Resources & Insights

Upcoming Changes to the Canada Labour Code: Equal Pay Requirements

The Canada Labour Code (the “Code”) may soon require federally regulated employers to review the wage rates of certain employees under the 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).

In 2018, the Canadian federal government passed the Budget Implementation Act, 2018, No. 2 (S.C. 2018, c. 27), to amend the Code focusing on equal treatment of federally regulated employees and temporary help agencies. These provisions have not yet come into force.

To support this eventual amendment to the Code, the federal government recently proposed draft regulations (i.e. changes to the Canada Labour Standards Regulations) which would clarify various rules and definitions that will be found in the Budget Implementation Act, 2018, No.2.

The federal government has indicated that the Budget Implementation Act, 2018, No.2 is expected to come into force by late 2025 or early 2026.

Below is a summary of some notable changes that federally regulated employers and temporary help agencies should look out for.

Equal Wages

Once the new provisions come into force, federally regulated employers cannot pay an employee a wage that is lower than what they pay another employee based on “employment status” when the employees perform substantially the same kind of work under similar working conditions. Employers will be prohibited from reducing their employee’s wages to align with this requirement. This equal treatment provision will not apply when a difference in employee wages is due to seniority, merit, or the quantity or quality of employee production.

Also, “employment status” will be more clearly defined to include the differences in hours worked between full and part-time workers as well as between temporary (i.e. casual, fixed-term, seasonal) and permanent employees.

The amendments also provide for a review mechanism, where an employee may request a review from their employer if they believe their wages do not comply with the legislation. The employer must conduct a review of the employee’s wages and write a response to the employee within 90 days.

The draft Regulations would add several new exceptions to the equal wage 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.

Temporary Help Agencies

The amendments will also have an impact on federally regulated temporary help agencies. Temporary help agencies will be prevented from paying an employee a lower wage than what their clients pay their own employees that perform substantially the same kind of work under similar working conditions. Most notably, an employer temporary help agency will be prohibited from charging a fee to an employee that establishes an employment relationship with a client.

Record Keeping

The draft Regulations include new record-keeping requirements. Employers will be required to 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.

Takeaways

The proposed legislative amendments and draft Regulations aim to ensure equal wages 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.

Federally regulated employers and temporary help agencies should keep an eye out for the eventual implementation of the final version of these amendments to the Code. Once these changes take effect, federal employers and temporary help agencies will need to review their pay structures to ensure they provide equal wages to employees (subject to the above exceptions), and to ensure that they are in compliance with all of the requirements for record-keeping and reviews.

By: Jessica Bungay and Jenna Smith