New wage adjustments on the horizon for federally regulated employers

Federally regulated employers may soon be required to review and possibly raise pay rates for part-time, seasonal or casual workers under new “Equal Treatment” wage rules. Federally regulated temporary help agencies (THAs) may be particularly affected by these new rules. THAs are entities that assign individuals to temporarily work for their clients.

The federal government is finalizing regulations to implement these Equal Treatment rules and is inviting public comment on the draft regulations until March 24, 2025. The government anticipates the proposed amendments will come into force by order-in-council in late 2025 or early 2026.

Background: equal treatment of wages 

In 2018, the Budget Implementation Act, 2018, No.2 (Bill C-86) revised the Canada Labour Code (the Code) with respect to Equal Treatment of wages. These provisions are not yet in force. 

The Equal Treatment rules prohibit differential wage rates among employees based on “employment status” when employees:

• Perform substantially the same kind of work;
• Exercise substantially the same skill, effort and responsibility;
• Work under similar conditions; and
• Are in the same industrial establishments.

Essentially, Equal Treatment requires employees performing similar work to be paid similar wage rates, with some exceptions. To this end, Bill C-86 also provides that federally regulated THAs cannot pay their employees a lower wage rate than what the client pays for the same kind of work under similar working conditions. 

Under the Bill C-86 rules, employers are not allowed to reduce an employee’s wages to comply with the Equal Treatment requirement. However, wage differences are allowed to account for seniority, merit, the quantity or quality of individual employee’s production, or any other criteria prescribed by regulation. 

Bill C-86 also provides a mechanism for employees to request a review of their wage rates. Within 90 days of receiving the request, employers must conduct the review and respond in writing with either a statement of wage increase or an explanation for the compliance status of the current rate.   

Proposed amendments to Canada Labour Standards Regulations (CLSR)

Bill C-86 left a number of key definitions and rules to be clarified in future regulation. The federal government is now proposing amendments to the CLSR to achieve that clarity. Revisions to the CLSR include:

• New Definitions: The following terms would be defined the purposes of the Equal Treatment and THA provisions of the Code only:
  • “Industrial Establishment” would be defined as the physical or general location where work is carried out. Two or more work sites of the same employer would be considered part of the same industrial establishment if they are in the same employment insurance region as defined in the Employment Insurance Regulations.  Only the wages of employees who work in the same industrial establishment can be compared for the purposes of the Equal Treatment provisions.
  • “Employment Status” will include differences between full-time and part-time workers and temporary (e.g. fixed-term, casual, seasonal or on-call) and permanent employees. These changes would specify that differences in the weekly hours worked and terms of employment are both considered part of employment status. 
  • “Full-time” and “Part-time”: These definitions would be added to the CLSR. To prevent confusion about the threshold number of hours to be considered a full-time employee, these definitions would be based on Statistics Canada’s classification of full-time and part-time hours.

• Calculation of Wage Rates: Only identical types of compensation (e.g. hourly wage, commission rate, mileage rate) will be compared to determine whether Equal Treatment in pay is achieved. Employers could also compare compensation for extra-duty services such as overtime wages and being on call, being called back to work and working or traveling on non-working days. 

• Additional Exceptions to Equal Treatment: The Code’s Equal Treatment and THA provisions already allow for differences in wage rates related to seniority, merit and the quantity or quality of each employee’s production. The proposed amendments would add more exceptions to the Equal Treatment provisions, including:
  • “Red-circling,” which is a practice where employees are reassigned to a lower classification but retain their previous higher salaries;
  • Wage increases due to recruitment and retention issues during a labour shortage;
  • Northern bonuses related to geographical regions and locations of hardship;
  • Travel status pay for employees on travel status; and
  • Employees’ pay when in a development or training program. 

• Record-keeping Requirements: Employers must maintain the employee’s written request for a review and the employer’s response, and a record of any system used to justify differential pay rates. THAs must record each client for whom the employee performs a work assignment and the start and end dates of the assignment. 
• Notices: Employers will need to update their notices of labour standards to reflect the coming into force of the new Equal Treatment and THA provisions.
• Administrative Monetary Penalties would be revised to designate certain actions as violations of the Equal Treatment provisions and the baseline penalty amount for any such violation. For example, an employer is prohibited from paying an employee lower wages than another employee due to a difference in employment status (e.g. full-time and part-time).

Takeaways

The proposed amendments may impose more obligations on employers that operate several industrial establishments with different employee status types (fixed-term, casual, on-call and permanent employees). On the other hand, employers that already differentiate pay based on the exceptions mentioned above, such as red-circling, may be less impacted. Employers still have an opportunity to submit feedback on these proposed rules until March 24, 2025. Stay tuned for further updates, including details on when these new changes will be coming into force.

The author would like to thank Valerie Li, articling student, for her contribution to preparing this legal update.