Kennedy, speaking on CBC Radio's Metro Morning, said the relationship between Ontario teachers and the government should be "fundamentally based on respect."
"Somehow that went off the rails and that has to be restored," the former education minister told host Matt Galloway. "The only way to do that is to re-open the contracts that were imposed. Teachers are taking a pay cut, not just a wage freeze."
Unable to reach a negotiated labour deal with its public school teachers, the Ontario government imposed two-year contracts on them earlier this month.
Kennedy said if chosen as Ontario’s next Liberal leader, he would work to reach a negotiated settlement with teachers.
"I understand the need to save money but we need to do it in a way that engages the people that are affected," he said. "Teachers are, in effect, taking a pay cut, not just a wage freeze. That needs to be negotiated. I think we can get a better deal ... by negotiating a new settlement."
Kennedy has three terms as an MPP under his belt and one as a MP. He lost bids to lead the provincial Liberals in 1996 and the federal liberals in 2006.
He is one of six candidates running to succeed outgoing Premier Dalton McGuinty at an Ontario Liberal leadership convention set for Jan. 25 to 26 in Toronto.
Kennedy will enter the convention with support from 14 per cent of elected delegates. That puts him third in delegate support but well behind front-runners former MPP Sandra Pupatello (27 per cent) and Don Valley West MPP Kathleen Wynne (25 per cent).
The other candidates include Mississauga-Erindale MPP Harinder Takhar who enters the convention with support from 13 per cent support of committed delegates; Mississauga South MPP Charles Sousa (11 per cent) and St. Paul's MPP Eric Hoskins (six per cent).
The majority of elected delegates, who number just over 1,800 party members, have declared first-ballot support for specific candidates. After that they can shift support to other candidates. The delegate count also includes about 400 ex-officio members, mostly party bigwigs and former candidates, who enter the convention without having to declare first-ballot support for any candidate.
Kennedy would recall the legislature
Kennedy said he will make recalling the legislature a priority should he win the leadership.
McGuinty prorogued the legislature in October on the same day he announced he was stepping down as premier.
"I think that’s important, we've got to be able to talk to the people of Ontario through the legislature's elected representatives," he said. "We have to get at the deficit in an orderly way, in a way that maintains and enhances services."
Galloway also asked Kennedy about Toronto's troubled transit planning and congestion on its highways.
Kennedy said expanding transit will require new revenue sources, even if it means taking the unpopular step of asking drivers to pay more.
"We're going to have to build up transit with a dedicated revenue source of some kind," he said. "We cannot have a little championship cup on the dashboard … saying that we're the longest commute in North America. That has to be reckoned with."
Kennedy did not specify which of the proposed revenue sources — such as road tolls, new taxes and parking fees — he supports.
"One or several of those choices will have to produce around $2 billion a year. Those things have to be paid for," he said.