The Liberals are poised to abandon the Conservative hardline approach to contract talks with public labour unions, a move that could cost the federal balance sheet nearly $1 billion this fiscal year.
The Liberal government has confirmed it will repeal Tory legislation that allows Ottawa to impose changes to short-term disability and sick leave in the public service.
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The Treasury Board recently signalled to federal unions that it would make withdrawing a provision in Bill C-59 "one of its first orders of business."
The action is expected to have fiscal consequences.
The Conservatives booked $900 million in savings to the government's bottom line in last year's budget, even though negotiations were still ongoing with the unions.
The Harper government's accounting decision helped its election-year budget forecast a $2.4-billion surplus, including the contingency reserve.
By booking that figure, it means the 2015-16 balance sheet could be another $900 million deeper in the red.
'Not what Canadians want to hear'
Since coming to power, the Liberals updated the 2015-16 budget projection in November to a $3-billion shortfall.
Internally, however, the government is aware that more could be shaved from the public books because of the accounting around the short-term disability and sick leave regime.
"If the (short-term disability plan) is not implemented this fiscal year, then the $900 million in savings in 2015-16 will need to be unwound," said briefing material on "urgent issues" provided to Prime Minister Justin Trudeau shortly after he took office.
The briefing said the matter could require action or a decision within 50 days of the October election.
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Regardless of the outcome of contract talks, the government won't ever see the $900 million in estimated savings realized in actual dollar terms, said Debi Daviau, president of the Professional Institute of the Public Service of Canada.
That's because the value is a booked liability, she said.
"They can remove the liability from their books, but the Canadian public needs to understand it's a liability that would have sat there to foreverness without ever actually having to be paid out," Daviau said.
"Truth be told — and I'm sure this is not what Canadians want to hear — but there will be another $900 million that we're in deficit."
Briefing material prepared for Treasury Board President Scott Brison informed him about two court applications filed in June against the federal government by about a dozen labour unions. The Treasury Board oversees government negotiations with the civil service.
The unions allege that part of C-59 substantially interfered with collective bargaining and contravened the freedom of association section in the Charter of Rights and Freedoms, Brison's briefing binder said.
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The Trudeau briefing document noted that C-59 enacted provisions to permit the Treasury Board to modify terms and conditions of public service sick leaves and create the short-term disability plan in the absence of a negotiated agreement.
The Trudeau and Brison briefings, each labelled "secret," were obtained separately by The Canadian Press under the Access to Information Act.
Daviau said the unions have suspended their legal action against the government because of its stated intention to ditch C-59. The government informed unions it would not exercise the legislation's powers before it is repealed, she added.
"It's something we worked really hard for because this was an absurd piece of legislation," Daviau said of C-59.
On Monday, Brison declined to discuss the potential fiscal impact for fear of disrupting the collective bargaining process, but he insisted the Liberals would negotiate in good faith with the unions.
"We're not going to repeat the same error that the previous government made in disrespecting the negotiation process," Brison said. "The previous government actually prejudiced the entire negotiations with C-59."