Ontario court of appeal finds public sector “wage cap” unconstitutional (for some)

On February 12, 2024, the Ontario Court of Appeal (“ONCA”) held that Bill 124, the Ontario government’s public sector wage restraint legislation, was unconstitutional in its application to unionized workers, as it violated their collective bargaining rights. However, the same bill was found to be constitutional in its application to non-unionized workers, where collective bargaining is not a right. The Ontario government has since repealed Bill 124 in its entirety but has stated plans to reintroduce new regulations in the future.

The decision

Bill 124 purported to cap public sector wage increases to 1% per year for a three year period, for most employees in a variety of public sector settings. The lower court struck the bill down in 2022, finding it breached workers’ freedom of association under Section 2(d) of the Canadian Charter of Rights and Freedoms. It was also found that this breach could not be “saved” by Section 1 of the Charter, which permits the government to limit Charter rights in certain circumstances, if the limit is reasonable and in response to a pressing objective. 

The Ontario government appealed that decision to the ONCA, which narrowed the lower courts’ decision. It found that the bill was in breach of Section 2(d) of the Charter as it applied to unionized workers. This was including because Bill 124 broadly defined “compensation” so as to significantly reduce the scope of items that could be negotiated during collective bargaining. It was also inconsistent with recent public sector collective bargaining agreements not subject to Bill 124, which permitted higher wage increases.

The ONCA also maintained that this breach of Section 2(d) could not be saved by Section 1 of the Charter. However, unlike the lower court, the ONCA found that managing government finances and budgetary considerations was a pressing objective that could trigger Section 1. With the said, the ONCA also found that Bill 124 did not provide reasonable or proportional means to achieve this objective. This was including because the Government failed to demonstrate why wage restraint could not have been achieved through less obtrusive means, including through the collective bargaining process.

Conversely, the ONCA found that the bill was not in breach of Section 2(d) of the Charter as it applied to unionized workers. This is because Section 2(d) of the Charter does not apply to workers who are not represented by a union and so do not collectively bargain.

Repeal of Bill 124

On February 23, 2024, the Ontario Government repealed Bill 124 in its entirety. The Government had previously announced that it would not be appealing the ONCA’s decision and would instead urgently introduce new regulations. At the time of writing, no regulations have been introduced.

Key takeaways for employers

Some labour arbitrators have already awarded additional wage increases for certain public sector workers affected by Bill 124, largely in cases where the applicable collective agreement includes a “reopener clause” (i.e. a negotiated term that enables the parties to renegotiate terms of an ongoing collective agreement before its term expires). Public sector employers who were implicated by Bill 124 will want to review their collective agreements to understand if such “reopening” is possible.

In addition, and even in the absences of a contractual reopening clause, public sector employers in the union space in particular will want to assess how the repeal of wage restraints may impact future negotiations, including with respect to unions’ wage expectations.

Ontario court picks on the enforceability of termination clauses, again…

In Dufault v The Corporation of the Township of Ignace, the Ontario Superior Court (the “Court”) again took issue with the wording of contractual termination clauses, finding new reasons to render both with and without cause termination language unenforceable.

Looking first at the employment contracts without cause termination language, the Court took issue with its statements that the employer could terminate employment at “its sole discretion” and “at any time”. It concluded that this language permitted the employer to contravene the Employment Standards Act, 2000 (“ESA”). In most circumstances, the ESA prohibits an employer from terminating the employment of an employee is on an ESA leave of absence. The ESA also prohibits termination of employment as means of reprisal against an employee who exercises their rights under the ESA. As a result, the Court reasoned, an employer cannot terminate “at any time” or in “its sole discretion” as the contract purported as, in some circumstances, this will be contrary to their ESA obligations. 

The Court also took issue with the language used in the contract’s termination with cause provisions. In that regard, the contract stated that the employee’s employment could be terminated “for cause” and “without statutory notice and severance pay”. While the common law relies on a “for cause” standard to enable termination without common law reasonable notice, the ESA relies on a different and higher standard – i.e. that employee must be “guilty of wilful misconduct, disobedience or wilful neglect of duty that is not trivial and has not been condoned by the employer” – to enable termination without ESA minimum notice.

There will therefore be scenarios where the grounds for termination meet the common law standard of “for cause” termination (and so common law reasonable notice is not owing); but do not meet the higher ESA standard for “wilful misconduct, disobedience or wilful neglect of duty” (and so statutory minimum notice and severance pay is still owing). As a result, the Court reasoned, an employer cannot purport to terminate “for cause” and without statutory minimum notice or severance pay as, in some instances, this will be this will be contrary to their ESA obligations. 

Ultimately, the Court deemed the termination clauses at issue to be unenforceable. The employee was therefore not limited to the clause’s restrictions to notice on termination of employment, but rather, availed to the greater period of notice available at common law.

It is yet to be seen if this decision will be appealed and so its full impact is unknown. However, the case serves as a sharp reminder that Ontario courts continue to erode an employer’s ability to enforce contractual restrictions on notice of termination of employment (whether with or without cause). Given the language permitted by the courts has proven to be a moving target, employers are encouraged to review their contracts regularly to ensure this language is up to date.

Pay equity case provides guidance to federal employers on use of multiple pay equity plans

As the September 2024 deadline looms for many federally-regulated employers to implement a pay equity plan under the federal Pay Equity Act (the “Act”), case law from the federal Pay Equity Commissioner (the “Commissioner”) remains closely watched. Of these cases, a recent decision from the Commissioner provides further insight for employers considering whether to establish multiple pay equity plans – versus the presumptive single plan. 

The Act presumes that employers will have a single pay equity plan for all employees, regardless of the diversity of many organizations. However, this presumption can, in limited circumstances, be rebutted. The Commissioner may permit an employer to maintain multiple pay equity plans if each plan contains “enough” predominantly ‘male’ job classes to enable the comparison to ‘female’ job classes (i.e. sufficient male job classes in both quantity and quality), and if the Commissioner is satisfied that multiple plans are “appropriate in the circumstances”.

In the limited case law to date, establishing the appropriateness of multiple plans has proven elusive. However, in a recent decision from the Commissioner, the employer was partly successful in its application for multiple plans. In that case, the employer sought three separate pay equity plans: one for non-unionized management employees, one for those in a particular technical role (the “TRE’s”) and one for everybody else (including both union and non-union employees).

The Commissioner deemed it appropriate to have a separate pay equity plan for TRE’s, given the complexity of their job evaluation and pay structures. These structures – and in particular, the job evaluation tool used to assess them – were highly technical, specialized and specific to TRE work. They would therefore pose unjustified complexity to the pay equity analysis of non-TRE employees, and so a separate pay equity plan for TRE’s was appropriate. 

However, the Commissioner refused to permit separate plans for each the management and non-management groups. In an effort to justify these separate plans, the employer explained the challenges of designing a job evaluation tool that could measure and compare the distinct responsibilities of its management workforce, with the fundamentally different skills and responsibilities of its non-management workforce. The employer also explained that when many different jobs are included in the same job evaluation tool, small difference between jobs can become impossible to meaningfully distinguish and therefore gender gaps can be unintentionally obscured. The Commissioner was ultimately unsympathetic the challenges raised by the employer. Quoting an earlier decision on the same issue, the Commissioner noted that:

The legislators were undoubtedly alive to the challenges of creating one pay equity plan in large organizations. Yet, that is what is required by the legislation. Any exception to this requirement [i.e. the exception of multiple plans] must be carefully applied.

The decision therefore reiterates that the ‘typical’ organizational and administrative difficulties of creating a single pay equity plan are unlikely to justify the use of multiple plans. However, the case does suggest that there are nonetheless some scenarios that are sufficiently complex and unique to render multiple pay equity plans appropriate.

B.C. court finds secret recordings by employee can constitute cause for dismissal

In Shalagin v. Mercer Celgar Limited Partnership 2023 BCCA 373, the British Columbia Court of Appeal (the “BCCA”) confirmed that an employee’s repeated, secret recording of coworker conversations can justify cause for dismissal. This was despite the fact the employee claimed the recordings were meant to capture discrimination in the workplace.


The employee, an accountant, was initially terminated from his employment on a without cause basis prompting him to commence lawsuits against the employer for both wrongful dismissal and alleged breaches of human rights legislation. As these claims progressed, evidence came to light that, over a 10-year period and while employed, the employee had surreptitiously recorded over 130 conversations with co-workers while still employed. The material recorded was predominantly confidential, personal and/or sensitive.

In an effort to explain the secret recordings, the employee claimed to have made them to substantiate his belief that he was being discriminated against at work. However, the employer alleged that the recordings were improper and resulted in having “after acquired” cause to terminate the employee’s employment (even though he had initially been dismissed on a without cause basis). 

The employee challenged the employer’s after acquired cause position in court. He was unsuccessful in both the lower court and on appeal to the BCCA. After acquired cause was upheld.

The BCCA substantiated the lower court’s findings.  It found the factors substantiating dismissal for cause included that the employee was aware that the recordings were contrary to his professional duties as an accountant, the confidentiality duties he owed to his employer and general privacy concerns. The information recorded was also sensitive and often included personal details about coworkers, and so the recordings would reasonably have made coworkers uncomfortable. The court was also compelled by the sheer number of the recordings. Finally, it was acknowledged that failure to censure the employee’s behavior might embolden other employees who perceived themselves as ill-treated at work to improperly start recording others.

The BCCA did acknowledge that the employee may have initially had a basis to record conversations due his fears of discrimination. However, it further stated that the fact the employee continued to record conversations – including over a 10-year period – went far beyond this.


This decision shows the growing importance British Columbia courts place on the privacy rights of individuals, even in the employment context. Depending on the scale and severity of the misconduct, infringing on the privacy of co-workers can sufficiently undermine trust and constitute just cause for termination.

The decision also highlights the importance of employers explicitly incorporating employee privacy and confidentiality obligations into every employment agreement. This serves to both reiterate workplace expectations and substantiate any related discipline, up to and including dismissal for cause.


Special thank you to Madison Frehlick for her contributions to this article.

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