Equal pay rules take shape for federally regulated employers

Federally regulated employers who spent the last few years working through pay equity compliance may be tempted to think they've already done the hard work — but that might not be entirely true, according to one expert.

The new equal treatment regulations coming into force Oct. 20, 2026, under the Canada Labour Code operate on a fundamentally different logic than pay equity. Where pay equity compares broad job classes across an organization, the equal treatment rules are a person-to-person analysis.

"With equal pay for equal work, we're truly looking at the individuals," says Sophie Arsenault, a partner at Fasken in Ottawa. "It has to be very much like a personal analysis, versus with pay equity, you're looking at large classes of people."

That said, any preparatory work is not wasted when it comes to the new regulations, she says.

"I would hope that many federally regulated employers that have gone through… the pay equity exercise will have done an internal cleanup of their job titles, their job classes in general, so that it will make that exercise easier compared to starting afresh.”

Regulations taking effect this fall

The regulations — formally titled the Regulations Amending Certain Regulations Made Under the Canada Labour Code (Equal Treatment and Temporary Help Agencies) (SOR/2026-75) — were recently published in the Canada Gazette, and implement provisions from the 2018 Budget Implementation Act that have been delayed for several years.

The rules apply to workplaces under federal jurisdiction, including banks, airlines, railways, telecommunications companies, interprovincial trucking operations, and First Nations band councils. They do not apply to the federal public service.

The regulations introduce a structured hierarchy for determining employment status:

• full‑time: determined by collective agreement, then employment contract, then employer policy, and finally a default threshold of 30 hours per week (with technical clarifications for averaging plans or modified work schedules)
• part‑time: any employee not classified as full‑time
• permanent: employment for an indeterminate period
• temporary: fixed‑term, seasonal, casual, irregular, or otherwise prescribed employment.

The core obligation prohibits employers from paying employees different wage rates based solely on their employment status, provided those employees perform “substantially the same work” — in terms of skill, effort and responsibility — under similar working conditions in the same industrial establishment. Employers are also prohibited from reducing any employee's wages to achieve compliance.

It’s important to note that comparability is not based on job titles, says Arsenault.

"It's very like a functional analysis because you have to look at whether employees perform work that requires substantially the same skill, the same effort and responsibility under similar working conditions," she says. "The way that the regulation is drafted is it does promote and reinforce an apples-to-apples type of comparison."

'Similar' working conditions

Brian Wood, associate at Norton Rose Fulbright in Montreal, echoes that point.

"What they're looking at is the actual duties and work performed by employees and not job titles," he says. “You want to look at the day-to-day tasks that employees are performing and is that similar to another employee that’s being compared in terms of wage rates?”

The Interpretation Policy and Guideline (IPG) document also says that two roles do not need to be identical to be comparable, says Wood.

“Under the rules, you can have the main duties being similar or the same, but there could also be minor differences, [and] that still allows them to be compared.”

Labour affairs officers responsible for enforcing the code might actually look beyond the job duties and any generic job descriptions, he says, “and ask the employer to provide a more detailed list of what's being performed on a daily basis — especially in cases where the job duties might be more generic or vague.”

When it comes to similar working conditions, the government's IPG document specifies that relevant factors can include whether employees work under similar temperatures, noise levels and shifts, and whether they face similar exposure to hazardous substances, according to Wood.

"It's really looking at very particular working conditions to see whether it's substantially similar to what another employee is doing. It doesn't have to be the identical exposure to hazardous substances, for instance.”

Permitted exceptions for wage rates

The regulations do not eliminate all wage differences. Employers may continue to pay different rates where differences stem from a legitimate "system" based on seniority, merit or the quantity or quality of production — or from one of several newly added regulatory criteria:

• red-circling (maintaining wages after a demotion or reclassification)
• difficulty recruiting or retaining during an ongoing skills shortage
• geographic area
• travel status.

"Employees might want to look in advance to see if their compensation practices fit in under one of the exceptions that are already provided, because that could reduce the load in terms of what needs to be done before October 20th," Wood says.

Employers might already differentiate on these bases already, but the main focus is the exceptions must be well-documented by the employer.

“For instance, if an employer is already differentiating based on seniority… it should be provided or applied consistently to all employees, and it should have already been provided to employees in writing,” he says, adding employers that have more ad hoc compensation practices will want to formalize that approach.

As an example, the IPG addresses a scenario where an employer establishes a system only after receiving a complaint.

 "In that case, it likely would not be considered an exception because you only established it after you received a complaint that you were not complying with the code," Wood says. "You want to make sure it's already in effect sooner rather than later, but then also documented sooner rather than later as well."

It shouldn’t come out of thin air, says Arsenault. "It will have to have been communicated to employees, documented, to avoid arbitrary or ad hoc differences."

For example, she has clients that have geographic location, bonuses and changes in structure depending on remote places where people are working, compared to central locations.

“So, that will be afforded some type of deference or explanation towards paying workers more than others,” says Arsenault.

‘Ongoing’ labour shortages

Employers claiming a labour shortage exception will need to demonstrate a protracted difficulty in recruiting or retaining employees with specific skills, according to Wood.

"The use of the word 'ongoing' in the IPG document tells us that it has to be some sort of prolonged shortage… that requires [the] employer to increase wage rates to attract qualified talent," he says, noting that no specific duration is defined.

"The government is really looking to see ‘Is this increase in wage rates linked to legitimate considerations for a shortage of work?’"

A previously proposed exception for employees in training or development programs was removed from the final regulations following stakeholder pushback, according to the government. The RIAS states that if an employee in training performs substantially the same work as a non-training employee, they are entitled to the same rate. If their work differs — for example, due to closer supervision or limited responsibilities — equal pay is not required.

Remote work and 'industrial establishment'

A central concept in the new framework is the "industrial establishment," since employees must work in the same one to be comparable. Two or more worksites of the same employer are considered part of the same industrial establishment if they fall within the same employment insurance (EI) region under the Employment Insurance Regulations.

The RIAS notes that EI regions are already used for this purpose in the group termination provisions of the Canada Labour Standards Regulations.

Determining which establishment that a remote employee belongs to is more complex.

"It gets tricky," Wood says. "The government is really looking at employees who perform all of their duties remotely — not hybrid employees."

For fully remote workers, the primary consideration is which workplace they most often reported to before their remote arrangement, if that location's duties have not since changed, according to Ottawa. If that is not determinative, employers must consider indicators such as where the employee would attend meetings, where they would receive instructions or documents, and where their supervisor reports for work.

The regulations do not address the situation of an employer with no physical location at all, according to Wood: "If there's none at all, that's not really envisioned in the regulations as is… that might come later."

New process and reprisal risks

Employees who believe their wages do not comply with the rules may submit a request for review to their employer. Employers have 90 days to respond in writing, either confirming a wage increase or explaining, with reasons, why the current rate is compliant. If a wage adjustment is granted, employers must also pay the difference retroactively.

Notably, employees can lodge a formal complaint with Employment and Social Development Canada (ESDC) if they haven’t already filed a request for a wage review.

Employers are prohibited from retaliating against employees who request reviews — they cannot dismiss, suspend, demote or discipline employees because of a review request, nor factor it into promotion or training decisions.

So, how should employers be prepared to respond?

“There should be some type of established system with which you're reviewing those types of requests…. providing a written response within whatever promise and maintaining a record of both the request and the reasoning behind that request,” says Arsenault.

“Certainly, [it’s about] having something to show that your process was the same for everyone and that you have a very neutral way of reviewing all those things.”

Arsenault says the safest approach is to treat these requests as a protected process.

“Handle it consistently and have a clear, business-based explanation with the data and the evidence to support it when you're being asked for those types of supporting evidence in case of a complaint.”

Wood also says employers should establish a clear process for how to handle these requests, including who will be the representative receiving them and what the response process will be.

“Respecting that [90-day] deadline could go a long way in reducing the risk of a reprisal claim,” he says.

Training managers on the reprisal protections would also be helpful, according to Wood, and employers should send a workplace-wide communication before the Oct. 20 deadline explaining the new provision and identifying a specific contact person for wage review requests.

"That way you can kind of funnel concerns to a particular individual and avoid a complaint, at least at the front end," he says.

Unionized workplaces

Unionized workplaces receive a separate grace period: under transitional provisions in the 2018 legislation, any existing collective agreement that permits wage differences based on employment status will continue to prevail for up to two years after the Oct. 20, 2026 coming-into-force date — meaning those agreements may not need to comply until Oct. 20, 2028.

"There's that two-year grace period for unionized employers that have collective agreements where there is a differentiation in pay based on employment status, largely because the government probably wanted to provide employers and unions time to renegotiate in light of the provision," Wood says.