Federal employers will be subject to new equal pay provisions under amendments to the Canada Labour Code that will take effect starting October 20, 2026.
Federal equal pay rules in Canada are changing the way federally regulated employers set employee wages. Starting October 20, 2026, new amendments to the Canada Labour Code and the Canada Labour Standards Regulations will prohibit employers from paying employees different wage rates solely because they are employed on a full-time, part-time, temporary, or permanent basis when they perform substantially the same work.
The Amendments focus on ensuring employees are treated equally despite their employment status. Employers should begin reviewing their compensation practices now to ensure they comply with the new equal pay requirements and understand when wage differences remain legally permitted.
Quick Overview (TL;DR:)
New federal equal pay rules will prohibit federally regulated employers from paying employees different wages solely because they are full-time, part-time, temporary, or permanent employees. While certain wage differences remain lawful, employers should review their compensation policies to ensure they comply with the new Canada Labour Code requirements.
What are the new federal equal pay rules?
The amendments to the Canada Labour Code prohibit federally regulated employers will to pay an employee a lower rate of wages due to a difference in “employment status”. The term “employment status” will be defined to include differences between employees who are:
- full time
- part-time
- temporary
- permanent
The focus is on equal pay for substantially similar work rath than job titles or status.
Which employers must comply?
These requirements apply to federally regulated employers, including businesses operating in sectors such as:
- banking
- telecommunications
- airlines
- railways
- interprovincial transportation
- federal Crown corporations
Most provincially regulated employers are not cover by these amendments.
When must employees receive equal pay?
The equal pay requirements apply where employees:
- perform substantially the same kind of work
- require substantially the same skill
- assume substantially the same responsibility
- require substantially the same effort
- work under similar conditions
- work within the same industrial establishment
The focus of the analysis is on job content and working conditions rather than job titles or classifications.
When can employers pay different wages?
Differences in wage rates are allowed when they are justified by reasons such as:
- seniority,
- merit,
- the quantity/quality of production
- any other criterion that the regulations may prescribe, which include:
- “red circling” a common term used to describe where an employee is reassigned to a lower classification but retains their previous higher salary;
- increasing rates of wages due to difficulty in recruiting or maintaining employees during a labour shortage;
- “northern bonuses,” related to geographical regions and hardship locations; and
- travel status pay for those employees required to travel.
If these differentials apply, they must:
- apply to all employees with comparable pay rates
- have been communicated in writing to employees
- be readily available to employees for review
Can employees request a wage review?
Yes. If an employee believes their pay does not meet the equal pay standards, they are entitled to formally request a review of their wage rate from their employer in writing.
The employer must:
- conduct the review
- provide a written response within 90 days
- respond by either adjusting wages or explaining why they comply with the Code
Are employees protected from reprisal?
Yes. Employers are prohibited from taking reprisals against an employee who requests a wage review. This includes:
- dismissing
- suspending
- laying off
- demoting
- disciplining
- denying promotions
- denying training opportunities
How do the rules affect temporary help agencies?
Federally regulated temporary help agencies are also required to comply with wage parity regulations. These agencies are generally prohibited from:
- paying their employees less than their clients’ employees who perform substantially the same work under similar conditions
- charging fees tied to becoming or remaining an employee or for assignment/job-preparation services
- preventing or attempting to prevent a worker from moving into direct employment with the client
Wage differences are allowed only when based on the criteria specified in the Canada Labour Code, such as seniority, merit, productivity, and other factors outlined in the regulations.
It is essential to understand that parity comparisons are made only when wages are calculated using the same type of rate, for example, comparing hourly wages to hourly wages or commission to commission. This approach ensures a clear and justifiable basis for comparison.
What should federally regulated employers do now about a pay equity plan?
With the federal equal treatment wage rules on the horizon, federally regulated employers should:
- review their compensation structures and policies
- ensure that comparator roles are clearly defined
- permissible wage differentials are properly supported
- internal wage-review processes are capable of withstanding regulatory scrutiny
Covered employers should also take proactive measures through the pay equity process required by the Pay Equity Act: under proactive pay equity and proactive pay equity legislation, they must develop or establish a pay equity plan within 3 years, and pay equity plans must be updated every 5 years.
Early preparation can reduce legal and compliance risks for employers managing proactive pay equity requirements.
Key takeaways:
- Federally regulated employers must generally pay employees performing substantially the same work must get the same wages, regardless of whether they are full-time, part-time, temporary, or permanent.
- Pay differences are still permitted where they are based on legitimate factors such as seniority, merit, productivity, or other prescribed exceptions.
- Employees can request a wage review, and employers must provide a written response within 90 days while ensuring employees are protected from reprisal.
- Temporary help agencies are also subject to new wage parity rules and additional restrictions on employment fees and hiring practices.
- Employers should begin evaluating their compensation policies now to ensure compliance with the updated requirements of the Canada Labour Code.
Why contact an employment lawyer like Whitten & Lublin?
The new federal equal pay rules introduce significant obligations for federally regulated employers and important protections for employees. Whether you are reviewing your compensation practices or believe your wages may not comply with the new requirements, the employment lawyers at Whitten & Lublin can help you understand your rights and obligations.
Contact us online or call (416) 640-2667 to speak with our team.
Frequently Asked Questions
What are Canada’s new federal equal pay rules?
The new rules prohibit federally regulated employers from paying employees different wages solely because they are full-time, part-time, temporary, or permanent employees when they perform substantially the same work. These rules are separate from the federal Pay Equity Act under federal pay equity and broader pay equity legislation: the Pay Equity Act received Royal Assent on December 13, 2018, and the federal pay equity act came into force on August 31, 2021 for federally regulated employers with 10 or more employees, enforced by the pay equity commissioner.
Do federally regulated employers have to pay part-time employees the same as full-time employees?
Generally, yes, where employees perform substantially the same work under similar conditions unless a permitted exception applies.
Can employers pay temporary employees less?
Not simply because they are temporary employees. Wage differences must be based on permitted factors such as seniority, merit, productivity, or other prescribed criteria.
Can employees request a wage review?
Yes. Employees may submit a written request, and employers must respond within 90 days.
Can an employer discipline someone for requesting equal pay?
No. The Canada Labour Code prohibits reprisals against employees who request a wage review.
Which employers are covered by the federal equal pay rules?
The legislation applies to federally regulated employers, including banks, airlines, telecommunications companies, railways, and other federally regulated industries. This article focuses on the federal regime, while provincial rules differ: in Ontario, parts of the public sector and many private sector employers with 10 or more employees must implement plans under pay equity legislation. By contrast, Alberta has no specific pay equity laws, and British Columbia does not have specific pay equity laws.
