Opting-Out originated as a device by which one or more provinces choose not to participate in a federal-provincial shared cost program; instead the province receives direct payment (in cash or tax room) of funds which would have been spent there. Under pressure from Québec, the Established Programs (Interim Arrangements) Act was passed in 1965, permitting opting-out of major programs, including hospital insurance, vocational training, public health and aid to the old and disabled. Only Québec opted out. Defended as an example of the ability of the federal system to respond to Québec's needs, the legislation was also attacked for allowing a measure of "special status." The Act set the stage for later developments in fiscal federalism, notably Established Programs Financing (1977).

The Constitution Act, 1982, extends the principle. In its amendment procedures it provides for some opting-out in that a province may remove itself from any amendment that derogates from its existing legislative powers, proprietary rights, "or any other rights or privileges" of its legislature or government. If an amendment transfers powers relating to education or culture, the federal government must provide "reasonable compensation" to a province which opts out. Section 33 of the Constitution Act, 1982, permits a government to opt out of some sections of the Canadian Charter of Rights and Freedoms. Parliament or a provincial legislature may declare that an Act will operate "notwithstanding" sections 2 (fundamental freedoms), and 7 to 15 (legal and equality rights) of the Charter. Such a provision can last a maximum of 5 years, but may be re-enacted.