June 2018

Quebec pay equity maintenance audit—Supreme Court judgment

Summary of the decision…

On May 10, the Supreme Court of Canada upheld judgments by the Superior Court of Québec (2014) and the Québec Court of Appeal (2016), namely that sections 76.3, 76.5 and section 103.1 paragraph 2 of the Pay Equity Act (hereinafter the “Act”) are unconstitutional.

By implicitly allowing discriminatory pay practices against women, these sections violate equality rights guaranteed in the Canadian Charter of Rights and Freedoms.

The legislature is now required to review the content of the Act concerning the three sections in question. Until the Act is modified, employer obligations remain unchanged.

Why doesn’t the pay equity maintenance audit prescribed by the Act sufficiently protect women from discriminatory practices?

Every five years, Quebec businesses subject to the Act must perform an audit on pay equity maintenance within their company. If discrepancies between pay for male and female employees emerge during the audit, they must be corrected from the date the posting of audit results is due, but not at an earlier date. This absence of retroactive adjustment is at the heart of the legal debate.

This judgment contains two elements that may substantially change employer obligations concerning pay equity maintenance audits:

  • Providing employees with more information in their postings, notably regarding the effective date that the change creating the pay inequity occurred (s. 76.3).
  • Paying retroactive adjustments from the date that the change creating the inequity occurred (ss. 76.5 and 103.1 para. 2). Under the current Act, adjustments are required every five years, from the date that the maintenance audit must be performed.

In light of this judgment, the current Act does not prevent discriminatory pay practices against women, as long as the practices are corrected after the fact, when the pay equity maintenance audit is posted. Organizations can then recreate these discrepancies in the five years following the audit, since “any pay inequities emerging during the five-year period between audits go uncorrected until the next audit.1

The Quebec legislature involuntarily allows these wage disparities, thereby permitting systemic discrimination against women. “By tolerating employer decision-making that results in unfair pay for women, the legislature sends a message condoning that very power imbalance, further perpetuating disadvantage.2

It is the fact that these adjustments cannot be made retroactively for the period between audits that infringes on the right to equality guaranteed by the Charter. “This has the effect of making the employer’s pay equity obligation an episodic, partial obligation.3

Implications for Quebec enterprises

The Supreme Court of Canada is the highest judicial body; their decision is final. The Quebec legislature will have no choice but to review the Act’s content.

The Court’s decision does not take a position on what the Act should include, but it does provide several suggestions:

“If, to point out just one example, s. 76.5 had required that adjustment payments be made from the date the pay inequity re-emerged, rather than from the date that the audit results were posted, then employers would not have a pay equity amnesty for the period between audits. And there would be no discriminatory impact.4”

The legislature may keep periodic audits for pay equity maintenance but will likely have to make the process retroactive. The Supreme Court points out that the infringement of constitutional rights lies in the absence of retroactivity rather than in the periodic nature of the audit.

Regarding information included in the postings: we predict that the legislature will add requirements to provide details on both the nature and the timing of changes that have occurred since the last audit.

Until the Act is modified, employer obligations remain unchanged. Businesses must continue to audit maintenance every five years and pay out the necessary adjustments at the time of the posting.5

Normandin Beaudry’s recommendation

If the changes made by the legislature require businesses to pay out adjustments retroactively from the time that the discrepancy was created, the organizations will have to continually document all changes that may affect the pay equity maintenance (abolition or creation of a predominantly male or female position, job reassessment, change in work conditions, collective agreement negotiation, etc.). This colossal undertaking can be significantly streamlined by implementing structured and equitable pay practices across job categories, whatever their predominance. If pay practices are not managed within an infrastructure that respects internal equity principles, changes to any job are likely to generate new discrepancies. The implementation of such an infrastructure will ensure the respect of internal equity, regardless of changes in jobs.

While the Act undeniably has its advantages, it does not guarantee equity in all compensation practices within an organization. What about jobs that are not predominantly female or male, i.e. are neutral, or jobs that are predominantly held by men and are not compensated fairly?

It is to an organization’s advantage to exceed legal requirements in pay equity by proactively implementing equitable pay policies and practices for all positions. A clear, structured pay policy allows for internal, external and individual equity and avoids discrepancies between male and female job categories during pay equity maintenance audits.

Inspired by Ontario’s Pay Transparency Act, several Canadian provinces may soon adopt their own, equivalent bill. Since employers will have to include pay or pay range information in any public job posting, they would do well to implement structured and equitable pay practices and policies.

Sound management of total compensation is beneficial to any organization and goes well beyond requirements for pay equity. Strong management practices not only comply with the law, they may also give organizations a competitive edge in attracting talent.

1. Quebec (Attorney General)  v. Alliance du personnel professionnel et technique de la santé et des services sociaux, 2018 CSC 17, para 33.

2. Ibid., para 38.

3. Ibid, para 33.

4. Ibid., para 36.

5. CNESST, May 25, 2018 (French only), www.ces.gouv.qc.ca/asp/quoideneuf.asp?no=10975

For additional information, feel free to contact Normandin Beaudry’s consultants.

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