Enforceable equal wages: More changes for federal employers
By Tiegan A. Scott and Sophie Poulos
The Canada Labour Code (the “Code”) may soon require federally regulated employers to review the wage rates of certain employees under Equal Treatment Wage Rate Rules. These changes would have a particular impact on federally regulated temporary help agencies (i.e. businesses that employ individuals and assign them to work for other companies on a temporary basis).
The Code amendments are expected to be proclaimed by Order in Council by late 2025 or early 2026. To support their implementation, the federal government has proposed changes to the Canada Labour Standards Regulations and the Administrative Monetary Penalties (Canada Labour Code) Regulations (the “Draft Regulations”), to clarify certain points not addressed by the legislative amendments. The government is currently in the process of finalizing these regulations, which would come into force along with the Code amendments.
This update is to inform federal employers about these amendments to the Code and corresponding regulations.
I. Changes to the Canada Labour Code – Budget Implementation Act, 2018
On December 13, 2018, the Budget Implementation Act, 2018, No. 2 (the “BIA”) received Royal Assent; it will come into force on a day to be fixed by order of the Governor in Council. The BIA included amendments to Part III of the Code to require equal remuneration for employees performing the same work, regardless of employment status (i.e., part-time or full-time) and differences in term of employment (i.e., fixed term, casual, or seasonal).
The Equal Treatment requirements prevent employers from paying an employee a lower wage rate than another because of a difference in their “employment status”, if:
- They work in the same industrial establishment;
- They perform substantially the same kind of work;
- The work requires substantially the same, skill, effort, and responsibility; and
- Their work is performed under similar working conditions.
The BIA will also prohibit federally regulated temporary help agencies from paying an employee a lesser wage rate than what their client is paying their employee, if that person is performing substantially the same kind of work under similar working conditions (i.e., if the above four factors are present).
Employers will be prohibited from reducing an employee’s wage rates in order to comply with the BIA’s equal treatment provisions. However, the Code will permit differential wage rates when they relate to seniority, merit, or the quantity or quality of each employee’s production or any other criteria prescribed by regulation.
If an employee believes their wage rate is not compliant with the BIA’s equal treatment provisions, they will be entitled to request a review from their employer. Upon receipt, employers must conduct a review and respond within 90 days. The response must either confirm an increase in wages to meet compliance or provide reasons why the current wage rate is compliant.
II. Proposed amendments to the Canada Labour Standards Regulations (“CLSR”)
To support the BIA’s changes to the Code, the federal government is now proposing amendments to the Canada Labour Standards Regulations and the Administrative Monetary Penalties (Canada Labour Code) Regulations (the “Draft Regulations”). Notable changes include:
(1) New definitions
The Draft Regulations propose defining several key terms within the CLSR (applicable to the equal treatment and temporary help agency provisions of the Code) as follows:
- “Industrial establishment” would refer to the physical or general location where work is being carried out. Two or more work sites of the same employer would be considered part of the same industrial establishment, if they are in the same employment insurance region as defined in the Employment Insurance Regulations. For employers with multiple industrial establishments, an employee would generally be considered to work in the industrial establishment where they most often report to work in person. This new definition would be used to compare wages between employees working in the same industrial establishment, and would only apply to Division III of the Code (the Equal Treatment provisions).
- “Employment status” would be defined to specify that differences in hours worked per week (e.g., full-time or part-time) and differences in term of employment (e.g., fixed term, casual, or seasonal) are both considered part of employment status.
- “Full-time” and “Part-time” would be defined to clarify the number of work hours per week necessary for an employee to be considered full-time. This number would be based on the Statistics Canada classification of how many hours equate to full-time employment, which is not currently reflected in the CLSR.
(2) Additional equal treatment exceptions
The Draft Regulations would add several new exceptions to the BIA’s equal treatment provisions. Allowable differences in wage rates include:
- “Red-Circling” (a practice where an employee is reassigned to a lower wage classification but retains their previous higher salary);
- Increasing wage rates due to difficulty in recruiting or maintaining employees during a labour shortage;
- Northern bonuses related to work in specific geographic regions and locations of hardship;
- Travel status pay for employees on travel status (including to regions and locations of hardship), as opposed to those who do not travel; and
- Employees’ pay when in a development or training program.
(3) Comparing wage rates
The Draft Regulations clarify that in determining whether the BIA’s equal remuneration provisions are being followed, only the same types of wages will be compared. This means, for example, that hourly wages can only be compared to other hourly wages, and mileage rates can only be compared to mileage rates. The intention is to ensure that the BIA’s equal treatment and temporary help agency provisions are being applied fairly, using analogous comparisons.
(4) New record-keeping requirements
The Draft Regulations include new record-keeping requirements that employers retain certain records following a review of wage rates. For each review, employers would need to retain:
- A record of any system an employer has in place that is being provided as a justification for differing wage rates; and
- The written request for review made by the employee, and the employer’s response.
Federally regulated temporary help agencies would also be required to retain:
- A record of each client for whom the employee performs a work assignment; and
- The dates of commencement and termination of the assignment.
(5) Posting of notices
The Draft Regulations would require employers to post updated workplace labour standards notices to reflect the BIA’s new equal treatment and temporary help agency provisions.
(6) Administrative monetary penalties
Additionally, Schedule 2 of the AMP Regulations would be amended to include new violations and penalties related to non-compliance with the BIA’s equal treatment and temporary help agency requirements.
The timeline for these changes will depend in part on feedback received on the Draft Regulations, which closed this week.
III. Conclusion
The legislative amendments proposed in the BIA and the ancillary Draft Regulations aim to ensure fair and equal remuneration for employees performing the same work, regardless of employment status. These changes will particularly impact federally regulated temporary help agencies, requiring them to align their wage practices with the new equal treatment provisions.
Once these changes eventually take effect, federal employers will need to review their pay structures to ensure they provide equal remuneration to employees (subject to the above exceptions), and must comply with all requirements for record-keeping and review once finalized. Stewart McKelvey will continue to monitor these developments for further insight into these changes and when they will come into force.
This client update is provided for general information only and does not constitute legal advice. If you have any questions about the above, please contact the authors, or a member of our Labour and Employment Group.
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