PSAC v. Canada

The Chief Justice (dissenting in part)‑‑This appeal raises the question whether the Public Sector Compensation Restraint Act, S.C. 1980‑81‑82‑83, c. 122 violates the guarantee of freedom of association in s. 2(d) of the Canadian Charter of Rights and Freedoms and, if so, whether such violation can be justified under s. 1.

The Charter provisions relevant to this appeal include the following:

2. Everyone has the following fundamental freedoms:

(a) freedom of conscience and religion;

(b) freedom of thought, belief, opinion and expression, including freedom of the press and other media of communication;

(c) freedom of peaceful assembly; and

(d) freedom of association. [Emphasis added.]

1. 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.

The appeal also raises a second issue, namely, whether the Act violates s. 1(b) of the Canadian Bill of Rights which provides:

1. It is hereby recognized and declared that in Canada there have existed and shall continue to exist without discrimination by reason of race, national origin, colour, religion or sex, the following human rights and fundamental freedoms, namely,

...

(b) the right of the individual to equality before the law and the protection of the law;

I

Facts and Legislation

The Public Service Alliance of Canada (PSAC) is a union representing approximately 168,000 employees of the federal government and its agencies. It brought an action in the Federal Court of Canada, Trial Division seeking a declaration that the Public Sector Compensation Restraint Act was of no force or effect by reason of inconsistency with the Charter , and was inoperative by reason of inconsistency with the Canadian Bill of Rights.

The Public Sector Compensation Restraint Act implements the federal government's "6 and 5" programme. It was enacted on August 4, 1982, but was deemed to come into force on June 29, 1982 (s. 17). Section 3 defines the scope of the Act. It covers employees of the federal government, employees of federal boards, commissions and corporations (as set out in Schedule II of the Act), employees of the Canadian Forces, the Royal Canadian Mounted Police and the Senate and House of Commons. Under s. 3(4), railway employees of Canadian Pacific Ltd., its subsidiaries, and a number of other privately owned railroads are also included in the scope of the Act.

The Act is aimed at ensuring that government employees' compensation plans accord with the government's restraint policy. In section 2(1), the terms "compensation" and "compensation plan" are defined broadly:

"compensation" means all forms of pay, benefits and perquisites paid or provided, directly or indirectly, by or on behalf of an employer to or for the benefit of an employee;

"compensation plan" means the provisions, however established, for the determination and administration of compensation, and includes such provisions contained in collective agreements or arbitral awards or established bilaterally between any employer and an employee, unilaterally by an employer or by or pursuant to any Act of Parliament.

Under s. 4, a "compensation plan" in force on June 29, 1982 is extended automatically for a two‑year period from the date upon which it was due to expire (s. 4(1)(b)), or from the date upon which an increase in wages was to take effect (s. 4(1)(a)). Under s. 9, the compensation plan, if part of a collective agreement or arbitral award, is increased by 6 per cent in the first twelve‑month period and 5 per cent in the second twelve‑month period. In any other case, the increase is by "not more than" 6 per cent and 5 per cent in the two respective twelve‑month periods. If a compensation plan provides for an increase after June 29, 1982, the agreed upon increase is of no effect.

Section 5 deals with employees who were not subject to a compensation plan on June 29, 1982, for example those whose collective agreement expired before June 29, 1982, and who had not made a new agreement at the time the Act came into force. For such employees, the previous agreement is automatically extended for one year from its expiry date and, under s. 6(2), the Treasury Board is authorized to increase wages up to 9 per cent for that year. At the end of the year the two years of "6 and 5" commence (s. 4(1)).

Sections 6(1) and 7 are of particular importance. They read as follows:

6. (1) Notwithstanding any other Act of Parliament except the Canadian Human Rights Act but subject to this section and section 7, the terms and conditions of

(a) every compensation plan that is extended under section 4 or 5, and

(b) every collective agreement or arbitral award that includes such a compensation plan, shall, subject to this Part, continue in force without change for the period for which the compensation plan is extended.

...

7. The parties to a collective agreement, or the persons bound by an arbitral award, that includes a compensation plan that is extended under section 4 may, by agreement, amend any terms and conditions of the collective agreement or arbitral award other than wage rates or other terms and conditions of the compensation plan.

For present purposes, it is sufficient to observe that s. 6(1)(a), by continuing in force the terms and conditions of compensation plans, precludes collective bargaining on compensatory components of collective agreements. Section 6(1)(b) similarly precludes collective bargaining on all issues, including non‑compensatory matters, subject to the operation of s. 7. As I understand s. 7, it permits the parties to a collective agreement to amend non‑compensatory terms and conditions by agreement only. It does not, in my view, authorize employees to strike or to submit proposed amendments to binding arbitration.

The only other provision to which I wish to refer is s. 16. Under this section, the Governor in Council is empowered to terminate the application of the Act in respect of an employee or a group of employees to which the Act applies.

II

Judgments

(i) Federal Court Trial Division

Madame Justice Reed began with an analysis of the effects of the Act: [1984] 2 F.C. 562. She rejected the submissions of the Attorney General of Canada that: (i) collective bargaining with respect to compensation items was possible under the Act, with the approval of the Governor in Council, through the mechanism of s. 16; and (ii) collective bargaining with respect to non‑compensation matters was possible pursuant to s. 7. In her view, these provisions did not preserve any meaningful right to collective bargaining (at p. 577):

Those sections prescribe ways in which collective agreements can be changed: under section 7 by Treasury Board; under section 16 with the approval of the Governor in Council. But to prescribe ways by which collective agreements can be changed is not synonymous with preserving a right to collective bargaining. I do not see how collective bargaining can be retained when the ability to collectively withdraw services is not retained by the employees. And, this is ruled out by the operation of section 6 of the Restraint Act and section 101 of the Public Service Staff Relations Act, as noted above. What the Restraint Act allows is for employees to make requests for changes and for Treasury Board to consent to such requests when they relate to non‑compensation items and for the Governor in Council to consent to such requests when they relate to compensation matters. But there is no element of bargaining in this. Bargaining involves a giving and taking, it involves more than just the right to make requests. We would not say that a person was free to bargain if he were compelled to purchase an article. We would not say that a person was free to bargain if he was compelled to sell an article. Similarly, I do not think one can say that a right to collective bargaining is preserved if there is no right to collectively withdraw services.

According to Reed J., however, freedom to bargain collectively is not encompassed by freedom of association. Section 2(d) of the Charter guarantees trade unions the right to join together, to pool economic resources, to solicit other members, to choose their own internal organizational structures, to advocate their views to employees and to the public at large, and not to suffer any prejudice or coercion by the employer or the state because of such activities. The right to bargain collectively and the right to strike were not held to be elements of freedom of association. Accordingly, Reed J. concluded that, though the Public Sector Compensation Restraint Act suspended the right to bargain which federal public servants would otherwise have had, it did not infringe s. 2(d) of the Charter .

Reed J. held that if the freedom to bargain collectively, including the right to strike, were constitutionally guaranteed under s. 2(d), the Public Sector Compensation Restraint Act would not be saved by s. 1. She found that, although inflation was a serious problem which required government intervention at the time the Act was introduced, when the economic benefit to society was weighed against the cost of infringement of fundamental rights, the Act was not justified under s. 1. In her view, the indirect effect on inflation which the Act might achieve was not sufficiently substantial to justify an abridgment of a constitutionally guaranteed freedom.

With respect to the Canadian Bill of Rights, Reed J. held that the Act did not violate the right of federal public employees to equality before the law as guaranteed by s. 1(b). According to her, the legislation did not impose wage restraints on an arbitrarily selected group of employees (at p. 607):

I could accept that restraint legislation which limited wage rises by `all blue‑eyed people' or `all nurses' or any other group of society arbitrarily selected and whose wages were not shown to be a particularly significant cause of inflation would not meet the test of a valid federal objective. However, in the instant case the government is really legislating as employer. It is not appreciably different from an employer who says to his employees that despite negotiated contracts the economic situation is such that all must take wage reductions or the company will fold. The government, of course, is not likely to go bankrupt. It is this that places public servants in a greater position of security than the work force as a whole, and indeed may place public service unions in a stronger bargaining position. In any event, while it is not free from doubt, I would hold that [the] employer‑employee relationship between the government and those challenging the Restraint Act in this case is such as to constitute a sufficient nexus or justification to meet the test of a valid federal objective in the sense that that phrase has been used in the jurisprudence.

The appeal was dismissed, [1984] 2 F.C. 889.

a) Mahoney J. (Hugessen J. concurring)

According to Mahoney J., the right of freedom of association guaranteed by the Charter is the right to enter into consensual arrangements, but does not protect the objects of the association nor the means of attaining those objects. While collective bargaining is the primary means by which organized labour expects to attain its principal object, the economic betterment of its membership, it remains a means and it is, therefore, not guaranteed by s. 2(d) of the Charter .

Mahoney J., although acknowledging that his remarks on this point, like those of the trial judge, were obiter dicta, commented on the difficulties faced by the courts in considering macro‑economic policy issues under s. 1 of the Charter . He suggested that macro‑economic expertise, while useful to explain terms of art, was not generally a sound basis "upon which a court should be expected to pronounce, on a balance of probabilities, the one true path" (p. 896). He added that the difficulty posed to the courts arose from the absence of a generally accepted orthodoxy against which to measure particular opinions of appropriate government policy.

On the Canadian Bill of Rights issue, Mahoney J. held that the Act was a wage control measure applied to an identifiable group. It therefore had a valid federal objective and did not violate s. 1(b). The reasonableness of the means chosen to achieve the objective is not, according to Mahoney J., part of the valid federal objective test.

b) Marceau J. (concurring in result)

According to Marceau J., the phrase "freedom of association" is not broad enough to encompass the right to strike. He maintained that courts should not construct edifices of policy without regard to the plain meaning of the words of the Charter .

Marceau J. pointed out that the interpretation given to s. 1 of the Charter by the trial judge was not one he was prepared to endorse.

Furthermore, the Act did not violate the right of the federal public employees to equality before the law under s. 1(b) of the Canadian Bill of Rights. In imposing wage controls on one group of employees only, Parliament was attempting to achieve the valid federal objective of curbing inflation. In so doing, it had adopted a means reasonable enough to force one to reject any thought of discrimination.

III

The Constitutional Questions

The constitutional questions were stated as follows:

1. Does the Public Sector Compensation Restraint Act, S.C. 1980‑81‑82‑83, c. 122, infringe upon the freedom of association guaranteed in s. 2(d) of the Canadian Charter of Rights and Freedoms ?

2. Is the Public Sector Compensation Restraint Act, S.C. 1980‑81‑82‑83, c. 122, justified on the basis of s. 1 of the Canadian Charter of Rights and Freedoms ?

3. Does the Public Sector Compensation Restraint Act, S.C. 1980‑81‑82‑83, c. 122, infringe upon the right to "equality before the law" recognized in s. 1(b) of the Canadian Bill of Rights, R.S.C. 1970, App. III?

IV

Section 2(d) of the Charter and the Public Sector Compensation Restraint Act

For the reasons I have given in the Reference re Public Service Employee Relations Act (Alta.), [1987] 1 S.C.R. 313 (hereinafter Alberta Labour Reference), released concurrently, I believe that freedom of association in the labour relations context includes the freedom to participate in determining conditions of work through collective bargaining and the right to strike. The Public Sector Compensation Restraint Act, by automatically extending the terms and conditions of collective agreements and arbitral awards and by fixing wage increases for a two‑year period, infringes the freedom of public sector employees to engage in collective bargaining.

This conclusion is not altered by s. 7 of the Act which, as noted above, permits parties to a collective agreement to agree to "amend any terms and conditions of the collective agreement or arbitral award other than wage rates or other terms and conditions of the compensation plan." Nor is it altered by s. 16 which permits the Governor in Council to suspend the operation of the Act in respect of an employee or group of employees. A union has no effective bargaining power under either of these provisions since it lacks the legal capacity to withdraw services collectively or even to remit a dispute to binding arbitration. As I have noted in the Alberta Labour Reference, freedom to strike is a necessary incident of collective bargaining. Without the capacity to strike or to submit a dispute to binding arbitration, employees seeking non‑compensatory amendments under s. 7, or employees requesting the Governor in Council to suspend the operation of the Act are not in an effective position to bargain. As Reed J. stated: "Bargaining involves a giving and taking, it involves more than just the right to make requests" (p. 577).

I conclude that the Public Sector Compensation Restraint Act impairs the freedom to bargain collectively both in respect of compensatory matters and in respect of other matters and therefore limits freedom of association as guaranteed by s. 2(d) of the Charter .

V

Section 1

The respondent submits that even if the Public Sector Compensation Restraint Act violates freedom of association as guaranteed by s. 2(d) of the Charter , the Act can be upheld under s. 1. No question arises as to whether the limits on freedom of association imposed by the Public Sector Compensation Restraint Act are "prescribed by law", as the legislation is duly enacted by a properly constituted legislature.

The general principles under which a s. 1 inquiry is to be conducted are to be found in Law Society of Upper Canada v. Skapinker, [1984] 1 S.C.R. 357; Hunter v. Southam Inc., [1984] 2 S.C.R. 145; Singh v. Minister of Employment and Immigration, [1985] 1 S.C.R. 177; R. v. Big M Drug Mart Ltd., [1985] 1 S.C.R. 295, and most recently in R. v. Oakes, [1986] 1 S.C.R. 103. In brief, the inquiry involves two steps: 1) assessing the importance of the objective underlying the impugned law, and 2) assessing the proportionality of the means employed to achieve the purpose pursued. The onus of proving the constituent elements of a s. 1 analysis is on the party seeking to justify the limit.

A legislative objective for imposing measures which limit a Charter right or freedom must be of sufficient importance to warrant overriding such a right or freedom: R. v. Big M Drug Mart Ltd. It must relate to a concern which is pressing and substantial in a free and democratic society: R. v. Oakes, at pp. 138‑39. In the present case, though there is no explicit indication of Parliament's objective in the Act, it is apparent that the general or overriding purpose for enacting the Public Sector Compensation Restraint Act was the reduction of inflation. This is, in my view, an objective of sufficient importance for the purpose of s. 1. Inflation at the time of the Act's passage was a serious problem. The evidence established that wage and price inflation had reached double digit levels, that Canada's inflation rate was exceeding that of the United States, and that the monetary and fiscal restraint policies of 1979 were not having a significant effect.

The trial judge noted that three of the four economists at trial agreed that inflation was a serious problem in 1982 and one which required government intervention. It should be noted in this regard that in Re Anti‑Inflation Act, [1976] 2 S.C.R. 373, a majority of this Court was not prepared to conclude that Parliament was wrong in considering the inflationary experience of the early 1970's to amount to a situation of economic crisis imperilling the well‑being of the people of Canada as a whole and requiring Parliament's stern intervention: see p. 425, per Laskin C.J. and p. 439, per Ritchie J. Accordingly, the Anti‑Inflation Act, S.C. 1974‑75‑76, c. 75, was held to be valid pursuant to the federal government's peace, order and good government power. The seriousness of inflation underlined by the Court's decision in Re Anti‑Inflation Act supports the characterization of Parliament's objective in the present case as relating to a "pressing and substantial concern". I am of the opinion, therefore, that the objective of reducing inflation was, at the time of passage of the Act, an objective of sufficient importance for the purpose of s. 1 of the Charter .

I would add that it is unnecessary in the present case to determine whether the inflation which led to the enactment of the legislation under review amounted to an economic crisis or emergency such that Parliament could, on the authority of the Anti‑Inflation Act case, have imposed controls on employees falling outside its traditional labour relations jurisdiction, and I refrain from so doing. A "pressing and substantial concern" need not amount to an emergency.

(ii) Are the Limits Imposed by the Public Sector Compensation Restraint Act a Proportionate Means for Achieving Parliament's Objective?

In R. v. Oakes, supra, three criteria were suggested which are useful in assessing proportionality under s. 1: 1) there must be a rational connection between the measure and the objective it is to serve; 2) the measure should impair as little as possible the right or freedom in question; and 3) the deleterious effects of the measure must be justifiable in light of the objective it is to serve. In the present appeal, we must determine whether it was reasonable and demonstrably justified for the legislators to try to achieve their objective of combatting inflation by suspending virtually all collective bargaining for two years and mandating specific non‑inflationary compensation increases for federal public employees.

Both at trial and in argument before this Court, considerable attention was focused on whether the imposition of compensation controls on a relatively small proportion of the labour force was an effective strategy for fighting inflation. The appellant maintained that such controls were merely a secondary or supplementary means of controlling inflation. Furthermore, since the controls were directed at only 5 per cent of the Canadian labour force, it was argued that the controls would not directly affect the level of inflation in a significant way. Any wider impact on inflation in the economy in general was said to be merely indirect and speculative, and dependent on the controls having a psychological effect on the expectations of employees beyond the ambit of the Act.

The respondent did not dispute that the controls programme was a secondary rather than a primary measure for fighting inflation. It was also acknowledged by the government that the role of wage controls in curbing inflation in general was indirect rather than direct. Nonetheless, the respondent submitted in its factum that the Act "was a reasonable and appropriate course of action to supplement and assist the government's monetary policies for the purpose of ameliorating inflation, to the considerable benefit of society as a whole". (Emphasis added.)

In my opinion, 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. 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. 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 . Thus, in the present case, I am prepared to accept the respondent's submission that compensation controls, even if limited to a select class of employees, could reasonably have been expected to have a positive, albeit partial and indirect, impact on combatting inflation in the economy in general. I am also prepared to accept that the temporary suspension of collective bargaining on compensation issues was a justifiable infringement of freedom of association having regard to the third limb of the proportionality test.

The conclusion that selective controls could reasonably have been considered to be an effective strategy does not, however, conclude the analysis under s. 1. It is still necessary to examine the provisions of the Public Sector Compensation Restraint Act to determine whether constitutionally guaranteed freedoms are abridged arbitrarily or without reason. As stated in R. v. Oakes, supra, the measures adopted must not be "arbitrary, unfair or based on irrational considerations" and they should "impair as little as possible" the right or freedom in question.

There are, I believe, three elements of the controls programme that require careful scrutiny in light of these requirements. First, the Act is directed at federal public sector employees and railway employees and subjects them to harsher treatment than other members of the labour force under federal jurisdiction. Second, the legislation precludes collective bargaining not only on wage issues, but on all matters falling within the definition of a "compensation plan" under s. 2(1). Finally, the Public Sector Compensation Restraint Act denies effective collective bargaining on non­compensatory issues by virtue of s. 6(1)(b). These aspects of the "6 and 5" legislation raise the possibility that the legislation is overbroad in its sweep or arbitrary in its focus.

Turning to the first concern, the issue in the present case is whether the legislative focus on public sector employees is rationally connected to the legislative purpose. As I have noted above, s. 3(4) of the Act makes the controls programme applicable to employees of certain railway companies. In this appeal, it is unnecessary to consider s. 3(4). The appellant union does not represent the railway workers. Nor was any argument centered on the inclusion of this group. It may be that there existed some rational basis for the seemingly anomalous inclusion of railway employees and I wish to express no opinion on the validity of s. 3(4) in a case that has been argued on behalf of and with respect to an entirely different group of employees.

The submission by the appellant was that the use of public sector labour remuneration as a focus of restraint was arbitrary and irrational. Indeed, this was the gist of the appellant's argument under s. 1(b) of the Canadian Bill of Rights. The suggestion is that the government, in its role as an employer, should be treated like any other employer; either compensation controls must be universally applied to all employees within federal labour relations jurisdiction or they must not be applied at all.

I cannot accept, however, that Parliament must consider the government to be just another employer. I have referred, above, to the important leadership role of the government, and to the psychological component of that role in relation to economic matters. Rightly or wrongly, the public sector is perceived to occupy a central role in defining the parameters of negotiations between employer and employee. By enacting its "6 and 5" programme, Parliament intended to send a dramatic message conveying its resolve to fight inflation. It wished to demonstrate to the nation in an unequivocal fashion that it was prepared to take tough measures within its own sphere of employer‑employee relations. During the House of Commons debate the Deputy Prime Minister and Minister of Finance emphasized the leadership role of government:

The private sector and the provinces could not be expected to accept income restraint unless the Government of Canada showed leadership in the conduct of its own affairs. The government has therefore decided to lead the way by implementing the proposed strategy in the federal public sector for a period of two years ... [Emphasis added.]

(House of Commons Debates, June 28, 1982, p. 18878.)

The President of the Treasury Board explained that the federal public sector controls programme was designed as a "striking example" for Canadians to follow:

All realized that it was imperative for the federal government to accentuate the anti‑inflationary impact of its economic policies by taking a more determined stand on wage rates. The federal public sector compensation restraint program alone cannot resolve all the economic problems Canadians are wrestling with today. It should be seen as a serious and striking example that all Canadians, employers and employees, individually and collectively, must follow if they are the least bit concerned with maintaining their competitive position abroad and their standard of living at home. [Emphasis added.]

(House of Commons Debates, July 9, 1982, at p. 19182.)

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. 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 the "6 and 5" legislation.

I am comforted in my conclusions on this issue by the opinions of the judges of the Ontario Divisional Court in the Broadway Manor case: Re Service Employees' International Union, Local 204 and Broadway Manor Nursing Home (1983), 44 O.R. (2d) 392. The majority judges (O'Leary and Smith JJ.) concluded that Ontario public sector compensation restraint legislation, which was modelled on the Act under review in this appeal, infringed the Charter guarantee of freedom of association in s. 2(d). However, the interference with collective bargaining and the removal of the right to strike with respect to public sector compensation matters was held to be a reasonable limit under s. 1. Smith J. stated at p. 468, "I see nothing a priori that is capricious or arbitrary in a restraint programme that is limited to the public sector."

I observe, too, that although the constitutional validity of macro‑economic initiatives ought not to depend upon their ultimate success or failure, it is relevant to establishing the sincerity of the legislative objectives to consider whether these objectives were in fact achieved. In this context, it is plainly apparent that the leadership role of the federal government was, at least, successful in promulgating temporary restraint programmes on the part of other public sector employers. Professor D. D. Carter observes that "Six of the provinces at about the same time also enacted public sector wage restraint programs similar in thrust to the federal Public Sector Compensation Restraint Act": "Collective Bargaining and Income Restraint Programs: The Legal Issues" in Recent Public Sector Restraint Programs: Two Views (Reprint Series No. 53, Industrial Relations Centre, Queen's University, 1984) at p. 1.

I turn now to the second consideration referred to above, namely, that the legislation controls "compensation" as defined in s. 2(1) rather than wages alone. I have little trouble in concluding that this aspect of the restraint legislation is justifiable. The very title of the Act, and its consistent focus on the broad range of compensation issues makes it clear that Parliament was not merely concerned with the inflationary pressure that might result from putting increasing amounts of cash into the hands of employees. It was also concerned with the inflationary effects of increasing the cost to employers of producing any given quantity of goods or services. This is made perfectly clear by the definition of "compensation" in s. 2(1), which is broad enough to include all matters which would require the employer to expend resources for the direct or indirect benefit of employees. If the legislation were perceived to contain "loop‑holes" whereby inflationary wage demands were simply diverted into a series of non‑pecuniary benefits, which nevertheless augmented production costs, the legislation would be regarded as a mere sham, an empty symbolic gesture. This would not be consistent with the objective of sending a clear and unmistakable message of restraint to other employers.

The third element of the "6 and 5" legislation which requires particular scrutiny is its effect on collective bargaining over non‑compensation issues. At a minimum, I believe, s. 6(1)(b) removes the right to strike over non‑compensatory issues as well as the right to submit such disputes to binding arbitration, and s. 7 does not restore those rights. In the Broadway Manor case, although the Ontario Court of Appeal differed from the majority of the Divisional Court in holding that provisions substantially the same as s. 6(1)(b) and s. 7 preserved the statutory duty of the employer to bargain in good faith on non‑compensatory issues, the Court of Appeal acknowledged:

... changes can be effected only by agreement. It may be, therefore, that the economic sanctions of strike and lock‑out under the Labour Relations Act and arbitration proceedings under the Hospital Labour Disputes Arbitration Act ... are not available to public sector employees under the [Inflation Restraint Act].

((1984), 48 O.R. (2d) 225, at p. 248)

The difference of interpretation between the majority in the Divisional Court and the Ontario Court of Appeal was particularly important in the context of the Broadway Manor litigation, since on the interpretation of the Court of Appeal it became unnecessary for that Court to consider the Charter issues. In the present context, however, the difference amounts only to the question whether collective bargaining on non‑compensatory issues was entirely denied or, alternatively, profoundly impaired.

In either event, I do not think the respondent has met the burden of justifying s. 6(1)(b) of the Act under s. 1 of the Charter . The respondent, in its factum, has not suggested any rationale for casting its net so widely as to impair collective bargaining on non‑compensatory issues in an Act designed to reduce inflationary expectations. Nor is there any rationale which springs obviously from the text of the Act. On the contrary, one would have expected that the breadth of the definition of "compensation" removed any possibility that costly employee benefits might serve as a proxy for wages in collective bargaining on non‑compensatory issues. No justification has been offered for the impairment of the constitutionally protected freedom to bargain collectively on such important matters as employee safety, management rights, grievance procedures, seniority and employee rights to engage (or duties to refrain from engaging) in political activity.

All three judges of the Ontario Divisional Court in the Broadway Manor case found s. 13(b) of the Ontario legislation, which was substantially the same as s. 6(1)(b) of the federal Act, to be unjustifiable. O'Leary J. at pp. 446‑47 adopted the conclusions of the Ontario Labour Relations Board:

This tribunal, with its special expertise in labour relations, recognizes the importance of non‑compensation terms and conditions of employment such as seniority, lay‑off and recall (especially in a time of recession), health and safety, grievance procedure and management rights. Notwithstanding the regulation of compensation, meaningful and substantial collective bargaining is nevertheless possible.

(Service Employees Union, Local 204 v. Broadway Manor Nursing Home, [1983] O.L.R.B. Rep. Jan. 26 at p. 36).

O'Leary J. went on to write, at p. 447:

I agree there is little point in allowing collective bargaining and strikes over wage‑package issues if the increase in any event is fixed at 5%. But it does not follow that employees should also be prevented from bargaining and striking over non‑compensation matters.

Smith J. expressed similar views: pp. 470‑71. Galligan J., whose interpretation of the statute led him to dissent in the result, nevertheless considered the Charter issues in obiter dicta. He expressed the opinion that (at p. 413):

To the extent therefore that the Act infringes upon the freedom of association by rendering nugatory freedom to organize and freedom to bargain on non‑compensatory matters, I would hold it to be unconstitutional and of no force and effect.

I agree with the judges of the Divisional Court that the effective nullification of the employees' ability to bargain collectively on non‑compensatory issues represents a profound intrusion into the associational freedoms of workers, and one which bears no apparent connection to the objectives of an inflation restraint programme. The Public Sector Compensation Restraint Act has swept away virtually the full range of collective bargaining activities of federal employees, seemingly without any thought for whether such draconian measures were necessary. This aspect of the 1982 law was clearly described by Professor Carter at p. 1 of his article:

The 1982 income restraint programs were a significant departure from their 1975 predecessor. While the earlier Anti‑Inflation Act reached both the public and private sectors, it was not as blunt an instrument as the public sector restraint legislation of 1982, as it at least attempted to accommodate existing collective bargaining structures by allowing collective bargaining to continue within a framework of controls. Guidelines were promulgated and, although bargaining settlements were expected to fall within these guidelines, it was also possible for exemptions to be made. Although the Canadian collective bargaining structure did not co‑exist in complete harmony within this system of wage restraints, it at least continued to function during this first period of income restraint.

As I have observed in the Alberta Labour Reference, the collective bargaining process serves important educative and democratic functions. The participation of employees in determining their rights and obligations in the workplace cannot be undermined without good reason. It follows that the Public Sector Compensation Restraint Act, by means of s. 6(1)(b), overreaches the otherwise acceptable justification offered for the Act's impairment of public sector workers' freedom of association.

The judges of the Divisional Court held that the appropriate remedy was a declaration that s. 13(b) of the Ontario legislation was of no force and effect. The legislation was, however, upheld in so far as it imposed the terms of employee compensation. I am in agreement with this approach and propose to apply it to the Act under review. In my view, s. 6(1)(b) is of no force and effect. The remainder of the Act, with the exception of s. 3(4) upon which I express no opinion, is justifiable under s. 1. In approaching remedial alternatives under the Charter , as under the Constitution Act, 1867 , the courts must be cautious not to nullify legitimate legislative initiatives on account of the overbreadth of a particular provision if severance of that provision is possible. The test for severance was stated by Viscount Simon in the following terms in the Alberta Bill of Rights case (Attorney‑General for Alberta v. Attorney‑General for Canada, [1947] A.C. 503) at p. 518:

The real question is whether what remains is so inextricably bound up with the part declared invalid that what remains cannot independently survive or, as it has sometimes been put, whether on a fair review of the whole matter it can be assumed that the legislature would have enacted what survives without enacting the part that is ultra vires at all.

In applying the severance principles to the Public Sector Compensation Restraint Act, it is worth bearing in mind that the central thrust of the Act was to extend compensation plans and to provide for the stipulated "6 and 5" increases. I have little hesitation in concluding that this aspect of the legislation is capable of survival independently of s. 6(1)(b). In my view s. 6(1)(a) is sufficient to preclude resort to strikes or binding arbitration for the settlement of disputes concerning the terms and conditions of compensation plans.

VI

The Canadian Bill of Rights

I am in agreement with the trial judge and the judges of the Federal Court of Appeal that s. 1(b) of the Canadian Bill of Rights does not assist the appellant. The Public Sector Compensation Restraint Act was enacted with a view to dampening inflationary expectations. This is a legislative objective which qualifies as a "valid federal objective" pursuant to the jurisprudence interpreting s. 1(b) of the Canadian Bill of Rights, at least in the context of legislation directed at a labour market within undisputed federal regulatory competence. Assuming that s. 1(b) requires some rational explanation for the legislative focus on government employees, I am satisfied, for the reasons I have already given when addressing this issue under s. 1 of the Charter , that the respondent has offered a satisfactory explanation. It follows that I would answer the third constitutional question in the negative, with the caveat that I refrain from pronouncing on s. 3(4) of the Act.

VII

Conclusions

The constitutional questions should be answered as follows:

1. Does the Public Sector Compensation Restraint Act, S.C. 1980‑81‑82‑83, c. 122, infringe upon the freedom of association guaranteed in s. 2(d) of the Canadian Charter of Rights and Freedoms ?

Answer: Yes.

2. Is the Public Sector Compensation Restraint Act, S.C. 1980‑81‑82‑83, c. 122, justified on the basis of s. 1 of the Canadian Charter of Rights and Freedoms ?

Answer: Section 6(1)(b) is not justified under s. 1 of the Charter . I express no opinion regarding s. 3(4) . The remainder of the Act is justified under s. 1 of the Charter .

3. Does the Public Sector Compensation Restraint Act, S.C. 1980‑81‑82‑83, c. 122, infringe upon the right to "equality before the law" recognized in s. 1(b) of the Canadian Bill of Rights, R.S.C. 1970, App. III?

Answer: I express no opinion on s. 3(4). The remainder of the Act does not infringe s. 1(b) of the Canadian Bill of Rights.

In light of these answers, I would declare s. 6(1)(b) of the Public Sector Compensation Restraint Act to be of no force or effect. The appeal should therefore be allowed in part. Since I would uphold the remainder of the legislation, however, I would not award costs.

The judgment of Beetz, Le Dain and La Forest JJ. was delivered by

Le Dain J.‑‑For the reasons I expressed in the Reference re Public Service Employee Relations Act (Alta.), [1987] 1 S.C.R. 313, I am of the opinion that the guarantee of freedom of association in s. 2(d) of the Canadian Charter of Rights and Freedoms does not include a guarantee of the right to bargain collectively and the right to strike. I agree with the Chief Justice and Justice McIntyre that the Public Sector Compensation Restraint Act does not infringe the right to equality recognized by s. 1(b) of the Canadian Bill of Rights. I would accordingly dismiss the appeal and answer the constitutional questions in the manner proposed by McIntyre J.

The following are the reasons delivered by

McIntyre J.‑‑I have read the reasons for judgment of the Chief Justice and Wilson J. in this appeal and I adopt the Chief Justice's recitation of the facts and his description of the issues and proceedings. With all due deference to the views of my colleagues, I have, however, reached a different conclusion and would answer the constitutional questions differently.

The Chief Justice bases his reasons on the first issue‑‑that of freedom of association under s. 2(d) of the Canadian Charter of Rights and Freedoms ‑‑upon the proposition that freedom of association in the context of labour relations includes freedom to engage in collective bargaining and the right to strike. For the reasons I expressed in the Reference re Public Service Employee Relations Act (Alta.), [1987] 1 S.C.R. 313 (judgment delivered concurrently), I am of the opinion that s. 2(d) of the Charter does not include a constitutional guarantee of a right to strike. My finding in that case does not, however, preclude the possibility that other aspects of collective bargaining may receive Charter protection under the guarantee of freedom of association.

In my opinion, the Public Sector Compensation Restraint Act, S.C. 1980‑81‑82‑83, c. 122, does not interfere with collective bargaining so as to infringe the Charter guarantee of freedom of association. The Act does not restrict the role of the trade union as the exclusive agent of the employees. It requires the employer to continue to bargain and deal with the unionized employees through the Union. It also permits continued negotiations between the parties with respect to changes in the terms and conditions of employment which do not involve compensation. The effect of the Act is simply to deny the use of the economic weapons of strikes and lockouts for a two‑year period. This may limit the bargaining power of the trade union, but it does not, in my view, violate freedom of association.

The appellant has also argued that the Public Sector Compensation Restraint Act violates s. l(b) of the Canadian Bill of Rights which recognizes the "right of the individual to equality before the law and the equal protection of the law". I am in general agreement with the Chief Justice in his rejection of this claim. I would add that the respondent here has dealt equally with all its employees and has not singled out any individuals or subgroups from within its work force. I would dismiss the appeal and answer the constitutional questions, as follows: