The End of the So-Called "Orphan" Clauses Relating to Pension Plans and Other Employee Benefits

July 24th, 2018

Until 12 June 2018, the Act respecting labour standards prohibited so-called "orphan" clauses relating to salary. Indeed, section 87.1 of the aforementioned Act, in its version in force until 11 June 2018, provided as follows:

"No agreement or decree may, with respect to a matter covered by a labour standard that is prescribed by Divisions I to V.1, VI and VII of this chapter and is applicable to an employee, 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 same applies in respect of a matter corresponding to any of the matters referred to in the first paragraph where a labour standard pertaining to that matter has been fixed by regulation."

Differences in Treatment Now Prohibited

Bill 176, an Act to amend the Act respecting labour standards and other legislative provisions mainly to facilitate family-work balance, as adopted by the National Assembly on 12 June 2018 (the "Act"), has added certain items to section 87.1 referred to above and henceforth hinders the application of so-called "orphan" clauses which cause employees hired after a given date to be entitled to a pension plan and/or other employee benefits that are less advantageous compared to that to which employees hired before said date are entitled.

In order to extend the scope of the prohibition set forth in section 87.1 of the Act respecting labour standards, the Act added a third paragraph, which is applicable since the date of the Act’s adoption and provides as follows: "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." As a consequence, a collective agreement can no longer provide that employees hired after a given date shall not be eligible to a certain pension plan (or other employee benefits) or shall be eligible to a pension plan (or other employee benefits) which is (are) less advantageous than the one applicable to employees who were hired at an earlier date.

Having said that, section 53 of the Act expressly indicates that this new third paragraph of section 87.1 of the Act respecting labour standards does not apply to a distinction made solely on the basis of a hiring date and existing on 11 June 2018, i.e. on the day before the coming into force of the Act. Consequently, differences in treatment relating to pension plans and other employee benefits that already existed on the date of entry into force of the Act remain valid and applicable.

It is worth highlighting as well that a difference in treatment based on seniority or length of service is still valid in application of section 87.2 of the Act respecting labour standards.

New Recourse Put in Place

Another important point to mention: the Act has put in place a special recourse for this type of differences in treatment. An entire chapter was created to this end in the Act respecting labour standards (see sections 121.1 to 121.8). Pursuant to these new provisions, an employee who believes he has been the victim of a distinction referred to in the third paragraph of section 87.1 of the Act respecting labour standards (or a non-profit organization acting on his behalf) may file a complaint in writing with the Commission des normes, de l’équité, de la santé et de la sécurité du travail ("CNESST" or "Commission") or with the Administrative Labour Tribunal ("TAT") within 12 months of the distinction becoming known to the employee. An employee who is subject to a collective agreement or a decree can file a complaint with the Commission if he can prove that he has not exercised his recourses arising out of that agreement or decree, or, if he has exercised them, that he discontinued proceedings before a final decision was rendered.

Upon receipt of a complaint, the Commission shall make an inquiry applying the standard rules of procedure (sections 103 to 110 and 123.3 of the Act respecting labour standards). If, at the end of said inquiry, the Commission refuses to take action, the employee (or the organization acting on his behalf) has 30 days to make a written request to the Commission for the referral of the complaint to the TAT. Conversely, if the Commission accepts to pursue the complaint and no settlement is reached between the parties, it shall defer the complaint without delay to the TAT. Please note that the Commission can represent the employee in said proceeding before the TAT.

If the TAT considers that the employee has been the victim of a prohibited distinction, it may render any decision it believes fair and reasonable, taking into account all the circumstances of the matter. In particular, and without this list being limited, the TAT may (i) order that the distinction no longer be made, (ii) order that an employee be made a member of a pension plan, or make other employee benefits applicable to the employee, (iii) order the employer to pay the employee an indemnity for the loss resulting from the distinction.

The BCF labour and employment law team is available to answer your questions.