On May 10, 2018, the Supreme Court of Canada (SCC) confirmed that certain sections of the Quebec Pay Equity Act (Act) regarding pay equity audits were invalid, inapplicable and unenforceable. The SCC agreed with the Quebec Court of Appeal’s decision as well as that of the Quebec Superior Court and determined that sections 76.3, 76.5 and 103.1, paragraph 2, of the Act are discriminatory under section 15(1) of the Canadian Charter of Rights and Freedoms (Charter).

At the same time, the SCC upheld the suspension of the declaration of invalidity, inapplicability and unenforceability for a period of one year or until such time as the Quebec legislature remedies the situation, whichever comes first. This way, the invalidated sections of the Act shall remain in force for at most one year, and Quebec employers who are in the process of a pay equity audit or are due to conduct one within the next year must continue to comply with the current wording of these sections.

BACKGROUND: DUTY TO MAINTAIN PAY EQUITY

An employer must conduct a pay equity exercise within four years after the calendar year during which its enterprise reaches an average of 10 employees. Following this exercise, the employer must, no later than five years from the date of the pay equity exercise or the date on which it should have been made, conduct a pay equity audit to consider new events in that period, which might require further adjustments in compensation. This obligation to proceed with equity pay audits replaced the previous continuing obligation imposed on employers to assess pay equity in their enterprise. This amendment was adopted by the legislature after the Government of Quebec noted that a large number of enterprises were not complying with the Act.

SCC DECISION

The SCC found that sections 76.3 and 76.5 perpetuate disadvantage for women by preserving the pay inequity status quo and providing for up to five years of amnesty for employers with respect to adjustments in compensation. As a result of these provisions, any pay inequities emerging during the five-year period between audits go uncorrected until the next audit. Section 76.3 of the Act limits the information provided to female employees, preventing them from knowing when an event that could have led to compensation adjustments occurred. Moreover, given that section 76.5 of the Act provides that compensation adjustments are payable only going forward, if an audit reveals the emergence of a pay inequity during the previous five years, the inequity persists during this period, which the SCC refers to as an “amnesty to the employer for discrimination between audits.” For the SCC, this amnesty is confirmed by the fact that under section 103.1, paragraph 2 of the Act, no compensation adjustments can be assessed by the Commission des normes, de l’équité, de la santé et de la sécurité du travail prior to the date of posting.

The SCC concluded that sections 76.3, 76.5 and 103.1, paragraph 2, of the Act violate section 15 of the Charter because women are denied retroactive compensation adjustments when an audit reveals pay inequity and are denied information required to assess and challenge the employer’s decisions.

Finally, the SCC found that Quebec had not engaged in any meaningful effort to enforce compliance with the Act by the employers who had failed to comply with the former provisions on pay equity maintenance, and that the harms of the new provisions far outweigh their benefits. According to the SCC, reducing employers’ obligations in the hopes of encouraging compliance subordinates the right of women to be free from discrimination in compensation to the willingness of employers to comply with the Act.

IMPLICATIONS

As stated above, the SCC upheld the Quebec Superior Court’s suspension of the declaration of invalidity, inapplicability and unenforceability. The Quebec legislature therefore has one year to amend the Pay Equity Act in light of the SCC’s comments. Employers’ pay equity obligations may become more onerous than they currently are, depending on the amendments to the Act.