I'm not sure why the government picked this fight in this way. Labour disputes were once commonplace in Ontario schools, and both sides' tactics are well known. The New Democratic and Progressive Conservative governments that preceded the current Liberals fought consistently with teachers, janitors and administrative staff over a series of contracts dating to the early 1990s. Once in power, the Liberals managed for many years to avoid a continuation of that labour war—but now it looks like old battles are destined to be fought again.
From a political strategy point of view, it looks like the government took a risk and it didn't pay off—much like the NDP in the 1990s. Only this time, it's hard to see the upside of their bet. Instead of convincing the public that fiscal priorities trump labour ones, the Liberals managed to make themselves look draconian.
The new labour law (introduced as Bill 115, and named in typical Orwellian fashion as the
Putting Students First Act, 2012) is a real mess from several angles. The (minority government) Liberals teamed up with the Progressive Conservative opposition to pass legislation that pre-emptively suspends the ability of education workers to strike during a two-year period. Moreover, it mandates that their collective bargaining agreements not include raises during that "restraint period". This has (unsurprisingly, and justifiably) prompted debate over the constitutionality of the law, and the extent to which the ability to freely bargain collectively is recognized as a legal right. Legal challenges are imminent, and may well last for several years.
Also, any contract that neglects or contravenes the terms set forth in the act is instead assumed to contain them, or is voided to the extent necessary—in other words, it doesn't matter what a school board and union agree to, to the extent that it's not consistent with the act. That's a step beyond the usual back-to-work legislation, and raises questions about the freedom to contract recognized in law.
The act also contains subtle, crafty mechanisms to allow the government to fine-tune the implementation of the law. While not inherently a bad thing, the act is written in a way that gives the government (via the Lt.-Governor-in-Council) wider than usual power to control it. Indeed, the act's entry into force requires
a legislative trick based on an odd provision of law that allows parts of statutes to be proclaimed into force at different times, even absent language to that effect in the bill.
1
While I can see how the unions might feel backed into a corner, they will ultimately have to take responsibility for their negotiating ploy to cancel some extracurricular activity, and its educational repercussions.
In any event, judging by the last time this happened—in 2001, the high school teachers union declared an end to extracurriculars during contract disputes—there will still be teachers who decide to persevere in other ways, and work around the union's demands. It's an open question whether that's a good thing in the long run—because it conceivably weakens the teachers' position—but at least in the short run, sporadic non-compliance in the name of worthy causes is probably a net plus to society.
1 Perhaps this is for the better—practically speaking, rather than as a matter of democratic principle—as it lets the government shut the law down, even if the Progressive Conservatives refuse to vote in support of a bill to repeal it.