Quebec: Proposals regarding disparity clauses
In December 2016, the Quebec government set up a working group to study disparity in treatment clauses based on the date of hire in pension plans (also known as “orphan clauses”). During its investigations, the committee broadened its mandate to also include group insurance plans.
At the time, the Quebec government was responding to criticisms raised by union groups and groups promoting rights of young workers, who want such clauses to be eliminated. They argue that disparity in treatment clauses in pension and group insurance plans should be prohibited, just like they are for other aspects of employee working conditions. In effect, in Quebec, disparity clauses based on date of hire that have an impact on, among other things, salary, work duration and statutory holidays, as well as annual paid holidays or vacations, have been prohibited since the early 2000s. Quebec is the only province to prohibit disparity in treatment with respect to certain working conditions.
One type of disparity that currently exists is that some employers offer a defined contribution plan to new employees, while employees hired previously participate in a defined benefit plan. Another common disparity is to offer post-retirement benefits only to employees who were hired before a certain date.
The working group released its report on November 23, 2017. The main recommendations are as follows:
The recommendations apply to both pension and group insurance plans, including post-retirement benefit plans. It may be impossible to maintain separate plans based on hiring date. For example:
- It would not be possible to maintain a defined benefit pension plan for employees hired before a certain date and a defined contribution plan for those hired as of that date.1
- It would not be possible to maintain postretirement medical coverage for employees hired before a certain date and have no coverage or reduced coverage for those hired as of that date.
The report also presents two options for reaching the objective of eliminating treatment disparities: the same plan for everyone or an equivalent plan for everyone:
If such legislation is actually passed, a number of questions remain and will need to be answered in 2018:
- Will the bill be enacted by June 2018? If not, could the Fall 2018 elections influence the adoption of the new bill?
- How much time will employers be given to comply with the new law?
- Will the concept of equivalent plan be permitted and how will the equivalency be determined?
- How will plans that cover employees in several different provinces be treated?
The stakeholders affected by the issue will make their respective points of view known before the bill on disparity in treatment clauses is tabled and passed. To date, we know that the bill is supported by unions and groups representing young workers, who defend the principle of intergenerational equity. Employer organizations oppose it, out of concern that it would harm the competitiveness of Quebec companies.
1 Unless the plan is deemed equivalent and that option is permitted under the new legislation