The Supreme Court rules pay equity legislation must allow for retroactive, non-onerous remedial avenues for women

The Supreme Court of Canada has released its much-anticipated decision in Quebec (Attorney General) v Alliance du personnel professionnel et technique de la santé et des services sociaux¹. The majority clearly stated that while a freestanding positive obligation to implement pay equity legislation is not required by subsection 15(1) of the Canadian Charter of Rights and Freedoms, if Parliament or the provincial/territorial legislatures decide to enact such legislation, they cannot deny women access to retroactive compensation for wage-based discrimination. This decision comes at an important time, as the Trudeau government moves forward with its promise to re-vamp and transition the current complaint-based federal pay equity regime into a proactive approach, similar to those enacted in Ontario and Quebec.

Context

The case involved an appeal to the Supreme Court of Canada (SCC or the Court) of a Quebec Court of Appeal decision that held certain Quebec Pay Equity Act (PEA) amendments were unconstitutional.² As mentioned in a previous publication, the Quebec Court of Appeal found the PEA amendments created a system that was contrary to the purpose of pay equity. The amendments replaced the employer’s ongoing obligation to maintain pay equity with a requirement to conduct a pay equity audit every five years.

However, the amendments only required retroactive payments to be made from the date the employer posted the audit results, as opposed to the date the inequities arose. Employees would only be entitled to retroactive payments from the time the pay inequity arose if they could prove bad-faith conduct by the employer, which was seen to be an onerous evidentiary burden. The Quebec Court of Appeal found that the impugned sections gave a “grace period” to employers of up to five years during which pay inequity could go unaddressed.

SCC decision

The main question in this appeal was whether the Quebec courts erred in finding the Pay Equity Act amendments breached subsection 15(1) of the Charter. The cross appeal by the union was whether episodic pay equity, as opposed to maintaining ongoing pay equity, infringed subsection 15(1). In the cross-appeal, the union also argued the PEA was non-compliant with the Charter because employees were not involved in the pay equity maintenance process.

The majority decision held that, while the Charter does not require positive action by legislatures to impose pay equity legislation on employers, when the legislature does take measures to redress the gender wage gap, they cannot escape Charter scrutiny.

The Supreme Court found that, collectively, sections 76.3, 76.5 and 103.1 para 2 created a discriminatory scheme, as follows:

• Section 76.5 required employers, absent a finding of bad faith, to make retroactive payments from the date of posting. This effectively meant it was possible to escape liability for pay inequity for up to five years. Indeed, the new amendments abolished the ongoing duty of employers to maintain pay equity, and instead replaced it with a requirement to conduct pay equity audits every five years. Therefore, pay inequity could exist for five years, and the victims would be denied compensation. In addition, section 103.1 para 2 barred the Pay Equity Commission from assessing adjustment payments prior to the date of the posting.

• Section 76.3, regarding the content of the posting requirement, further exacerbated the discriminatory scheme of s 76.5 and 103.1 para 2. Section 76.3 did not provide employees with sufficient information upon which to challenge the decisions employers made as a result of pay equity audits. Section 76.3 did not require employers to post the date on which pay inequity was observed. Therefore, section 76.3 made it especially difficult, from an evidentiary standpoint, for employees to allege bad-faith conduct by employers, which was necessary to recover lost wages for the entire period of pay inequity.

• The Supreme Court also criticized the legislative requirement that complainants prove intentional discrimination (i.e., bad faith), which was a requirement to recover wages prior to the date of posting. The Court found this at odds with the purpose of pay equity, namely to counter systemic discrimination against women.

The Court found the amendments were not saved by section 1 of the Charter. However, the SCC recognized that in some cases, encouraging employer compliance may constitute a pressing and substantial objective. The Court also recognized there may hypothetically be a rational connection between reducing employer obligations and increased employer compliance. But, in the circumstances, no evidence was presented to support such a defence.

As for the cross appeal, the Court dismissed the argument that a periodic pay equity review, as opposed to proactive and continued pay equity, is unconstitutional. Moreover, the Court confirmed the Charter does not require that employees be involved in the pay equity maintenance process once pay equity is achieved.

Take-aways

This case raises important issues regarding the retroactivity of pay equity adjustments and the challenge of promoting compliance with legislative efforts to address the gender wage gap. In Ontario, employers were permitted to limit annual pay equity adjustments to 1% of the organization’s previous year’s payroll until they achieved pay equity, but only if they implemented pay equity by the deadlines set out in the Ontario Pay Equity Act.

Currently, in the federal jurisdiction, retroactive liability for pay inequity under the Canadian Human Rights Act has generally been interpreted by the Federal Court to be one year prior to the date on which the complaint was filed. However, it may go back further in time than that, depending upon the evidence. New federal pay equity legislation is expected in September, which may well set a different requirement for retroactive pay equity obligations for federally regulated employers. The important point to bear in mind is that retroactive pay equity obligations can be significant, and failure to attend to these obligations can result in very high costs to employers.

The case also raises interesting issues about how best to encourage employer compliance with pay equity legislation. The Court cautiously agreed that a rational link may exist between limiting employers’ pay equity liability and promoting increased compliance. However, there was insufficient evidence in this case to establish the connection. As the Quebec government moves to address this decision, and the federal government presses ahead with new proactive pay equity legislation, it will be interesting to see what creative means lawmakers will take to promote compliance with this important legislation.

Footnotes

¹ 2018 SCC 17.

² See: Québec (Procureure générale) c Alliance du personnel professionnel et technique de la santé et des services sociaux, 2016 QCCA 1659 (original decision published in French only).