SEPARATE PAY EQUITY PLANS HELD VALID

The Superior Court has struck down the decision of the Commission des relations du travail (“CRT”) and held that a certified association may call for the establishment of a separate pay equity plan in an enterprise even where the certified association does not represent any employees included in a predominantly female job class.

SEPARATE PLANS

Section 10 of the Pay Equity Act (“PEA”) requires every employer to establish a pay equity plan applicable throughout its enterprise, unless the Commission de l’équité salariale (the “Commission”) authorizes separate plans to be established as warranted by regional disparities.

Section 11 of the PEA provides that every certified association may ask the employer to establish a pay equity plan applicable to the members represented by the association, in which case the employer is required to establish such a plan for the employees concerned.

Indeed, since the PEA came into force, numerous certified associations have called for separate plans to be established, among other things in order to preserve the labour relations structure prevailing in an enterprise.

When the PEA was adopted and for some time thereafter, it was always accepted, including by the Commission, that the right of a certified association under section 11 was not subject to any special conditions. Thus a certified association could make such a request even where it did not represent any employees included in a predominantly female job class. In such cases, the exercise provided for under the PEA was greatly simplified, as the pay equity plan was considered completed upon confirmation that there were no predominantly female job classes within the group covered by the plan.

THE COMMISSION’S NEW INTERPRETATION

However, a few years after the PEA came into force, the Commission changed the interpretation that it had itself given to section 11 and concluded that a certified association could not call for such a separate pay equity plan to be established where the association did not represent any employees included in a predominantly female job class. Claiming that this new interpretation was more in keeping with the purpose that the PEA sought to achieve, the Commission went on to invalidate separate plans established by certified associations that did not represent any employees included in a predominantly female job class.

Accordingly, the Commission invalidated such separate plans in effect at the Société des alcools du Québec (“SAQ”) and at Beaulieu Canada (“Beaulieu”) and ordered the enterprises concerned to incorporate the employees who had been covered by those separate plans into their respective general plans applicable to all their employees.

The two affected enterprises contested these decisions before the CRT, in accordance with section 104 of the PEA. The CRT dismissed the proceedings in a decision which in essence reiterated the Commission’s interpretation.1 Both enterprises then applied to the Superior Court for a judicial review of the CRT’s decision.

THE SUPERIOR COURT’S DECISION AND ITS CONSEQUENCES

The Superior Court found that the wording of section 11 of the PEA expressly recognized the right of any certified association to request the establishment of a separate pay equity plan.2 The interpretation favoured by the Commission and the CRT on the grounds that it was more in line with the PEA’s end purpose could not be retained, as it was not the role of those bodies to read words into a statutory provision.

The Superior Court went on to emphasize that its conclusion was borne out by the scholarly authorities, as well as by an investigation of the preparatory work done prior to the PEA’s adoption (National Assembly debates and legislative drafts). Indeed, it is clear that the legislator, in full knowledge of the facts, had chosen to respect the labour relations structures prevailing in the business environment and allow certified associations the right to call for separate pay equity plans to be established, in spite of the potentially limiting effects with respect to the implementation of pay equity within an enterprise.

The Superior Court thus struck down the CRT’s decision that had invalidated the separate pay equity plans established at the request of certified associations at Beaulieu and the SAQ. The Court nevertheless dismissed in part the application of the SAQ, which had also alleged that the Commission could not issue a retroactive remedial order where separate plans had been established at the request of associations that were not certified within the meaning of the Labour Code. The Superior Court was of the view that such an order was in no way abusive in the particular circumstances of the case under consideration.

This latter finding has significant consequences for all enterprises. The rules governing the establishment of a pay equity plan are very complex and the process of establishing a plan entails many compromises at the level of the pay equity committee. At the end of the exercise, if no challenges are put forward, employers will usually consider their plans to meet the legal requirements. However, the validity of a pay equity plan cannot be assumed.

The Commission, which has very broad discretion to interpret the provisions of the PEA, may, at any time, even on its own initiative, determine that a pay equity plan that was completed and has been applied for several years is invalid because it fails to comply with one or other of the various rules pertaining to the establishment of such plans. In theory, all enterprises that were in existence in 1996 were required to have finished setting up their pay equity plans by November 21, 2001. If the Commission were to declare their plans invalid, these enterprises could be required, depending on the circumstances, to go through the entire pay equity process again, retroactively, based on the situation that was prevailing at that date! The problems and costs that would be associated with such an exercise can only increase as time goes on.

Since no procedure is in place for the Commission to validate pay equity plans, the risk of an ultimate unfavourable decision by the Commission hangs like a “sword of Damocles” over the heads of all enterprises that have completed their pay equity process. It should be pointed out, however, that the Court ruled in this case in response to a particular set of facts submitted to it; it did not conclude that a retroactive order will be valid in all circumstances.

CONCLUSION

While this Superior Court ruling will serve to reassure many companies and certified associations that established separate pay equity plans where none of the employees covered was included in a predominantly female job class, it should be stressed that the power of the Commission to order a pay equity plan to be corrected retroactively where it considers the conditions set out in the PEA not to have been met, so long as such order is not abusive, remains unchanged.

It will be interesting to follow developments in this matter. At the time this Information bulletin was prepared, the thirty (30) day time limit for seeking leave to appeal to the Quebec Court of Appeal had not yet expired, as the Superior Court ruling was handed down on July 29, 2008.