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Ontario Premier Dalton McGuinty.Peter Power/The Globe and Mail

Dalton McGuinty's government is set to open the latest front in its battle with organized labour.

Sources have confirmed that Finance Minister Dwight Duncan will unveil legislation on Wednesday that aims to extend a two-year wage freeze – already imposed on some workers, including teachers – across the broader public sector.

The announcement will provide a welcome change of topic for Mr. McGuinty's Liberals, who are currently being battered by the provincial opposition over the fallout from the cancellation of construction of two gas-fired power plants before last year's election. But it will also add to the acrimony between the Liberals and their erstwhile union allies, which has created some unease on the government benches.

While the government signalled some time ago that it would move forward with an across-the-board freeze, Liberals concede they have struggled to figure out how to draft the legislation in a way that passes legal muster. Of concern is whether they will be seen to have bypassed the collective bargaining process, which the unions are expected to allege in court if new contracts are imposed rather than negotiated.

The government has indicated that the legislation won't go as far as the immediate wage freeze demanded by Progressive Conservative Leader Tim Hudak. Instead, measures will likely be imposed as contracts expire, if new agreements are not reached by that point.

The Liberals initially dismissed Mr. Hudak's wage-freeze call outright, suggesting it was a short-term solution that would do nothing to address Ontario's long-term budgetary challenges. But saddled with a deficit of more than $13-billion, they now say they need to limit borrowing before structural changes are implemented.

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