Canada: Compensation Adjustments: When Lack Of Retroactivity Constitutes Gender Discrimination

The provisions of the Quebec Pay Equity Act relating to pay equity audits were struck down by the Quebec Superior Court on January 22, 2014 on the ground that lack of retroactivity in compensation adjustments is an infringement of the Charters.¹

The impugned legislation

The Quebec Pay Equity Act requires any public or private sector employer who has an average of ten or more employees in the course of a given year to have a pay equity plan.

In 2006, ten years after the adoption of the Act, the Minister of Labour tabled in the National Assembly a report prepared by the Commission de l'équité salariale (CES) in which the CES noted that barely half of employers had set up a pay equity plan and that 38% of the 53% of delinquent employers had not even started the process.

In an attempt to resolve this situation, the legislator adopted An Act to amend the Pay Equity Act² in 2009. That act repealed sections 40 to 43 of the Act and required employers to maintain pay equity without providing any specific guidance as to how that should be achieved. The Act to amend the Pay Equity Act merely replaced the vague obligation in the original Act to "maintain a plan" with a proactive requirement that employers conduct a pay equity audit every five years. Consequently, since 2009, Quebec employers must conduct a pay equity audit every five years, post a list of the events leading to compensation adjustments and pay the compensation adjustments as of the date of posting.

This measure failed to satisfy certain unions, which believed that the new provisions merely contributed to maintaining wage disparity. Thus, the Alliance du personnel professionnel et technique de la santé et des services sociaux (APTS), the Syndicat de la fonction publique et parapublique du Québec (SFPQ), the Fédération interprofessionnelle de la santé du Québec (FIQ) and certain locals of the Canadian Union of Public Employees and the Fédération des travailleurs du Québec (SCFP-FTQ) all contested the constitutionality of the new provisions.

Decision of the Quebec Superior Court

The Court found that the failure to incorporate retroactivity into the employer's obligation to pay compensation adjustments following changed circumstances is a source of gender discrimination. Losses caused by the absence of any requirement to apply compensation adjustments retroactively may in fact be considerable and could affect the pension benefits of employees in a predominantly female job class. The Court also noted that s 76.3 of the Act, as amended by the Act to amend the Pay Equity Act, requires the employer to post the results of the pay equity audit in order to give employees a minimum amount of information, including the list of the events leading to compensation adjustments, but not including the date when the changes occurred. In the opinion of the Court, in many instances, the employer could specify when the changes occurred and should provide such information to employees to allow them to evaluate whether or not the audit results are good or bad and, based on their evaluation, to assert their rights.

The Court ruled that the provisions of the Act pertaining to the posting of the audit results are invalid and of no legal force or effect because there is no requirement that the posting indicate when the changes occurred, even where it is possible to do so, or that the compensation adjustments be paid from the date of the changes. However, the Court has suspended its ruling for one year or until the legislator remedies the situation, whichever occurs first.

Conclusion

The Court found that the provisions relating to the posting of the audit results and the lack of retroactivity in the payment of compensation adjustments allows the systemic discrimination that the Act was supposed to eliminate to persist. According to the Court, this is in flagrant contradiction of social advances that are considered to be fundamental and constitutes an unacceptable situation in a free and democratic society.

Clearly, the Attorney General was defending the position of the legislator and the Court has given little consideration to the position of Quebec employers in its ruling. For example, the five-year audit requirement may create uncertainty in that Quebec employers could be compelled to pay retroactive compensation adjustments without having any way of determining them in advance. The other solution, for employers who do not wish to face unexpected compensation adjustments, would be to have continuous audits or much more frequent audits (for instance, annually). However, such an exercise could be too burdensome for some employers.

It remains to be seen what the legislator will propose to correct the situation in light of this suspended ruling.

Footnotes

1 Alliance du personnel professionnel et technique de la santé et des services sociaux c Québec (Procureur général du Trésor), 2014 QCCS 149.

2 An Act to amend the Pay Equity Act, 2009, chapter 9.

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