Equal Treatment Pay Regulations: Changes to Wage Rules for Federally Regulated Workplaces coming October 2026

Significant equal treatment wage-related statutory mandates are coming to federally-regulated private-sector industries and Crown corporations (not federal public service) covered under Part III of the Canada Labour Code. Effective October 20, 2026, regardless the size of the employer, federally-regulated employers may not pay employees different wage rates based solely on their employment , which will be explored in detail below. It is important to note that these changes will not apply to existing collective agreements for the first two years, or until October 20, 2028.

This equal treatment legislation was first enacted as part of Bill C-86, Budget Implementation Act, 2018, No. 2, but an “in force” date depended on the introduction of supporting regulations. Those regulations were recently published in the Canada Gazette, Part II (May 6, 2026), along with the order announcing the commencement date of October 20, 2026: Regulations Amending Certain Regulations Made Under the Canada Labour Code (Equal Treatment and Temporary Help Agencies), SOR/2026-75 and SI/2026-18.  Employment and Social Development Canada also recently published IPG – 122, Equal Treatment, to assist with interpretation and compliance.

Readers should not confuse these status-based equal pay with the Regulations to the equal treatment provisions of the federal Pay Equity Act passed in 2018. While the federal Pay Equity Act proactively addresses systemic gender-based discrimination by ensuring equal pay for different jobs of equal value, equal treatment provisions under the Canada Labour Code focus on employment status rather than gender. The equal treatment rules ensure that part-time, full-time, and temporary employees receive the same wage rate when performing substantially the same kind of work.

Redefining Employment Status

To prevent arbitrary pay disparities, the regulations introduce a structured hierarchy to clearly define “employment status”. Under the new rules, an employee’s status is categorized as full-time or part-time, and permanent or temporary.

• Full-Time vs. Part-Time: An employee’s full-time status is determined first by looking at any applicable collective agreement, followed by their individual employment contract, and then by established employer policy. If none of these sources provide an answer, the regulations establish a default threshold: any employee scheduled to work, or who usually works, an average of 30 or more hours per week is legally considered full-time. Anyone falling below this threshold is classified as part-time.
• Permanent vs. Temporary: A worker is deemed permanent if their employment contract is for an indeterminate period. Conversely, a temporary worker is anyone hired on a fixed-term, seasonal, casual, or irregular basis.

The regulations explicitly extend these protections to interns, ensuring they are treated equally under the law, though regular student interns remain excluded from the regime.

Who Gets Comparable Pay – The 5 Criteria

When evaluating whether two employees are entitled to comparable pay, employers cannot simply look at job titles or high-level descriptions. Instead, the following five criteria must be met for equal treatment laws to apply:

1. Same Industrial Establishment: The regulations significantly broaden the geographic pool of comparable workers by tying the definition of an “industrial establishment” to Employment Insurance (EI) economic regions. Rather than comparing workers within a single physical office, an employer must look across all of its branches, sections, and divisions located within the same EI region.

To handle modern work arrangements, detailed tracking rules have been introduced. For multi-site employers, an employee is generally mapped to the physical location where they report in person most often. For transportation workers, the relevant terminal, base, or port governs. For fully remote staff, employers must perform a look-back analysis to their pre-remote location or apply a multi-factor test evaluating where they report or hold in-person meetings with their supervisor.

2. Substantially the Same Kind of Work: The actual, day-to-day work performed by each individual is the ultimate benchmark. The law defines “substantially” as being largely but not entirely identical. This means that if two employees share the same primary duties, minor discrepancies in their tasks will not shield an employer from the obligation to pay them equally.
3. Substantially the Same Skill, Effort, and Responsibility: Employers must isolate the objective core requirements of the position rather than the personal capabilities of the individual occupying it.

(a)          Skill evaluates the required judgment, communication, education, experience, and physical dexterity.

(b)          Effort tracks the mental concentration, critical thinking, and physical energy required to perform the tasks.

(c)          Responsibility measures the nature and organizational impact of the role, including elements like managerial oversight, budget administration, and decision-making independence.

4. Similar Working Conditions: The environmental and physical conditions under which employees work must closely resemble each other. Factors such as noise levels, temperature variances, shift schedules, or exposure to hazardous substances are evaluated to ensure they are similar in nature, though they do not need to be completely identical.
5. Identical Wage Rate Structure: A legal comparison can only be triggered if both employees are compensated using the exact same type of wage rate. For example, an employer is required to compare a part-time hourly employee against a full-time hourly employee. However, if one worker is paid a time-based wage and the other is paid via a mileage rate, piece rate, pay-per-load, or commission structure, the rates are not considered legally comparable, and the equal pay rules do not mandate an adjustment.

Permissible Pay Differentials and Exceptions

While the regulations establish a sweeping baseline of equal treatment with respect to rates of wages, they recognize that legitimate business reasons can justify paying one employee more than another. Wage disparities remain lawful if they are rooted in a defined, formalized system based on seniority, merit, or the quantity or quality of production. For instance, a merit system must evaluate performance or achievements using objective criteria, while a production system must rely on employees meeting or exceeding predefined output thresholds.

The Canada Labour Standards Regulations also carve out several highly specific exceptions where differential pay is legally permitted:

• Red-Circling: This applies when an employee’s historical, higher wage rate is intentionally maintained after they are reclassified or demoted to a lower-paying position.
• Labour Shortages: Employers can pay a premium if they can prove they are facing ongoing difficulties recruiting or retaining qualified workers due to a legitimate, localized shortage of skilled labour.
• Geography and Travel Status: Differences are permitted if they are based strictly on the geographic area where the work is performed, or if a unique rate is paid to an employee who is actively on travel status compared to a stationary peer.

Operational Highlights and Enforcement Risks

Transitioning into compliance requires a thorough understanding of the strict operational boundaries set by the federal Labour Program. Employers must pay close attention to several key logistical and legal directives described below.

I. The “Upward-Only” Correction Rule

When an employer identifies an unjustified pay gap between a temporary or part-time worker and a permanent full-time peer, they are strictly prohibited from reducing the higher salary to achieve equity. Disparities can only be legally resolved by increasing the wage rate of the lower-paid employee. Attempting to lower wages to meet compliance targets is a direct violation of the Code and will trigger regulatory penalties.

II. The 90-Day Formal Wage Review Protocol

The new regulations empower employees by creating a formal mechanism to challenge their pay. An employee who suspects they are receiving lower wages due to their employment status can submit a formal request for a wage review. Upon receipt, the employer has exactly 90 days to conduct a comprehensive internal audit and deliver a formal, written response. This response must either provide clear, justified reasons why the current wage rate complies with the Code, or state that the employer has increased the wage rate to achieve compliance. If a wage increase is granted, the employee is legally entitled to back pay retroactive to the exact date they filed the review request.

III. Anti-Reprisal Shields and Record-Keeping Mandates

The regulations surround the review process with intense legal protections. Employers are strictly barred from taking any disciplinary or retaliatory action against a worker who exercises their right to request a wage review. Furthermore, management cannot allow a wage review request to negatively influence decisions regarding the employee’s future training opportunities or promotions.

To back up these protections, record-keeping requirements have been heavily expanded. Organizations must maintain a paper trail of all written review requests, the corresponding employer responses, and detailed documentation describing any internal system relied upon to justify a pay differential.

IV. The Temporary Help Agency (THA) Shift

The framework introduces a parallel, mirrored regime for federally regulated temporary help agencies to account for the tripartite relationship between the agency, the worker, and the client business. THAs are prohibited from paying their assigned workers less than the client pays their own internal employees for substantially the same work. Crucially, when determining whether a pay disparity is justified for an agency worker, the applicable system evaluated is that of the client, not the agency. THAs must also implement meticulous tracking protocols, keeping a record of every client assignment alongside its exact start and end dates.

Employment and Social Development Canada recently published IPG – 123, Temporary Help Agencies, to provide further guidance on these provisions.

V. Penalties and the Unionized Grace Period

Enforcement under SOR/2026-75 is backed by real financial consequences. Violations of the equal treatment provisions, temporary help agency rules, or record-keeping mandates are integrated directly into the federal enforcement framework as Type A, B, or C infractions under the Administrative Monetary Penalties Regulations.

For unionized environments, the government has provided a brief transition window. If an employer has an active collective agreement that explicitly permits wage differences based on employment status, the new equal treatment rules will not override that agreement for a period of two years, officially expiring on October 20, 2028.

Actionable Steps for Employers

With the October 20, 2026 effective date fast approaching, federally regulated employers should execute a proactive compliance strategy:

1. Execute a Workforce Classification Audit: Review all part-time, temporary, casual, and seasonal contracts against full-time peers, keeping the 30-hour regulatory threshold in mind.
2. Map Regional Operations: Cross-reference physical facilities and remote worker reporting structures to identify any employees working within shared Employment Insurance economic regions.
3. Formalize and Publish Pay Scales: Review and formalize all internal seniority, merit, and production systems, ensuring they are entirely grounded in objective criteria and distributed to staff in writing.
4. Train HR on the 90-Day Window: Establish clear internal workflows to ensure that any employee-initiated wage review request is properly logged, audited, and answered within the mandatory 90-day legal window.

Please contact a member of our Labour + Employment group if you have any questions regarding how these regulatory changes may impact your workplace.