Newfoundland wins appeal in pay-equity case

October 28,2004

By KIRK MAKIN

Globe and Mail Update

Newfoundland was justified in cancelling a pay-equity agreement with female hospital workers in 1991 because a severe recession had swept over the province, the Supreme Court of Canada said Thursday.

"The exceptional financial crisis called for an exceptional response," a 7-0 majority said. "In such cases, a legislature must be given reasonable room to manoeuvre.

"The fiscal measures adopted by the government did more good than harm, despite the adverse effects on the women hospital workers."

The case went straight to the core of accusations that the court habitually meddles in the business of government, adding fuel to a heated debate about who sets financial priorities: judges or elected politicians.

It involved a 1991 decision by the cash-strapped Newfoundland government to cancel pay-equity settlements for thousands of health-care workers, 80 per cent of them women.

The province reneged on a total payment of $24-million that was intended to cover the period 1988-1991.

"The need to address the fiscal crisis was a pressing and substantial legislative objective in the spring of 1991," Mr. Justice Ian Binnie wrote for the Supreme Court on Thursday. "The crisis was severe. The cost of putting pay equity into effect according to the original timetable was a major expenditure."

Judge Binnie warned politicians, however, not to read the ruling as giving them carte blanche to breach the Charter for budgetary reasons.

"Courts will continue to look with strong skepticism at attempts to justify infringements of Charter rights on the basis of budgetary constraints," he said. "To do otherwise would devalue the Charter, because there are always budgetary constraints and there are always other pressing government priorities."

Lawyer David Stratas described the ruling as "a ground-breaking case about how courts should deal with the collision between government's obligation to protect and promote fundamental human rights and the public purse."

While the court has set the bar high when it comes permitting Charter infringements for budgetary reasons, he said, the ruling will nonetheless bring relief to politicians.

"The judgment is a pretty decisive, blunt rejection of the view that the courts, when interpreting the Charter, are not deferring sufficiently to Parliament," said Mr. Stratas, a constitutional expert with the firm of Heenan Blaikie.

Judge Binnie noted that the province faced imminent financial disaster at the time — including a lower credit rating, the erosion of its ability to borrow and the added cost of borrowing to finance the provincial debt.

"The courts cannot close their eyes to the periodic occurrence of financial emergencies when measures must be taken to juggle priorities to see a government through the crisis," he said.

"Moreover, the government was debating not just rights versus dollars, but rights versus hospital beds, layoffs, jobs, education and social welfare," he said.

Still, Judge Binnie made it clear that clawback legislation "affirmed a policy of gender discrimination which the provincial government had itself denounced three years previously."

Employment considered to be "women's jobs" tends to be chronically underpaid, he said. The legislation "perpetuated and reinforced the idea that women could be paid less for no reason other than the fact that they were women," he said.

A lawyer for the Women's Legal Education and Action Fund, Fiona Sampson, said it is well and fine for the court to empathize with the victims of blatant discrimination, but it still permitted "women's equality to be trumped by cost reduction measures.

"The message it sends is that it's okay to discriminate against women and treat them as second-class citizens," Ms. Sampson said Thursday. "Why couldn't Newfoundland have cut ministerial car allowances?

Ms. Sampson said lawyers for LEAF told the court that "you can't balance the budget on the backs of women and the disadvantaged in society. But there was a huge amount of fear-mongering by lawyers for the provinces about what would happen if the courts started to micro-manage government budgets."

The health-care unions grieved the legislation retracting the payments, accusing the province of failing to search diligently for other ways to save money. Although the unions won, the arbitration ruling was quickly reversed by the courts.

In the Newfoundland Court of Appeal ruling that led to Thursday's ruling, a 3-0 majority of the Newfoundland Court of Appeal backed the province, saying it had every right to choose its own way to deal with a fiscal crisis.

Mr. Justice William Marshall also issued a dire warning in the ruling that civil unrest could result from "undue incursions by the judiciary into the policy domain of the elected branches of government."

Judge Marshall urged the Supreme Court to incorporate a new provision into the template it uses to review alleged Charter breaches, namely, to consider whether striking down a particular law would violate the constitutional separation of powers.

Advocates of strong Charter powers quickly denounced his notion as one that would oblige the courts to defer to legislatures in virtually any case involving budget allocations or social benefits.

Thursday, Judge Binnie was equally dismissive of Judge Marshall's suggestions.

"Judicial review of governmental action long predates the adoption of the Charter," he said. "Since Confederation, courts have been required by the Constitution to ensure that legislatures comply with the division of legislative powers,"

"The Charter has placed new limits on government power in the area of human rights, but judicial review of those limits involves the courts in the same role in relation to the separation of powers as they have occupied from the beginning, that of the constitutionally mandated referee. It is not the courts which limit the legislatures. It is the constitution."

Thursday's ruling comes as a blow to equality-seeking groups such as women, disabled persons and the poor, who feared that an emphasis on budgets and money-setting priorities will rebound against them.

The 1988 pay-equity agreement was reached shortly before a recession hit Newfoundland.

The province argued that it must be permitted to determine budgetary priorities based on the good of all citizens, especially when it faces a state of serious insolvency. Had it not withheld the payments, the province says, it would have had to lay off 900 provincial workers.

"The justification was that the government was experiencing a financial crisis unprecedented in the Province's history," the Court said.

"The government adopted other severe measures to reduce the province's deficit, including a freeze on wage scales for public-sector employees, a closure of hospital beds, and a freeze on per capita student grants and equalization grants to school boards. It also laid off almost two thousand employees and terminated medicare coverage for certain items."