[159] Negotiations began more than one year before the possibility of wage restraint arose. The core public administration units represented by PIPSC all met for bargaining sessions with the employer. There is nothing to suggest that this process did not include meaningful dialogue, did not arrive at some areas of agreement and did not incorporate discussion of issues other than wages. In time these negotiations moved on to mediation and arbitration. There is no suggestion that any of the core public administration bargaining units represented by PSAC were treated any differently.

[160] In October 2008, following the federal election, the economic downturn attracted the concern of the government. As part of the development of its response it requested, and the Treasury Board Secretariat prepared the options paper. In late October and early November the government representatives moved to expedite the negotiation process which had been ongoing.[^272] They made known the limits on the wage increases they could agree to with the public release of the “final offer” on November 18, 2008.

[161] The PSAC agreed to fast track the negotiations. As evidenced by the press releases issued by the PSAC the process of negotiation represented “hard bargaining”. It had been “a difficult round of bargaining” in a “very challenging collective bargaining environment”. There is nothing in this which suggests an absence of “meaningful dialogue”. To the contrary the agreements made exemplify the results of a “meaningful process”. Of the five units involved four were able to agree with their employer.

[162] It cannot be said that the fifth bargaining unit did not have a process. It went back to April 27, 2007. A year later a pay proposal was tabled by the employer. The bargaining unit did not respond. There was mediation. Negotiations continued. With the “final offer” on the table the bargaining unit advised it was seeking a 13.5% increase for the year following the restraint period.[^273] So far as I am aware there is no evidence in the record to explain the rationale for this request. On the other hand there was evidence that there were no recruitment or retention issues for this bargaining unit. More employees were joining than leaving.[^274] Moreover, a wage study undertaken on behalf of the Treasury Board Secretariat indicated that salary levels for this unit were competitive with external comparators.[^275] Be that as it may, it should go without saying that it cannot reasonably have been expected that, in the circumstances, a demand for a 13.5% increase would generate a positive response. Meaningful dialogue is a two-way street. If this bargaining unit had been able to agree to the wage increases accepted by the other four PSAC bargaining units it might have been possible for it to enter into a collective agreement as they did. The fact that it did not, or could not, does not render the process meaningless. It is the same process; it just did not generate a positive result.

[163] The process did not end with the passage of the Expenditure Restraint Act. There was arbitration. The bargaining unit continued to seek a 13.5% increase for the year after the end of the restraint period. The arbitrator did not make the award requested. This does not suggest that the process was without meaning. To say that it does is to acknowledge that the complaint is about the result, not about the process.

[164] All the separate agency bargaining units represented by PSAC had entered into agreements. This occurred between November 24, 2008 and November 27, 2008. There is nothing in the record that explains the full history of these negotiations. The agreements imply that the process was meaningful. In one case the PSAC issued a news release saying the union had achieved “significant breakthroughs”.[^276]

[165] For the core public administration bargaining units represented by PIPSC the result of the effort to speed up the process was the “central table” discussions that took place on November 25-27, 2008. The acknowledgment, by the PIPSC representative, that the first two days of these discussions were taken up exchanging non-monetary proposals along with the range of issues reflected in the counter-proposal and subsequent proposal of the PIPSC are demonstrative of a meaningful process. This is confirmed by the terms prospectively agreed to. Progress was made.[^277]

[166] It may be that the government representatives were unable to, and refused to, discuss wage increases beyond those in the final offer but that does not render the dialogue or the process meaningless. The idea that it does springs from the contention that money was at the core of these discussions. The fact that wages were “taken off the table” meant that whatever else happened it would not result in a meaningful process. This is not consistent with the process that took place, the concessions given and the terms agreed to.[^278] Agreements were made, following the budget, through mediation, arbitration and agreement. They all complied with the provision of the Expenditure Restraint Act but they all included benefit improvements arrived at after the wage restraints were known.[^279]

[167] All of the thirteen separate agency bargaining units represented by PIPSC entered into agreements with their employers: nine made in November 2008 and four in 2009. There is nothing in the record that explains the bargaining process. One of the four is the Canada Revenue Agency unit where the bargaining is explained through the competing affidavits to which I have already referred.[^280] These affidavits do not show much agreement but they demonstrate an active and meaningful process.

[168] In dealing with the Crown corporations government officials encouraged the employers to move quickly. The meeting to this effect took place on November 17, 2008, the day before the final offer was made public. Nothing was said about the history of their negotiations. The same is true of the bargaining units associated with the Senate and House of Commons.

[169] What becomes apparent with this review is that either these bargaining units were part of a process of collective bargaining or there is no evidence to suggest they were not. Viewed as a whole these processes were substantive and meaningful. In the end, faced with what it understood to be an economic crisis that required response and bargaining units without agreement (at least three asking for increases that bore no relationship to the increases in the final offer (13.5% and 30% over two years and another asking for 17%[^281])), the government moved forward with the Expenditure Restraint Act. The Attorney General says this was necessary for there to be consistent treatment across the public sector. The unions say there was no need to pass the legislation. They say 84% of all union members were already covered by collective agreements. The Attorney General says this is too high. It does not matter. If the Expenditure Restraint Act had not been passed there would be no overarching guidance for or restraint on the wages of those employees who are not members of a union.

[170] I have not as yet referred to those bargaining units that were the subject of rollbacks. These bargaining units had entered into collective agreements with their employers. These agreements included terms dealing with wages. As a result of the passage of the Expenditure Restraint Act these agreements were changed. The record includes reference to seven bargaining units that are in this position. Two of these are bargaining units that represent employees of the Canada Revenue Agency and five represent individuals who are employed by four Crown corporations.[^282] For five of the seven the change was a rollback of 1% (2.5% to 1.5%) for one year of the restraint period. For the other two the rollback was 1% for each of two years.

[171] In Canada we anticipate and expect that government will stand behind and comply with the contracts which it has entered into:

... [T]here is an appropriate and natural expectation that government, and those who represent or act in its interests, will abide by the agreements that they have made.[^283]

and

In short, if we cannot rely on the Province to stand behind a contract it has made, knowing that the other parties are relying on its terms, what confidence can we have that our government will respect other obligations it has taken on?[^284]

[172] If the government is going to divert from this understanding, it can only do so where the intention is clearly expressed:

…In a nation governed by the rule of law, we assume that the government will honour its obligations unless it explicitly exercises its power not to. In the absence of a clear express intent to abrogate rights and obligations -- rights of the highest importance to the individual -- those rights remain in force. To argue the opposite is to say that the government is bound only by its whim, not its word. In Canada this is unacceptable, and does not accord with the nation’s understanding of the relationship between the state and its citizens...[^285]

[173] It is and should be unusual for the government to move, through legislation, to set aside a collective agreement. That does not mean that it can never happen:

While it is impossible to determine in advance exactly what sorts of matters are important to the ability of union members to pursue shared goals in concert, some general guidance may be apposite. Laws or state actions that prevent or deny meaningful discussion and consultation about working conditions between employees and their employer may substantially interfere with the activity of collective bargaining, as may laws that unilaterally nullify significant negotiated terms in existing collective agreements.[^286]

[Emphasis added].

[174] The question is whether these rollbacks represent a substantial interference with the freedom to associate.

[175] In Fraser, the Supreme Court discussed the setting aside of collective agreements, as substantial interference, by reference to Health Services:

...By legislating to undo the existing collective bargaining arrangements and by hampering future collective bargaining on important workplace issues, the British Columbia government had “substantially interfered” with the s. 2(d) right of free association, and had failed to justify the resultant limitation on the exercise of the right under s. 1 of the Charter (paras. 129-61).[^287]

[176] The court went on to repeat that this does not mean legislation can never set aside collective agreements:

The majority in Health Services held that the unilateral nullification of significant contractual terms, by the government that had entered into them or that had overseen their conclusion, coupled with effective denial of future collective bargaining, undermines the s. 2(d) right to associate, not that labour contracts could never be interfered with by legislation.[^288]

[Emphasis added].

[177] This was taken up in Dockyard Trades which considered the Expenditure Restraint Act and distinguished it from the legislation in Health Services:

...[I]t seems to me that Health Services is explained by the invasive extent of the nullification of collective agreement terms, combined with the exclusion of the topics of the nullified terms as subjects for collective bargaining so long as the Act remained in force. The Act in this case lacks that breadth. Although there has been cancellation of one wage increase, and wage increases are set for five years (a provision that is not challenged by the Council), there is no restriction on bargaining after that time. The prospective interference with collective bargaining evident in Health Services is simply not present here.[^289]

[178] It is on this basis that the British Columbia Court of Appeal concluded that the rollback of a 5.2% wage increase did not represent a substantial interference with the freedom of association of the affected employees.[^290] In Dockyard Trades the court concluded:

I consider that the Act does not substantially interfere with associational activity or the collective bargaining process so as to infringe freedom of association as contended by the Council, if there is an interference at all.[^291]

[179] I cannot see why the situation is different here, where the rollback is less, even though in two cases it affects two years rather than one.

[180] The affidavit of the National President of the second of the two Canada Revenue Agency bargaining units, represented by PSAC, recounts the reaction of the members to the rollback.[^292] They were frustrated by the withdrawal of a wage increase that had been agreed to. A large number filed grievances. “Numerous members have also told [her] that they no longer have confidence that signing a collective agreement provides them with any guarantee as to the terms and conditions of employment they will be governed by…”[^293]

[181] This response fails to give any weight to the context in which all of this took place. There is no acknowledgement of the economic circumstances of the moment or the global concern that it generated. A 1% decrease in wages for one year is said to represent an interference with collective bargaining that is so substantial that it impacts the ability of the union to pursue its collective goals. This remains the case even in circumstances where, as I have found here, the freedom of association of all other unionized federal public employees has not been breached by the imposition of the same restraints these rollbacks confirm. I return to Dockyard Trades:

...It bears observing that this single foregone wage increase is an economic circumstance that may be discussed in future rounds of collective bargaining, along with other economic issues. Employment relations have about them an essential, pragmatic, dynamic, business aspect that precludes, in my respectful view, a single, time-limited wage increase from rising to such significance that its loss amounts to breach of the constitution of Canada.[^294]

[182] It is the evidence of the National President that despite her many requests, no one advised her that there would be a rollback until after the legislation was introduced. The negotiations of the new collective agreement were over. There was no discussion respecting the change until after the government had made its decision. The concern is that with respect to those bargaining units affected by rollbacks there was no opportunity to review their impact with the government. There was no “meaningful process”. Section 8 of the Expenditure Restraint Act says:

Nothing in this Act precludes the bargaining agent for employees governed by a collective agreement or arbitral award and the employer of those employees from amending, by agreement in writing, any provision of the collective agreement or arbitral award, other than a provision relating to its term, so long as the amendment is not contrary to any provision of this Act.

[183] This is an invitation to reopen any collective agreement. Where there has been an amendment to a contract, for example a rollback of wages, it is open to any bargaining agent to request that the agreement be reopened. This could be done with the purpose being to obtain some concession in return for the change that has been imposed. It would be too quick and easy an answer to say that there would be no impetus on the employers to accede to any request. This would be inconsistent with the benefit improvements and exceptions provided in agreements entered into after the “final offer” was made and the wage restraints to be imposed were known. There was no evidence to suggest that any bargaining unit has made a request to use this part of the process; a part that was included in the Expenditure Restraint Act.

[184] I should also make mention of the PIPSC core public administration bargaining unit where an arbitration was conducted before the passage of the Expenditure Restraint Act and the award made after. It was the position of PIPSC that this denied the bargaining unit any process in respect of the extension back of the restraint period to include the 2006-2007 fiscal year.[^295] To my mind this is no different from any other unit that had been part of an ongoing process. In any case it was in no different position from those which had wage increases “rolled back”.

[185] I return to the three components of the complaint: the past, the present and the future.[^296] These reasons have dealt with the past (rollbacks) and the present (the ongoing negotiations). All that is left is the future. The applicant unions say that the impact of the Expenditure Restraint Act is permanent. It will extend into the future. The wage rates of their members will never catch up. This idea springs from s. 57 which says:

No provision of any collective agreement that is entered into — or of any arbitral award that is made, or of any terms and conditions of employment that are established — after the day on which this Act comes into force may provide for compensation for amounts that employees did not receive as a result of the restraint measures in this Act.

[186] What this says is that the wages that would have been earned had the restraints not be put in place cannot be recovered. The unions will not be able to ague, in subsequent bargaining, that they should recover what was lost. The intention is clear. The restraints are to be effective. This does not mean that in the future, bargaining of wage rates will not be subject to considerations of what other comparable workers are earning at the time and whatever other appropriate factors may be brought to bear.

[187] Based on this analysis: the measure of the significance of compensation to this bargaining and the substance of the processes that took place, I find there was no substantial interference with the freedom of association of the two applicant unions.

[188] For the reasons reviewed, if in this case any right of the unions to bargain collectively applied, I would find that it was not breached.

THE CHARTER OF RIGHTS AND FREEDOMS: SECTION 1

[189] I have found that there has been no breach of the applicant unions’ freedom of association. Accordingly, the issue set by s. 1 of the Charter does not arise. Even so, on the understanding that these reasons may be a weigh station on the way to a higher court, I make following comments.

[190] The Charter recognizes that there can be circumstances where, in the broader interests of our society, the rights it protects may be impinged. Section 1 of the Charter says:

The Canadian Charter of Rights and Freedoms guarantees the rights and freedoms set out in it subject only to such reasonable limits prescribed by law as can be demonstrably justified in a free and democratic society.

[191] In circumstances where it is determined that a protected right or freedom has been breached the onus is on the government, or public authority that is the source of the breach, to demonstrate it can be justified within the established standard. The Attorney General says that if there was a breach of the freedom of association it is so justified.

[192] The context remains important. It is the position of the government that the Expenditure Restraint Act was not an isolated measure but a significant element of an integrated response to a set of challenging economic and fiscal conditions. The response was directed at avoiding long-term deficits and returning to balanced budgets as soon as possible. It was designed, in all its elements, to address not only the short-term negative impacts of the economic downturn but also to strengthen the government’s fiscal position as it emerged from recession. Achieving balance and fiscal sustainability was not an end in itself but a means of stabilizing the economy of Canada, ensuring long-term growth, preserving living standards and providing a sustainable foundation for the maintenance of public programs, services and social benefits.[^297]

[193] “Under the umbrella of the Government’s overriding objective of managing its way out of the crisis in a fiscally responsible manner, the policy objectives of the [Expenditure Restraint Act] were threefold”: [^298]

(i) to help reduce undue upward pressure on private-sector wages and salaries;

[194] The Attorney General submitted that there is a relationship between public and private sector wage settlements. This submission relied on “a preponderant body of empirical and theoretical literature on public and private sector compensation in advanced capitalist economies” and the proposition that private-sector firms compete directly and indirectly with the public sector for labour in many markets.[^299]

(ii) to provide leadership by showing restraint and respect for public money;

[195] The Attorney General submitted that through the Expenditure Restraint Act the government signaled to other levels of government the importance of restraining public-sector compensation. The need for complementary government action was rooted in the fact that public-sector employment accounts for approximately 20% of total employment in Canada.[^300] It was said to be imperative that the government provide leadership to Canadians by demonstrating its commitment to maintain public finances on a sustainable basis.[^301]

(iii) to manage public sector wages in an appropriate and predictable manner that would help ensure the ongoing soundness of the government’s fiscal position.

[196] The public sector wage bill represents about one-third of the direct program expenses of the government (government spending excluding transfers to persons, transfers to other levels of government, and spending on public debt charges).[^302] “In canvassing options to respond to the economic crisis and weighing their economic and fiscal impacts, the Government considered it appropriate, given the size of the wage bill, to take action to reduce the growth in public sector wages to ensure the soundness of the Government’s medium-term fiscal position.”[^303] It was a time of declining government revenues. Public sector wage increases needed to be affordable.

[197] The unions contest the validity of these policy objectives. They do not agree that the Expenditure Restraint Act responded to these concerns or that the wage restraints it imposed were justified such that any breach of the freedom of association should be left to stand. They retained Lars Osberg, a professor of economics at Dalhousie University. He is offered as an expert in labour economics, macroeconomics and public finances. His expertise was not questioned by the Attorney General. Lars Osberg was asked to consider the three policy objectives. He produced a lengthy and detailed report and offers the opinion that:

(a) there was no upward pressure on private sector wages

[198] In arriving at this conclusion Lars Osberg points to a number of mistakes he says are present in the analysis relied on by the government in asserting a need to reduce undue upward pressure on private-sector wages. These include:

• The government was wrong to rely on wage increases in the broader public sector which includes provincial and municipal governments and is approximately ten-times larger than the federal public service. The broader public sector led both the private sector and the federal public sector from the third-quarter of 2006 on.[^304]

• In saying that federal wage settlements had surpassed those in the private sector, the government relied on a single quarter of data. This ignored the fact that private-sector wage growth had not fallen below the federal public sector in any of the preceding five quarters and did not for any of the succeeding four quarters.[^305]

• The government erred in only looking at unionized employees. 84% of the Canadian private-sector labour market is not unionized. Non-unionized wages outpaced those of unionized workers in the years leading up to the Expenditure Restraint Act.[^306]

• The reduction to the increase in wages implemented by the Expenditure Restraint Act was in the order of 1.3%.[^307] This small reduction, applied to the federal public service, a small fraction of the Canadian labour force, would not have any appreciable impact on salaries in the private sector.[^308]

• Even if wages in the federal public service had been leading the private sector, it was unlikely that this would create upward pressure on the private sector. Canada was in the midst of an economic crisis. Increasing unemployment insulates private-sector employers from demands for higher wages.[^309] The claim that restraint measures would address concerns of the struggling manufacturing sector was misplaced. Ontario manufacturing had been hard-hit by the recession. This undercut concerns for upward pressure on wages. A number of private-sector collective agreements were voluntarily opened to allow for reduction in wage rates.[^310]

• Federal public-service wages only lead to increased pressure on private wages if there is an increase in the number of available federal public-service positions. Without such an increase, private-sector employees cannot pursue public-sector wages. The availability of these positions is in the control of the government. The net increase of 17,500 federal public-service jobs from November 2008 to March 2011 in a private-sector market of over 11 million jobs would have no noticeable impact on private wages in Canada.[^311]

[199] For these and other reasons Lars Osberg determined that there was no basis to suggest that increasing federal public-sector wages would lead to upward pressure on private-sector wages.

[200] The government responded. Paul Rochon, the deponent of its initial affidavit, produced an affidavit in reply to that of Lars Osberg. It continues to hold that there is a relationship between public and private sector wages:

• The broader public sector is the appropriate component of the market to consider. Different levels of the public sector do look to each other in the process of negotiation and wage setting. Wage moderation in the public sector can send an important message to the broader public sector which accounts for roughly 20% of the labour force in Canada. This in turn sends important signals to the private sector. This is referred by Paul Rochon as the “transmission mechanism”.[^312]

• During the fourth-quarter of 2008 wage increases in the federal public sector surpassed those of the private sector. For the preceding five quarters the reverse was true. However, over that period private wage increases came down while both those of the federal public service and the broader public service went up. The Expenditure Restraint Act was announced, the final offers were made and the Economic and Fiscal Statement was introduced in November 2008, which is to say during the fourth quarter. In the following months the wage increases for all three segments of the workforce decreased. By mid-2010 they had converged to within a range of 1.5% to 2%.[^313]

• Lars Osberg assumed that had the Expenditure Restraint Act not been enacted wages in the federal public sector would have grown at the rate of 2.8% per year (hence the decrease of 1.3% he postulates as the result of its passage). As a result there would have been a prolonged period in which the wage growth in the federal public sector would have outstripped that of the unionized private sector. Such a sustained wage gap would have raised the ratio of federal wages relative to unionized private-sector wages. The cumulative wage differential could have been expected to put upward pressure on private-sector wages during a recessionary period.[^314]

• The wage growth of 1.5% imposed by the Expenditure Restraint Act has been consistent with wage moderation in other sectors of the economy. This was demonstrated by the private sector agreements that were reopened as the recession deepened. Unions and management agreed to wage rollbacks as an alternative to plant closures and layoffs.[^315]

• The reliance on the net increase in federal public-service positions (17,500) is not the correct measure of the ability of private-sector employees to seek out public-sector employment. It fails to account for the increase in employment in other levels of government which would include those that resulted from the stimulus measures that were part of the government’s response to the economic downturn. Net growth shows the increase in size of the public service. It fails to account for turnover in the positions which already exist. The gross federal hiring to non-student positions from the general public for the 2008-2009, 2009-2010 and 2010-2011 years amounted to “roughly” 103,100. Gross hiring for the “broader federal government” was “roughly” 200,000.[^316]

[201] Lars Osberg was critical of the studies relied on by the government. They were inapplicable in the Canadian context. There are significant differences between North American and European labour markets, from which the majority of the studies emerge. Key differences included the unitary nature of most European states, the significantly larger public sector in Europe, the significantly higher unionization rates in Europe, the stronger employment protection legislation in Europe, the strength of social democratic parties in Europe and the fact that European collective bargaining often features industry-wide collective bargaining by confederations of union and employers. This leads to the conclusion that “North American labour relations systems are much less likely than European labour relations systems to facilitate public sector leadership”.[^317]

[202] The studies raise a number of methodological concerns. Six of the eight adopt the “calibrated computable general equilibrium (CCGE)” modeling methodology. These models do not provide insights into the question of public sector wages exerting upward pressure on the private sector.[^318] These studies assume a given relationship and seek to determine whether, under specific theoretical conditions, they could approximate observed patterns in the data. The usefulness of these studies depends on whether the assumptions underlying them align with the realities of the Canadian labour market. Most of them are based on assumptions that do not apply. These include 0% unemployment, total unionization, and tax rates set at whatever level is necessary to pay public sector workers. There are studies that focus on special circumstances, such as the period in Greece following military dictatorships. This assumes that the military dictatorship and subsequent socialist regime sought to reward their followers with highly paid public-sector jobs. This does not model federal government behaviour in Canada.[^319]

[203] There are two studies relied on by the government which utilize different methodologies. One of them uses data from 1967-1978. The Canadian labour market has changed over the past 40 years. For the other there was a competing study, not referred to by the government, which concluded that, in Canada, the private sector leads the public sector.[^320]

[204] Paul Rochon reviewed the criticism of the studies.

[205] The studies do not focus specifically on Canada but they do examine the relationship between private and public-sector wages in advanced market-based economies and labour markets that are broadly similar to this country. It is standard in economics to use analysis for previous periods and from other countries to inform expectations about current or future events for which insufficient analysis is available for the country of interest.[^321]

[206] The use of theory-based CCGE models is a valid and accepted approach to analyzing complex problems of public policy. They are commonly used to analyze labour market behaviour because of their ability to determine the channels through which economic shocks impact labour market variables. The theoretical structures of these models are not arbitrary; they are carefully chosen based on a body of literature. These models use quantitative estimates to best replicate actual data based on estimates from literature, which are in turn based on statistical analysis. Governments, international organizations (including the OECD and the IMF), and private sector organizations “routinely” commission such models to examine a wide range of issues.[^322]

[207] The literature shows that because both private and public sector employers draw from the same total supply of labour, there are important linkages between the public and private sector. There are clear channels through which wage setting in the public sector can impact on wage setting in the private sector. What cannot be determined from these studies is the precise magnitude of the impact.[^323]

[208] Paul Rochon does not accept the “competing study”. Lars Osberg explained that the results of this study show that in Canada and other advanced economies private-sector wages lead public-sector wages. This provides a skewed picture of the conclusions of this paper. The authors themselves acknowledge that this particular finding is not solid for Anglo-Saxon countries and in a subsequent study highlighted important drawbacks to this earlier work.[^324]

(b) leadership was not provided to Canadians

[209] To Lars Osberg: “‘Leadership’ is a political, not an economic, term”.[^325] As an economic consideration the Expenditure Restraint Act did not lead. It did what one does not want to have happen in a worsening economy. If all Canadians had exercised spending restraint and reduced their current purchases, demand would have collapsed even more than it did and the recession would have been much more severe.[^326]

[210] To Paul Rochon the severity of the financial crisis and economic recession caused a sharp deterioration in the fiscal position of the government. It needed to reassure households and investors that the return to fiscal deficits would be temporary and would not undermine the commitments to long-term fiscal sustainability. The Expenditure Restraint Act helped to demonstrate this commitment. Contrary to the suggestion of Lars Osberg, the statement of the Minister was not a call to households to reduce their consumption.[^327]

(c) nothing was done that ensured the ongoing soundness of the government’s fiscal position

[211] Lars Osberg believes the Expenditure Restraint Act was unnecessary. It had limited impact on Canada’s fiscal situation. With the asserted savings the federal debt-to-GDP would be 0.301 instead of 0.304.[^328] The legislation would make “no difference to the year in which the federal government turns to a budget balance”. The government would meet its objective of returning to balanced budgets in 2015-2016.[^329] Canada’s fiscal situation in 2008-2009 was much improved from earlier years and much less serious than in other G-8 countries. “It is the relative attractiveness of each possible venue for investment which is the important issue in capital flows”.[^330]

[212] From the perspective of the government, as expressed by Paul Rochon, it is inappropriate to consider the Expenditure Restraint Act on its own. It was part of a broader set of expenditure control measures. Together they were intended to have and did have a significant fiscal impact. While the fiscal impact of each measure on its own may be small, it is the total impact of the package of measures that is significant.[^331]

[213] The debate did not end with these two competing affidavits. Lars Osberg responds with a further affidavit.[^332] It says:

In his rebuttal, Mr. Rochon continues to: (a) blur the distinction between federal employees affected by the [Expenditure Restraint Act] and the broad public sector; (b) switch back and forth between contradictory analyses of the labour market; and (c) substitute theoretical hypotheses about what could possibly happen to public sector and private sector wages somewhere, at some possible time, for empirical evidence on what did actually happen, or was likely to happen, in Canada in 2008-2009.[^333]

[214] For his part Paul Rochon provides another follow-up affidavit.[^334] It reviews the same general topics under the following headings: (1) Were federal wage settlements trending up during 2008? (2) Pattern-Setting in Collective Bargaining (3) Federal Vacancies and the “Demand/Supply Impact on the [Expenditure Restraint Act] on the Private Sector, (4) Interpretative Previous Literature, (5) The [Expenditure Restraint Act] as a Measure Demonstrating Economic Leadership, (6) The Contribution of the [Expenditure Restraint Act] to Sound Management of Public Finances, and (7) Misunderstandings, Misstatements and Misquotations and concludes”:

Uncertainty and risk were exceptionally high in the fall of 2008, which required the Government to act quickly and with a high degree of prudence. [The (Reply) Affidavit of Lars Osberg] disputes the Government’s assessment of what was “reasonably probable” at the time of the recession. However, the Government was not engaged in an academic exercise and it did not have the advantage of hindsight. It needed to make swift decisions in rapidly evolving circumstances to minimize risk, address negative impacts and bolster the confidence of Canadians and international investors alike.[^335]

[215] The problem confronting the court should be self-evident. There are two divergent views in a highly technical area dealing with the government’s response to a global concern. It is difficult in the context of an application such as this to assess the evidence and come to an understanding of the appropriate perspective. To counsel for the unions the answer is simple. The evidence relied on by the government should be disregarded in favour of that provided by Lars Osberg. Paul Rochon has held a series of senior positions with the Department of Finance. From 2007 to 2009, he was Assistant Deputy Minister of the Economic and Fiscal Policy Branch. From 2009 to 2010, he was Senior Assistant Deputy Minister of the branch and in 2010 became the Associate Deputy Minister and G-7 Deputy. He left that position in August 2012. Nonetheless, counsel for the PSAC objects. Paul Rochon was part of the “leadership cadre” that participated in the “articulation” of the objectives of the government in enacting the Expenditure Restraint Act. Paul Rochon “is not an expert in labour economics”.[^336] Thus the evidence of Lars Osberg, who is independent and an expert, should be favoured.

[216] In taking this position counsel for PSAC relied on Alfano v. Piersanti.[^337] A witness was retained to give expert evidence with respect to issues of forensic accounting and damages. He prepared two reports. During the course of the trial the judge had conducted a three-day voir dire to determine whether to admit the evidence. She decided not to do so. The witness had assumed the role of an advocate. “His role as an independent witness was secondary to the role of ‘someone who is trying their best for their client to counter the other side’.” The reports were “…tainted by the lack of impartiality…”.[^338] It is in this context that the Court of Appeal made the observation relied on by counsel:

In determining whether an expert’s evidence will be helpful, a court will, as a matter of common sense, look to the question of the expert’s independence or objectivity. A biased expert is unlikely to provide useful assistance.[^339]

[217] There is nothing like that here. There is nothing in the evidence of Paul Rochon to suggest that he has lost perspective on his role or abandoned his objectivity. Expertise can be obtained “in the field”. It can come from practical experience. There is nothing to suggest that direct involvement in the decision and activities that have brought the matter to court necessarily leads to the conclusion that a properly qualified witness cannot provide opinion evidence.

[218] In any event counsel for the Attorney General submitted that Paul Rochon was not presented as an expert but as a witness who can provide a factual foundation explaining the actions of the government. As she sees it, he has responded to Lars Osberg by providing further explanations to correct inaccuracies and to reply to the points raised. Counsel for PSAC observed that the evidence of Paul Rochon does include opinions.

[219] There is a better answer than a contest between witnesses. As far back as the Labour Trilogy this problem was considered by Chief Justice Dickson in the context of a statute limiting wages with the objective of reducing inflation:

….courts must exercise considerable caution when confronted with difficult questions of economic policy. It is not our judicial role to assess the effectiveness or wisdom of various government strategies for solving pressing economic problems. The question how best to combat inflation has perplexed economists for several generations. It would be highly undesirable for the courts to attempt to pronounce on the relative importance of various suggested causes of inflation, such as the expansion of the money supply, fiscal deficits, foreign inflation, or the built‑in inflationary expectations of individual economic actors. A high degree of deference ought properly to be accorded to the government’s choice of strategy in combatting this complex problem…[^340]

[Emphasis added].

[220] It is not a matter of who is right. The issue remains whether, in the circumstances, any breach of the freedom of association falls within such reasonable limits as can be demonstrably justified in a free and democratic society. In searching for the answer some measure of deference is to be given to the government’s choice of strategy. I say “some measure” mindful of the admonition of counsel for PIPSC that any deference should not lower the standard of justification. This is not a question of mindless genuflection in the direction of the government. Rather it is an acknowledgement that in the economic sphere there are complex choices to be made and difficult decisions to be taken:[^341]

…The role of the judiciary in such situations lies primarily in ensuring that the selected legislative strategy is fairly implemented with as little interference as is reasonably possible with the rights and freedoms guaranteed by the Charter.[^342]

[221] The evidence of Paul Rochon is important because it assists in explaining why the government acted as it did in response to what it saw as an economic crisis.

[222] The analytical approach is provided by the Oakes test.[^343] It has two criteria:

• First the objective of the government action at issue must be “…of sufficient importance to warrant overriding a constitutionally protected right or freedom”.[^344] Before it can be characterized as sufficiently important the objective must, at a minimum, “…relate to concerns which are pressing and substantial in a free and democratic society”.[^345]

• Second, once it has been determined that the objective is sufficiently important, it must be shown that the means chosen are reasonable and demonstrably justified. This has been referred to as “…a form of proportionality test”. It is generally recognized that there are three components to the test: (a) the measures adopted must be rationally connected to the objective (“They must not be arbitrary, unfair or based on irrational considerations.”); (b) the measures should impair “as little as possible” the right or freedom in question; and (c) there must be a proportionality between the effects of the measures and the identified objective.[^346]“Although the nature of the proportionality test will vary depending on the circumstances, in each case, courts will be required to balance the interests of society with those of individuals and groups.”[^347]

[223] For the unions the answer as to whether the objectives relate to concerns which are pressing and substantial arises largely through the evidence of Lars Osberg. Since any opinions of Paul Rochon should be rejected the evidence of Lars Osberg must stand and his conclusions accepted. On this basis the three objectives do not relate to concerns that have the required urgency and substance.

[224] I start with the second objective: leadership. This is dispensed with by Lars Osberg on the basis that leadership is a political not an economic term.[^348] He went further:

The general objective “to provide leadership to Canadians by showing restraint and respect for public money” and the specific objective noted in PR70 “to demonstrate Government leadership and respect for public resources in a time of economic stress” are presumably intended as political statements summarizing a public relations strategy.[^349]

[225] There is an unhappy tendency to use “politics” as a pejorative. It is not. Politics is the means by which those we elect govern. It is not something that can be set aside when matters of public policy are being considered. This was recognized by Chief Justice Dickson:

Due deference must be paid as well to the symbolic leadership role of government. Many government initiatives, especially in the economic sphere, necessarily involve a large inspirational or psychological component which must not be undervalued.[^350]

[226] I pause to observe that it is not clear to me why an economist is able to opine on leadership at this level. Lars Osberg acknowledges that there are two points of view:

…One could perhaps argue that communications strategies which maintain public confidence in government in general and this specific government in particular might assist the government in maintaining consumer confidence – but one could also argue that governments show respect for the rule of law by abiding by signed contracts, so there might also be a downside in the erosion of consumer confidence. I cannot claim any professional expertise in evaluating public relations strategies.[^351]

[227] On the other hand Paul Rochon has held significant leadership positions in the Department of Finance. It does not seem out of place to suggest that he would have an understanding of the role government can play in the face of an economic crisis. Paul Rochon noted:

…The Government needed to reassure households and investors that the return to fiscal deficits would be temporary and would not undermine the Government’s commitment to long-term fiscal sustainability. As a spending restraint measure, the [Expenditure Restraint Act] helped to demonstrate this commitment.[^352]

[228] Lars Osberg relies on leadership as “setting an example”. This, he says, has “clear economic meaning and consequences”.[^353] It is on that basis he is able to say that the example being provided is not one that should be supported. The Expenditure Restraint Act encouraged Canadians to exercise restraint in their spending. If that occurred there would have been less demand and the recession would have been deeper. This response does not respect the broader perspective of leadership referred to by Chief Justice Dickson. The balance being struck was to provide the assurance that the government was behaving responsibly so that Canadians would understand that the economic issues were being dealt with. This could have the effect of encouraging them to be confident in their economic future leading them to continue to purchase the goods and services they needed and wanted. Paul Rochon made this point. He said that the statement of the Minister of Finance was not a call for households to reduce their consumption:

…I understood the purport of the statement to be that, at a time when adverse economic conditions would entail hardships for Canadian households, it was incumbent upon the public sector to exercise appropriate restraint. That this message was not meant to signal a need for widespread restraint is clear from the fact that the Government subsequently engaged in a massive stimulus program to support economic growth. Indeed, a significant part of the stimulus program was aimed at supporting spending by Canadian households – for example, the Home Renovation Tax credit. The Government’s intent, as expressed by the Minister, was to engage in restraint where appropriate so that stimulus would be temporary and would not entail permanent increases in spending that would undermine the country’s fiscal position.[^354]

[229] This is consistent with the inspirational and psychological view of leadership expressed by Chief Justice Dickson. This difference in perspective as expressed by Lars Osberg and Paul Rochon calls for the deference to which Chief Justice Dickson referred.

[230] Having said this, leadership can function as an example to others. It does so here. I turn to the first of the three objectives: the possible impact of public wage increases on the private sector. Lars Osberg is concerned that the reliance of the federal government on the broader public sector is inappropriate. Considered on its own the federal public service lagged behind. It is such a small component of the economy of Canada that advancing its salaries would have no wider impact. This does not address the prospect of wage restraint on the federal public service as an example for other levels of government and the broader impact extending on to the private sector. Paul Rochon observed:

…[T]he federal government aimed to indirectly reduce pressure on private sector wages by setting an example for other orders of government in Canada through the introduction of the [Expenditure Restraint Act]. …[^355]

[231] This is the “transmission mechanism”.[^356] In his initial affidavit he noted that “…[s]ince the introduction of the Expenditure Restraint Act most provincial governments (Nova Scotia, New Brunswick, Ontario, Manitoba, Alberta, British Columbia and Québec) have also acted to moderate the growth of their public service compensation”.[^357] In his reply affidavit Paul Rochon includes as an exhibit a list of “Provincial Wage Restraint Actions (To March 2011)”. This outlines the actions taken and adds Prince Edward Island and Newfoundland and Labrador to the provinces that have taken action to restrain wages in their public services.[^358] In the body of the affidavit Paul Rochon deposes:

Wage moderation in the federal public sector sent an important signal to the broader public sector, which accounts for roughly 20% of the labour force and which, in turn, sends important signals to the private sector. The fact that, after the [Expenditure Restraint Act], a number of provinces introduced similar measures in their jurisdictions to limit wage increases suggests that they followed the federal government’s lead….[^359]

[232] The reopening of private-sector collective agreements and the readjustment of their wage terms could have been prompted, in part, by the leadership of the federal government in imposing wage restraint. Lars Osberg does not agree. He said:

…[T]he recession of 2008-2009 was so severe that some collective agreements (e.g. in the auto sector) were re-opened by employers seeking wage concessions, and as the Conference Board report by Glenn Hodgson documents (page 27), unions typically agreed to the wage rollbacks demanded by employers, when faced with the realistic prospect that the employer might not survive otherwise. Clearly, such contract reopening to cut wages in a recession is not influenced by ‘pattern-bargaining’ with the public sector.[^360]

[233] For his part Paul Rochon indicates that, in the end, the Expenditure Restraint Act:

…[P]roved to be consistent with the wage moderation that occurred in other sectors of the economy…. a number of private sector collective agreements were re-opened as the 2008-2009 recession deepened, which resulted in unions and management agreeing to wage roll-backs as an alternative to plant closures and layoffs. … [W]age growth in all sectors began to decline in a similar fashion immediately following the announcement of the [Expenditure Restraint Act]….[^361]

[234] This is not to suggest that the promulgation of the Expenditure Restraint Act was the principal catalyst for the reopening of private sector contracts. I take Paul Rochon to be saying that by the leadership it showed, in restraining wages and passing the legislation, the federal government did what it could to encourage the pragmatic approach the private sector exhibited in reopening these contracts. This suggests the completion of the “transmission mechanism”.

[235] The proposition that leadership, by the government, may be exhibited in actions that are directed only to a smaller contributor to the economy was recognized by Chief Justice Dickson:

In my view, the leadership role of government constitutes justification for Parliament’s legislative focus on the public sector. It was, in the circumstances, permissible for Parliament to decline to impose a universally applicable short‑term controls programme on an heterogeneous labour force, and instead to limit its interference with collective bargaining processes to a discrete and relatively homogeneous group of employees. The employees in question shared in common an employer perceived to occupy the role of the national economic leader and trend‑setter and they had, according to the evidence, a greater degree of job security than other employees, which might have made them less susceptible to adverse long‑term effects from temporary controls.[^362]

[236] This takes me to the third objective: the management of public sector wage bill to ensure the ongoing soundness of the government’s medium-term fiscal position. Demonstrating that the impact of savings from wage restraint on the federal debt-to-GDP ratio will be small or that, on its own, wage restraint in the federal public sector will only hasten the return to budget balance by a few months is not surprising.[^363] A small change to a small component of the economy will not have a large overall impact. This does not mean that in the context of an economic crisis the government should not bear in mind the narrower concern for its own expenditures. In some sense it depends on how you look at it. The Expenditure Restraint Act is said to have annual savings of $1 billion. This is roughly equivalent to the annual expenditures of each of the Department of Justice and the Department of the Environment.[^364] If every unit of the federal public service was not asked to reduce its costs in response to an emergency because the independent impact each of them represents would be small, it would be difficult for the federal government to do anything to control its costs. This does not reduce the understanding that “courts will look with strong scepticism at attempts to justify infringements of Charter rights. To do otherwise would devalue the Charter because there are always budgetary constraints and there are always other pressing governmental priorities.”[^365]

[237] In Newfoundland (Treasury Board) v. N.A.P.E.,[^366] in 1988, the provincial government signed a Pay Equity Agreement in favour of female employees in the healthcare sector. In 1991, the same government introduced legislation which deferred the commencement of the promised pay equity increase and extinguished the arrears that, then, existed. The reduction continued a breach of s. 15(1) of the Charter. The Supreme Court of Canada confirmed that “…[b]udgetary considerations in and of themselves cannot normally be invoked as a free-standing pressing and substantial objective for the purposes of s. 1 of the Charter”. The court recognized that the spring of 1991 was not a normal time. There was an exceptional financial crisis. It called for an exceptional response. The response was justifiable under s. 1 of the Charter.[^367] In N.A.P.E. the crisis was such that had the provincial government been required to make the payments necessary to provide pay equity, other significant programs such as those involving education and health care could have been impaired. The situation in Canada in the fall of 2008 and the spring of 2009 was also extraordinary. It was the worst recession in eighty years. The wage restraint plan was part of a large co-ordinated response that included the introduction, into the economy, of $40 billion in federal stimulus measures over two years.

[238] In this case Lars Osberg observed that savings from the wage restraint imposed would be small when compared to a number of other policy initiatives. There had been cuts to the GST. They were estimated to be 12 times greater than the impact of the Expenditure Restraint Act. Lars Osberg calculated that the fiscal equivalent of the Expenditure Restraint Act would be met if the cut in the GST had been reduced by .16% such that the GST was set to 5.16% instead of 5%.[^368] The point being made was that the government has made policy choices that have a far greater impact on the soundness of the fiscal position of the government.[^369] What this demonstrates is that the government acted to reduce taxes, associated with purchases, for all Canadians. The fact that it could have done this and left wage rates unaffected by reducing the tax by 1.84% instead of 2% speaks to strategies and policy choices the government has made.

[239] This objective also should be considered in the context of the leadership government sought to provide at a time of economic crisis. Paul Rochon made the following observation:

The statement in paragraph 46 of [the (Reply) Affidavit of Lars Osberg, sworn April 5, 2013] that the [Expenditure Restraint Act] ‘did not make any difference at all to expectations about Canada’s long-run fiscal sustainability’ overlooks its importance in enhancing the credibility of the Government’s management of public finances…[^370]

[240] The government sought to respond to an economic crisis. It sought to provide leadership. Interestingly, Chief Justice Dickson went so far as to say that leadership, by the restraint of compensation through legislation, may be acceptable:

Similarly, it was permissible for Parliament to exercise governmental leadership in compensation restraint by legislative means, rather than by merely adopting a firm posture in labour negotiations. The evidence indicates that the government had tried a non‑legislative approach and, during the period between 1978 and 1982, it succeeded in keeping federal government wage settlements below the corresponding rates in the private sector and in the provincial public sector. Evidently, however, this was not a sufficiently dramatic means of reducing public expectations. I am not inclined to second guess Parliament’s dissatisfaction with the incremental and unspectacular exercise of its leadership role in the period preceeding [sic] the “6 and 5” legislation.[^371]

[241] If the Chief Justice was not prepared to second guess Parliament there, it does not seem to me that I should do so here.

[242] In a time of economic concern and crisis, the government sought to provide leadership to instil confidence in Canadians. The need for leadership was pressing and substantial. The objectives of ensuring that public-sector wages did not affect demands on the private sector and protecting the fiscal standing of the government, when viewed as areas where leadership was required, added to and augmented the pressing and substantial need for leadership from those we elect to provide it.

[243] This leaves the second of the two issues introduced by the Oakes test: the test of “proportionality”. The answers to the three questions posed are not difficult to find. The unions continue their reliance on the opinions of Lars Osberg. This ignores the significance of leadership and relies on discounting the evidence of Paul Rochon.

[244] The economy is influenced by public policy. In a time of economic uncertainty it is the role of government to provide leadership. The passage of the Expenditure Restraint Act was part of the program by which the government demonstrated leadership. It was rationally connected to the objective of providing leadership on the inspirational and psychological level envisaged by Chief Justice Dickson and by way of setting an example for other levels of government. This was confirmed by the objective not to allow wage increases in the federal public service to negatively influence the broader public or private sectors and to set an example by controlling its own spending. An acceptance of the evidence of Paul Rochon leads to the understanding that, while others may disagree with the substance, there was nothing arbitrary or irrational about the actions taken by the government.

[245] The unions say that the passage of the Expenditure Restraint Act did more than minimally impair rights under the Charter. This position focuses on the need for the Expenditure Restraint Act and the proposition that there were other policy choices available. It is very easy after decisions have been made, removed from the urgency of the moment and without the weight of responsibility to say some other approach would have been less obtrusive:

...There may be many ways to approach a particular problem, and no certainty as to which will be the most effective. It may, in the calm of the courtroom, be possible to imagine a solution that impairs the right at stake less than the solution Parliament has adopted. But one must also ask whether the alternative would be reasonably effective when weighed against the means chosen by Parliament. To complicate matters, a particular legislative regime may have a number of goals, and impairing a right minimally in the furtherance of one particular goal may inhibit achieving another goal. Crafting legislative solutions to complex problems is necessarily a complex task. It is a task that requires weighing and balancing.[^372]

[246] In this case, the court is being asked to delve into whether a smaller reduction in the GST or in the corporate tax rate would have been as, or more effective, in meeting the objectives of the government while at the same time not imperilling any Charter right. This would engage the judge in examining the strategy of the government and the impact of the other policy choices the unions say were available. I agree with Chief Justice Dickson. It would preferable if the court did not engage in second guessing Parliament or re-evaluating the strategies of the government where complex policy issues are at stake. Efforts were made to minimize the intrusive effect of the Expenditure Restraint Act. Employees would still see increases, albeit lesser than in previous years. Ancillary compensation features such as movement within the pay ranges, leave, performance pay, overtime and leave would be unaffected. The measures were time-limited. The question is whether or not rollbacks to the wage terms in existing contracts of 1% for one or two years and notional reductions of .3%, .5% of 1.3% to increases not yet negotiated demonstrate something more than a minimal impairment to the freedom of association. Without wishing to take away from the impact these reductions may have on individual members of the unions, in the context of an economic crisis where unemployment was increasing and even large industries were vulnerable, the imposition on the freedom of association would have been minimal.

[247] Finally, the unions say that the impact of the Expenditure Restraint Act would be small and did little to advance the government’s efforts to meet the stated objectives. This fails to acknowledge the importance of leadership in times of crisis. Leadership was central to the response of the government. Its salutary effect can be measured against a consideration of the likely or anticipated response of Canadians if there was none.

[248] It was said that the Expenditure Restraint Act will undermine “...the willingness of employees to come together and work towards common workplace objectives.”[^373] This would be unfortunate. The fundamental premise behind s.1 of the Charter is the acknowledgment that from time to time some Canadians are asked to accept a limitation in their individual rights in recognition of the greater good.

[249] If I were required to, I would find that the any violation of the freedom of association of the Applicants can be and has been demonstrably justified in accordance with s. 1 of the Charter.

CONCLUSION

[250] The members of the two unions feel done in by the limitation in the increases to their wages and the means by which they were imposed. They have the ability and the right to act in association. A right they believe has been breached. Having the benefit of the right does not mean that a piece of legislation that impacts them, in company with others, necessarily denies the freedom of association promised by the Charter. It may mean that they cannot be distinguished from others who are affected. Counsel for PSAC pointed out that the government could have left each employer of its non-unionized staff to impose the limitation.[^374] This does not change the fundamental dynamic. The primary goal of the Expenditure Restraint Act was to restrict all or “almost all” federal public-service wage increases. This is not as counsel for PIPSC would have it, a denial of the “collective dimension” of the freedom of association.[^375] It is the recognition that an association cannot rely on that dimension to allege a breach of the freedom where the impugned actions have no impact on the association that can be distinguished from its impact on others. In such circumstances there would be no breach of rights associated with the collective dimension. This is the situation in this case. Associational rights were not breached. The derivative right to collectively bargain was not engaged. To ask the court to look behind the legislation and determine that the true purpose was to take advantage of the economic crisis to restrict union wages would withdraw from the government the deference referred to by Chief Justice Dickson. It would deny the broad concept of leadership which he noted. It would permit the unions to obtain collective agreements independent of and removed from the responsibility of the legislature. Finally, it was suggested that to rely on these propositions is to render the freedom to associate “content neutral”.[^376] I understand this to mean that in the absence of being able to rely on the right to collectively bargain, simply because others are affected, makes the right meaningless. I would have thought that each of Dunmore, Health Services and Fraser would make clear that this is not so. The right is effective when the impact of the legislation is on associational rights, not on associations in the company of others. Is it possible that a governmental authority could attempt to hide the true impact of its actions by including others? I suppose. But that is not demonstrated here.

[251] I find that there has been no breach of the associational rights of the Applicants.

[252] The Expenditure Restraint Act is not directed at the members of the applicant unions but at the federal public service as a whole. In any case the impact of the wage restraints imposed by the legislation does not demonstrate substantial interference with the freedom of association. Accordingly, the derivative right to collective bargaining is not engaged and the Applications must fail.

[253] If the right to collective bargaining does apply, it was not breached. There was a meaningful process.

[254] If there was a breach of the freedom of association, through a breach of any right to collective bargaining or otherwise, it was a breach that can be and has been demonstrably justified in accordance with s. 1 of the Charter.

[255] For the reasons referred to herein, the applications are dismissed.

COSTS

[256] This was a matter of general public concern, involving parties with an ongoing interest in the issues and relationship with each other. If they are unable to agree as to costs I may be spoken to.

Lederer J.

Released: February 12, 2014

COURT FILE NO.: CV-09-375977 COURT FILE NO.: CV-09-377318

DATE: 20140212

ONTARIO

SUPERIOR COURT OF JUSTICE

BETWEEN:

The Professional Institute of the Public Service of Canada/L’Institut de la Fonction Publique du Canada, Raymond Lazzara, 72 Anne Chamney and Humayoun Akhtar

Applicants

– and –

Her Majesty in Right of Canada as represented by the Attorney General of Canada

Respondent

AND BETWEEN:

John Gordon, Patricia Ducharme, Megan Adam, Nick Stein, Chris Aylward, Darrell-Lee McKenzie, and Public Service Alliance of Canada

Applicants

– and –

Attorney General of Canada

Respondent

JUDGMENT

Lederer J.

Released: February 12, 2014

[^1]: Found in the Budget Implementation Act, S.C. 2009, c. 2 s. 393. [^2]: Ibid at s. 16. [^3]: Affidavit of Paul Rochon, sworn February 28, 2012 at para. 27. [^4]: Concise Oxford English Dictionary, Eleventh Edition, Revised Oxford University Press 2006. [^5]: Affidavit of Paul Rochon, sworn February 28, 2012 at paras. 24 and 28. [^6]: Ibid at para. 28. [^7]: Ibid at para. 31 and Exhibit G, which is also Exhibit X to the Affidavit of Hélène Laurendeau, sworn February 28, 2012. [^8]: Affidavit of Hélène Laurendeau, sworn February 28, 2012 at Exhibit X, which is also Exhibit G to the Affidavit of Paul Rochon, sworn February 28, 2012. [^9]: Ibid (Hélène Laurendeau) Exhibit X and (Paul Rochon) Exhibit G. [^10]: Ibid (Paul Rochon) Exhibit H pages 9, 50 and 86 of the Economic and Fiscal Statement of November 27, 2008. The complete Economic and Fiscal Statement of November 27, 2008 is Exhibit R to the Affidavit of Stephen Jelly, affirmed October 1, 2010, and Exhibit 17 to the Affidavit of Isabelle Roy, sworn July 13, 2011. [^11]: Nominal GDP measures the value of all final goods and services produced within a country’s borders in current dollars. It serves as the main basis for fiscal planning. (Affidavit of Paul Rochon sworn February 28, 2012 at para. 17). [^12]: Affidavit of Paul Rochon, sworn February 28, 2012 at para. 53 and see para. 29 where it is noted that, as of November the projected reduction in nominal GDP was 3.5% demonstrating a further 2% drop from the forecasts made in the February 2008 budget and for the $8.9 billion revenue loss see Affidavit of Stephen Jelly affirmed October 1, 2010, Exhibit R (Economic and Fiscal Statement of November 27, 2008) at p. 49. [^13]: Ibid Exhibit R (Economic and Fiscal Statement of November 27) at p. 82. [^14]: Ibid Exhibit R (Economic and Fiscal Statement of November 27) at pp. 58-59. [^15]: Factum of the PIPSC at para. 35. [^16]: Affidavit of Stephen Jelly affirmed October 1, 2010, Exhibit R (Economic and Fiscal Statement of November 27) at p. 50 (table 2.1). [^17]: The savings for the “new Management Expenditure System” were expected to be $4.3 billion in 2009-2010, $2.6 billion in 2010-2011, $2.8 billion in 2011-2012 $2.9 billion in 2012-2013 and $3.0 billion in 2013-2014 which adds up to the projected savings of $15.6 billion (Affidavit of Stephen Jelly affirmed October 1, 2010, Exhibit R (Economic and Fiscal Statement of November 27, 2008) at p. 53 and table 2.2.). [^18]: No source was provided. As I understand it the surpluses shown for the years in question are $0.8 billion in 2008-09, $0.1 billion in 2009-2010, $0.1 billion in 2010-2011, $1.1 billion in 2011-2012, and $4.2 billion in 2012-2013. This adds up to $6.3 billion which is less than the surplus of $15.9 billion referred to. The surplus projected for the following year (2013-2014) is $8.1 billion which would bring the accumulated surplus to $14.4 billion. (Affidavit of Stephen Jelly affirmed October 1, 2010, Exhibit R (Economic and Fiscal Statement of November 27, 2008) at p. 82. [^19]: Factum of the PIPSC at para. 79. [^20]: Canadian Charter of Rights and Freedoms at s. 1. [^21]: Affidavit of Paul Rochon, sworn February 28, 2012 at para. 54 and Exhibit J (Budget tabled January 27, 2009). [^22]: Affidavit of Stephen Jelly affirmed October 1, 2010, Exhibit R (Economic and Fiscal Statement of November 27) at pp. 8, 46, 51 to 61. The government’s fiscal projections are found at Chapter 3. [^23]: Affidavit of Paul Rochon, sworn February 28, 2012 at para. 55. [^24]: Affidavit of Hélène Laurendeau, sworn February 28, 2012 at para. 206. [^25]: Treasury Board manages government funds within the fiscal framework established by the Department of Finance on behalf of the federal government as a whole. The Treasury Board Secretariat is the administrative arm of Treasury Board. The Treasury Board Secretariat provides advice and support to Treasury Board with respect to its role as general manager of expenditures and performance oversight and employer of employees in the core public administration (see: Affidavit of Hélène Laurendeau, sworn February 28, 2012 at paras. 14 to 18). The “core public administration” is the departments and agencies listed in Schedule I and IV of the Financial Administration Act (see: Financial Administration Act, R.S.C., 1985, c. 11 s. 11(1) and Affidavit of Hélène Laurendeau at para. 10). [^26]: Affidavit of Hélène Laurendeau, sworn February 28, 2012 at para. 204. [^27]: Ibid Exhibit X, which is also Exhibit G to the Affidavit of Paul Rochon, sworn February 28, 2012. [^28]: Ibid at para. 208 and Exhibit W. [^29]: Ibid at paras. 209 to 211 and Exhibit W. [^30]: Speech from the Throne delivered on November 19, 2008 (see: Affidavit of Hélène Laurendeau, sworn February 28, 2012, Exhibit Y; Affidavit of Stephen Jelly affirmed October 1, 2010, Exhibit N and Affidavit of Isabelle Roy, sworn July 13, 2011, Exhibit 12). [^31]: Affidavit of Stephen Jelly affirmed October 1, 2010, Exhibit R (Economic and Fiscal Statement of November 27, 2008) at p. 54 (see also: Affidavit of Paul Rochon, sworn February 28, 2012 at Exhibit H) and Affidavit of Hélène Laurendeau, sworn February 28, 2012 at para. 218. [^32]: Affidavit of Paul Rochon, sworn February 28, 2012 at Exhibit J. [^33]: See fn. 1. [^34]: Expenditure Restraint Act (see: fn. 1) s. 16. [^35]: Ibid at s. 23. [^36]: Ibid at s. 24 to s. 29 and see s. 2 for the definition of “additional remuneration”. [^37]: Ibid at s. 64. [^38]: Ibid at s. 56. [^39]: Ibid at s. 7. [^40]: Ibid at s.