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Dalton McGuinty's Liberals are set to test just how much governments can impose their will on unions, without violating constitutional rights.

On Wednesday morning, Ontario Finance Minister Dwight Duncan will unveil legislation aimed at imposing a two-year pay freeze across the public sector. Officials concede they can't be sure the proposed measures would withstand a court challenge. But they hope they've built in just enough flexibility to demonstrate respect for collective bargaining, which a 2007 Supreme Court decision deemed to be protected under the Charter of Rights and Freedoms.

Rather than an immediate across-the-board freeze, as the opposition Progressive Conservatives have demanded, the bill would introduce freezes as contracts expire. And Liberals, who spoke on condition of anonymity, told The Globe that freezes would only be imposed when negotiations did not produce an agreement that met the government's bottom line.

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Their challenge, Liberals acknowledge, is to avoid the appearance of negotiations beginning with predetermined outcomes. So they will establish financial targets that need to be met – expected to be zero per cent increases for two years – while encouraging unions to come to the table in order to find mutually agreeable ways of reaching them.

Their hope is to reach settlements with enough unions to make the case that the government negotiated in good faith, and that contracts were only reluctantly imposed on those groups that refused to play ball.

Negotiations with teachers were instructive on that front. Relatively early on, the government was able to reach an agreement with the Ontario English Catholic Teachers Association, including subbing in some wage-restraint measures for ones the Liberals had proposed. The framework of that deal was later imposed on two larger and more militant unions, the Elementary Teachers Federation of Ontario and the Ontario Secondary School Teachers Federation.

Early indications are that the Liberals may have trouble finding willing partners going forward. The leaders of many of Ontario's biggest unions have announced that they will hold an "emergency meeting" on Wednesday aimed at challenging Mr. McGuinty's "attack on the Charter rights of workers."

An additional legal question the government may be forced to contend with is how much it can control negotiations between unions and institutions such as hospitals and universities, which, while publicly funded, are not centrally run. Previously, the Liberals indicated only that they would not increase transfers to cover higher labour costs. Now, they will attempt to outright prohibit institutions from increasing those costs, in order to avoid money being drawn away from services.

The legislation will be indicative of a major shift by the Liberals, who only a few months ago argued that across-the-board wage freezes are a short-term solution that are counterproductive when it comes to addressing long-term budgetary challenges – an argument also made by economist Don Drummond in this year's government-commissioned report.

Saddled with a deficit of more than $13-billion, they now say they need to limit borrowing while more structural changes are pursued, and to show immediate action to both the public and credit-rating agencies. The timing of Mr. Duncan's announcement also has the virtue of shifting some focus away from the ongoing fallout from the costly and politically motivated cancellation of two power-plant projects, over which the Liberals are currently being battered by the province's opposition parties.

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It remains to be seen whether the bill will make it through Ontario's fractious minority legislature. The third-party New Democrats, who allowed Mr. Duncan's budget to pass earlier this year, will undoubtedly oppose it. That will leave it up to Mr. Hudak's Tories, who refused to co-operate with the Liberals through much of the year, but supported the bill that imposed new contracts on teachers.

A potential sticking point, if it is included in the legislation, could be changes aimed at making the outcomes of interest arbitration – involving workers, such as police and firefighters, who provide essential services – more favourable to government. The Liberals and Tories clashed on that front earlier this year, with the opposition party arguing that proposed reforms weren't strong enough.

Even if Mr. Duncan's bill passes, however, it may take years before the courts decide if it can stand, and if cash-strapped governments across the country will be allowed to follow suit in future.

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