As with several other provinces, Quebec is revamping its labour standards.
Among the changes proposed in Bill 176, the province is looking to boost the number of weeks for leaves, address psychological harassment, become stricter with temporary staffing agencies, and change overtime rules.
But one proposed alteration around pensions is causing a stir as it could have quite an impact on how employers compensate, attract and retain employees, according to experts.
Essentially, employers that offer one type of pension plan would not be able to offer a different type of pension plan to newer employees based on their hiring date.
The amendment concerns Section 87.1 of the original act, which states: “No agreement or decree may… operate to apply to the employee solely on the basis of the employee’s hiring date, a condition of employment less advantageous than that which is applicable to other employees performing the same tasks in the same establishment.”
The proposed change would add: “Any distinction made solely on the basis of a hiring date, in relation to pension plans or other employee benefits, that affects employees performing the same tasks in the same establishment is also prohibited.”
In reality, the rule was already present, but now it’s being more clearly defined in relation to pensions, according to Todd Saulnier, vice-chair of the ACPM National Policy Committee in Halifax.
“You don’t necessarily have to treat everybody exactly the same but you should be able to demonstrate that it’s of a similar financial value, so you don’t have two different populations that have materially different compensation packages,” he said.
Up until now, the interpretation of the act was that pension plans and benefit plans were not included in the concept of wages, said Geneviève Beaudin, partner at Langlois Lawyers in Montreal.
Employers could have a group of employees who did essentially the same task with a different pension plan — and the distinction was the hiring date, she said.
“The main principle is that you can have differences in treatment except for specific subjects. Since these pension benefits and other benefits employees had were not wages, the employer was able to make a distinction between its employees according to the hiring date,” said Beaudin.
But going forward, the government would prohibit the distinction.
“It’s not an easy subject, so the legislature now is choosing to take a position in that debate, and I’m really not sure it’s a good idea.”
For one, Quebec’s Supplemental Pension Plans Act already has this covered, she said, citing Section 34:
“Unless another plan providing similar benefits in which he is eligible for membership is established, an employee is entitled to become a member of a pension plan, on the same conditions as those applicable to other members, if his employment is similar or identical to that of members belonging to the class of employees for whom the plan is established.”
There is already an obligation for employers to ensure an employee would be eligible for a pension plan that would have similar benefits, said Beaudin.
“I think this is enough — it’s already there, and it’s not really been challenged, what this provision means… I think it would be sufficient.”
The new rules being proposed just don’t make sense, according to Yves-Thomas Dorval, CEO of the Conseil du patronat du Québec in Montreal — especially now that so many people don’t stay with one employer for their entire career.
“The reality today is employees will change at least every five years with employers, so the defined benefit (DB) plan, as an example, that was designed to fulfil the needs for the long-term employees at the time; the new employees look more for flexibility,” he said.
“They want to leave the company to go to another employer with the investment that was made in their plan, and not impacted by the fact that they will not spend their whole life for only one employer.”
Today’s employees are more knowledgeable about investments, said Dorval, “and a lot of new employees want to manage themselves the type of risk they want to afford with their investments for retirement, and not necessarily be linked with a group, with the demography of the group and investment policy of a specific plan.”
Younger members, for example, might be interested in riskier investments, he said.
“They want to manage more flexibility to address their specific needs and the level of risk they want to afford themselves.”
And now, the government wants to eliminate those differences, said Dorval.
“Most of the new plans are equivalent with the other plans, but they are different, that’s why we call this… a differentiation treatment, it’s not a disparity treatment.”
And looking long-term, it’s not even an issue, he said.
“Most of the people that were on the older plans will be retiring anyway, so why are we creating the chaos if you can avoid it? There is no chaos right now.”
Quebec’s move to eliminate so-called disparities in pension plans will have unintended consequences, according to the Pension Investment Association of Canada.
“In particular, we think that it will lead to an acceleration of the closing of DB pension plans and will hamper the ability of Quebec-based employers to offer and/or negotiate total compensation packages that are tailored to a changing workforce,” said chair Brenda King in a letter to the province’s Ministry of Labour, Employment and Social Solidarity.
If it becomes law, employers that are considering closing DB plans to new employees and moving them into a new DC (defined contribution) arrangement will instead opt to move all employees into a DC plan, she said.
“This will accelerate the decline of DB plan coverage in the Quebec private sector and disproportionately impact older employees with the most years of service under the DB plan.”
The association also believes the change doesn’t appropriately consider other forms of compensation and benefits.
The underlying premise of Bill 176 is the notion that DB plans are invariably superior to DC plans, said King.
“DC features such as portability, flexibility and control are valued by many employees — in particular younger employees — and it is not straightforward to place a value on these features relative to DB plan design features.”
Challenges for employers
Employers require flexibility to alter benefits and pensions throughout the years, and the needs of employees also change over time, said Beaudin.
“A DC (pension) is not necessarily worse than a DB (pension), and it depends on a number of points,” she said, citing as examples the employer’s level of contribution and the length of time an employee stays with an employer.
For instance, if an employer is contributing five per cent to an employee’s DC plan, and the worker stays there just two years, that’s probably better than a DB plan which gains value over the long term.
“It’s difficult to say that a certain DB is necessarily less advantageous than a DC… because it depends on so many things,”
It’s not an easy task to measure the equivalence, and you have to take into consideration the overall remunerations or other options that are put in place, according to Dorval.
Some companies, for example, offer employees stock options instead of pension plans, he said.
“If you eliminate those differentiations for companies that want to maintain it… what you are doing, essentially, is you are saying that the company has to adopt only one plan for everybody that will not fulfil necessarily the needs for everyone. In the same time, you will create a huge risk of more labour conflict… if you are in an unionized organization.”
Quebec is already facing a tight labour market, so limiting employers’ flexibility does not help when it comes to recruitment and retention, said Dorval.
“Employers have already a lot of pressure to offer different things to attract and retain employees, and if you eliminate the flexibility that they have, you just create more difficulties for employers to find ways to accommodate different types of employees. This is not a good way to go.”
Making the transition
There is one welcome part of the bill for employers, according to Beaudin.
“Essentially, if you add a different regime according to the hiring date before the bill will come into force, you are OK… so this is a good thing because in pension plans and benefit plans, you don’t have a simple reverse button.”
However, there are some people who don’t agree with that transitional provision and they want to have it abolished, she said.
“There will be certainly pressure from employers so that this provision stays, at least… I’m not sure it’s even possible to go back in time. At present, the bill is just going forward.”
At least the government came up with this clause allowing employers to maintain what they have already, said Dorval.
“If you have differentiation in your plans already there, you can maintain it, but if you are coming with new plans, you have to adopt only one plan for everybody.”
The bill will not be retroactive, said Patrick Glaude, a lawyer at Gowling Lafleur Henderson in Montreal.
“I know unions don’t like that, but it’s going to be impossible to re-open collective agreements across the province and say, ‘As of today, it’s applicable’ — it would be a nightmare. But for the future, at least, this is what the legislature decided.”
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