Summary of the recent changes to the Pay Equity Act

In a recent decision, the Supreme Court of Canada (2018 SCC 17) examined the discriminatory nature of certain provisions of the Pay Equity Act (hereinafter the "Act") and, more specifically, the pay equity auditing process.

The provisions analyzed by the Supreme Court as part of the appeal require that employers conduct pay equity audits every five years.

On completion of an audit, the employer must then verify whether pay equity was maintained over the past five years and determine any compensation adjustments that are required in order to restore equity. The adjustments implemented upon the completion of the audit must also apply in the future. As examined by the Supreme Court, the Act does not call for the retroactive payment of salary adjustments, unless an employer's bad faith is established.

The nation's highest court deemed this particular aspect of the Act unconstitutional, since it violates the right to equality under section 15 of the Canadian Charter of Rights and Freedoms. More specifically, the Supreme Court found that the mechanism to maintain pay equity served to perpetuate the disadvantage suffered by women, since the inequities that arise in the five-year period between the two audits will not be remedied. For the employer, the period becomes a type of grace period during which inequities are tolerated. In this sense, equity compliance is only a one-off.

The Supreme Court added that because audit postings lack details on the time at which the pay inequities emerged in the five-year period, they deprive employees of an element that would enable them to establish the employer's bad faith?the only situation in which the Commission des normes, de l'équité, de la santé et de la sécurité du travail (?CNESST?) may determine that adjustments are payable retroactively.

At the end of its analysis, the Court established that if the Act had required the application of pay adjustments as of the date on which the inequities emerged rather than as of the date on which the results of the pay equity audit are released, there would have been no discriminatory impact.

Changes to the Act following the decision

The Supreme Court ruling was quickly reflected in the Québec government's parliamentary work and led to the adoption of the Act to amend the Pay Equity Act mainly to improve the pay equity audit process (hereinafter the "Act to amend"), which was assented to on April 10, 2019, and whose provisions specifically aim to eliminate the discriminatory effects of the Act highlighted by the Supreme Court.

As a result, from now on, compensation adjustments must be made as of the date of the event that led to them and therefore retroactively. These retroactive adjustments are payable as a lump sum on the date on which the pay equity maintenance audit results are posted, as stipulated in section 76.4 of the Act. In order to mitigate the financial impacts, the Act provides for the option to pay the retroactive compensation adjustments in four equal annual instalments.

Also, to ensure that the retroactive salary adjustment payments are made, the posting of the results of pay equity maintenance audits must now include the list of events that generated the adjustments, as well as the start and end (if applicable) dates of the events.

The Act to amend introduces changes that should make pay equity maintenance audits more transparent. Indeed, it calls for the implementation of a participation process for employers that assemble a pay equity committee or which have at least one certified association. Once the process has been completed, employers must now provide documentation on their pay equity audits, and employees must be given the opportunity to ask questions and share their observations as part of consultation measures.

A summary of these consultation measures must be included with the first posting of the results of the audit. The second posting must also list the additional information requested by employees or certified associations, their observations and the means taken by the employer in response.

Finally, the CNESST now has the positive obligation to assist employees who want to file a complaint and provide them with an appropriate complaint form. It also has the power to consolidate complaints to reach an agreement or establish corrective measures.

It is important to note that the changes to the Act are already in effect, and a number of transitional measures have been set out to process previously filed complaints and pay equity audits that are currently underway.