Canada: Federal Update — Equal Pay Provisions in Force Effective October 2026

Federally regulated employers are facing a significant development under the Canada Labour Code (the “CLC”) with the coming into force of new equal pay provisions on October 20, 2026. These long-anticipated amendments establish a statutory framework requiring employers to ensure that employees performing substantially similar work receive equal pay, regardless of differences in employment status.

These new obligations will apply to federally regulated employers, including industries such as banking, airlines, railways, trucking, and telecommunications, but not employers that are provincially regulated.

Overview of the New Regime

Effective October 20, 2026, the CLC will prohibit federally regulated employers from paying employees different wage rates based solely on differences in “employment status” (e.g., full‑time vs. part‑time, permanent vs. temporary). 

Under the new rules, an employer must not pay a lower rate of wages to one employee than another if all of the following criteria are met:

• The employees work in the same industrial establishment
• They perform substantially similar work
• The work requires similar skill, effort, and responsibility
• The work is performed under similar working conditions
• Any other criterion prescribed by regulation 

The analysis is substance‑based, emphasizing actual job duties rather than job titles or classifications. Additionally, the regulations adopt a broad definition of “industrial establishment,” which can extend beyond a single physical location to include multiple divisions within the same Employment Insurance region. 

Permissible Wage Differences

Not all pay differentials are prohibited. Employers may maintain differences where they arise from:

• A seniority system
• A merit-based system
• Differences in quantity or quality of production
• Prescribed factors set out in the regulations, which currently include:
  • maintaining an employee’s existing rate of pay following reclassification or demotion (often referred to as “red circling”);
  • recruitment or retention premiums in the context of a demonstrated labour shortage;
  • differences based on the geographic area in which the employee works; and
  • different rates applicable where an employee is working on travel status.

Where an employer relies on a system to justify a pay differential, particulars of that system must apply to all employees with comparable pay rates. It must also have been communicated in writing to employees and readily available to them for examination.

Addressing Non-Compliance

If an employer determines there is a disparity in wages, it cannot reduce wages in order to comply with the new equal pay obligations. If non-compliance is found, the employer can address this only by increasing the rate of the lesser-paid employee. 

A key compliance feature under the CLC amendments is the employee right to request a wage review. Any employee who believes they are underpaid may request a review and the employer must respond, in writing, within 90 days, advising if the employee is entitled to an increase or, if not, why the pay rate complies with the equal pay requirements. An employee can also file a complaint with the Labour Program about a perceived wage disparity, but only after the 90-day employer response period has expired or the employer has provided a written response.

Temporary Help Agency Obligations

The CLC amendments also introduce parallel equal wage requirements for temporary help agencies in the federal sector. Agency workers must be paid at least the same rate as comparable employees of the client, with the same criteria and permissible exceptions applied. 

Key Employer Takeaways

To prepare for the implementation of these new requirements, federally regulated employers are well advised to begin planning now, by:

• Conducting proactive pay audits across employment categories
• Reviewing and documenting compensation systems (seniority, merit, productivity) particularly where differentials exist
• Assessing comparator groups across geographic and operational units
• Implementing procedures to respond to wage review requests
• Training HR and management on consistent pay practices