The Superior Court of Justice says the bill infringes on collective bargaining rights.
An Ontario court has struck down a bill that limited wages for public sector workers.
Bill 124, which was passed in 2019, capped salary increases at one percent a year for public service employees.
Unions representing government workers, teachers, university faculty members and nurses argued the law was unconstitutional and took away meaningful collective bargaining.
Meanwhile, the province said it didn't violate the Canadian Charter of Rights and Freedoms.
The Tories have also said the bill was a time-limited approach to help tackle the deficit.
Provisions of the bill were supposed to be in effect for three years, as new contracts were negotiated.
Judge Markus Koehnen says the bill interferes with collective bargaining in a "substantial" way.
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