Publication
The new Quebec parental insurance plan, which was introduced by An Act respecting parental insurance,[1] will come into force on January 1, 2006. It is important for all employers to understand the impact of the introduction of this Plan which will grant new benefits not only to employees, but also to self-employed workers.
BRIEF HISTORICAL BACKGROUND
For several years, the Quebec government has been trying to promote work/family balance by giving parents the right to more advantageous paid leave than they were entitled to under the Employment Insurance Act. This desire of the Quebec government resulted in the passage, in 2001, of the Act respecting parental insurance. However, the coming into effect of the Act was suspended because the introduction of the new Plan required an agreement with the federal government. The family leaves provided by the Employment Insurance Act would have to cease to apply in Quebec and there would need to be a corresponding reduction in premiums collected under that act, to avoid the simultaneous application of two statutes and a duplication of costs.
Negotiations between the two governments began in 1997. The Quebec Government was challenging the jurisdiction of the federal government in parental leave matters and claimed that the relevant provisions of the Employment Insurance Act were not valid. When negotiations reached a deadlock, the Quebec Government sought the opinion of the Quebec Court of Appeal, which unanimously agreed that the relevant provisions of the Employment Insurance Act[2] were invalid.
The federal government appealed to the Supreme Court of Canada and on October 20 2005, that Court unanimously overturned the decision of the Court of Appeal, finding that the relevant provisions of the Employment Insurance Act fell within federal jurisdiction over unemployment insurance matters.[3]
In the meantime, despite the decision of the Court of Appeal, negotiations had resumed between the two governments and, in March 2005, a comprehensive agreement was reached on all the disputed questions. The subsequent decision of the Supreme Court does not in any way undermine the validity of that agreement, pursuant to which the federal government agreed:
- that the provisions of the Employment Insurance Act with respect to maternity and parental leaves no longer apply to Quebec; and
to provide for a corresponding reduction in premiums payable by employees and employers in Quebec pursuant to the provisions of that act. - The conditions for the introduction of the new Plan had thus been met. Therefore, the Quebec Government decided that the Act should come into force on January 1, 2006 and that certain related provisions of the Act respecting labour standards should come into force at the same time.
THE NEW PLAN
The new Plan will be managed by the Conseil de gestion de l'assurance parentale.
A person is eligible under the Plan if:
- the person is the parent of a child born on or after January 1, 2006, or the parent of a child adopted on or after January 1, 2006;
- the person pays premiums to the Plan (or, to the extent prescribed by regulation of the Conseil, under the Employment Insurance Act).
- the person is resident in Quebec at the beginning of the benefit period; however, as regards a self-employed worker, the person must be a resident of Quebec on December 31 of the year preceding the beginning of the person's benefit period;
- the person's insurable earnings during the qualifying period are $2,000 or more;
- the person has had an interruption of earnings as defined by regulation of the Conseil.[4]
The Plan offers four different types of benefits:
- maternity benefits;
- paternity benefits;
- parental benefits;
- adoption benefits.
The Plan provides two options for each type of benefit. Therefore, a person can apply for a longer benefit period with lower weekly benefits (basic plan) or a shorter benefit period with higher weekly benefits (special plan). The amount of benefits is calculated according to the person's earnings; pursuant to section 5 of the Act, the maximum yearly insurable earnings correspond, as of January 1 of each year, to the maximum yearly insurable earnings determined in accordance with section 66 of An Act respecting industrial accidents and occupational diseases. On January 1, 2006, the maximum yearly insurable earnings under that act will be $57,000. The following table summarizes the duration and amount of weekly benefits provided by the Plan:
| Type of Benefits | Basic Plan | Special Plan |
|---|---|---|
| Maternity benefits | 18 weeks of benefits at 70% of earnings | 15 weeks of benefits at 75% of earnings |
| Paternity benefits | 5 weeks of benefits at 70% of earnings | 3 weeks of benefits at 75% of earnings |
| Parental benefits (may be shared between both parents) | 7 weeks of benefits at 70% of earnings and 25 weeks of benefits at 55% of earnings | 25 weeks of benefits at 75% of earnings |
| Adoption benefits (may be shared between both parents) | 12 weeks of benefits at 70% of earnings and 25 weeks of benefits at 55% of earnings | 28 weeks of benefits at 75% of earnings |
Both parents will have to agree on the allocation of parental or adoption benefits. Failing agreement, the benefits will be allocated fairly between them, in accordance with the provisions of the Regulation under the Act respecting parental insurance (ss. 15 to 17).
FINANCING THE PLAN
All employees, self-employed workers and employers in Quebec will have to pay premiums under the Plan starting on January 1, 2006. Therefore, employers will have to make a new source deduction on the salary paid to their employees in Quebec. Every year the Conseil will set the premium rates by regulation. According to the Regulation respecting premium rates under the parental insurance plan,[5] the rates applicable as of January 1, 2006 will be as follows:
- employee: 0.416% of salary earned;
- employer: 0.583% of salaries paid;
- self-employed worker: 0.737% of earnings.
It should be noted that the total premiums paid by employers and employees under the Act and the Employment Insurance Act will be higher, in January 1, 2006, than the premiums they used to pay, despite the reduction in premiums payable under the Employment Insurance Act. Thus, an additional cost must be assumed by employers and employees to provide benefits under the Plan, despite statements to the contrary which were made in the past to facilitate acceptance of this new Plan.[6] It goes without saying that self-employed workers will feel the impact of these new premiums the hardest. Since they were not subject to the Employment Insurance Act, they never had to pay such premiums in the past.[7] However, self-employed workers were also not entitled to the benefits under the Employment Insurance Act, a situation which was often criticized.
To avoid any negative reactions by their employees, employers should notify them that the reduction in their net pay as of January 1, 2006 is a result of the new Plan premiums and is not a payroll error.
IMPACT ON LABOUR STANDARDS
Various standards provided in the Act respecting labour standards (the "LSA") will also be amended, as of January 1, 2006, to harmonize this act with the provisions of the Act. Thus, section 79.8 LSA, which provides the right for an employee to be absent from work for a period of not more than 12 weeks per year to take care of a member of his/her family who has a serious illness, will also apply when the father's or mother's spouse is seriously ill.
Pursuant to section 81.1 LSA, an employee may be absent from work for five days upon the adoption of a child. The first two days of absence will be remunerated if the employee is credited with 60 days of continuous service. The exception for an employee who adopts the child of his spouse will be repealed. Therefore, the employee will have the same rights, whether or not the adopted child is his or her spouse's child. Moreover, the right to a parental leave of up to 52 consecutive weeks in the case of the adoption of a child will also apply in the case of the adoption of the spouse's child. In addition, the right to this leave will now apply even in cases where the child is of full age.
Section 81.2 LSA will grant a father the right to a paternity leave of not more than five consecutive weeks, without pay, on the birth of his child. The leave will not begin before the week of the birth of the child and will not end more than 52 weeks after the birth of the child. No specific limit is provided for the request for leave; we must assume that the request must be made within a reasonable time, according to the circumstances.
New section 81.14.1 LSA also provides that a maternity, paternity or parental leave may be divided into weeks if the child is hospitalized or in various other circumstances. In addition, pursuant to section 81.14.2 LSA, these leaves may be suspended, following an agreement with the employer, to allow the employee to return to work during the hospitalization of the child. Finally, these leaves may be extended if required by the state of health of the child, or of the employee in the case of a maternity leave. Before the expiry date of the leave, the employee must send the employer a notice accompanied by a medical certificate attesting to the need to extend the leave. The length of the extension and the other circumstances in which leaves may be extended are prescribed by regulation, in accordance with section 86.6.1 LSA.[8]
CONCLUSION
The objective of this Act, that is to say, achieving work/family balance, is obviously very commendable and will not encounter any opposition. However, the complexity of the new Plan and the additional costs, for employers as well as for employees and self-employed workers, will likely draw criticism, especially when the Plan first comes into force. Therefore, at the beginning of 2006, employers would be well advised to attach a note to their employees' pay slip informing them of the advantages of the new Plan and the premiums required to finance it.
[1]. R.S.Q. c. A-29.011
[2]. Quebec (Attorney General) v. Canada (Attorney General), 2004 R.J.Q. 399
[3]. Re Employment Insurance Act (Can.), ss. 22 and 23, 2005 C.S.C. 56.
[4]. Generally, this refers to a person who has seen a reduction of at least 40% in their regular weekly employment income; see s. 7 of the Regulation under the Act respecting parental insurance, O.C. 986-2005, 19 October 2005, Gazette officielle du Québec, Part 2, November 2, 2005, p. 4742.
[5]. O.C. 985-2005, 19 October 2005, Gazette officielle du Québec, Part 2, November 2, 2005, p. 4742.
[6]. In the case of an employee who earns $57,000 or more, the additional cost will be $104.00 a year; the employer will have to pay an additional amount of $146.00.
[7]. The annual premium of a self-employed worker who earns $57,000 or more will be $420.00.
[8]. Regulation under the Act respecting parental insurance, s. 35.
The purpose of this document is to provide information as to developments in the law. It does not contain a full analysis of the law nor does it constitute an opinion of Ogilvy Renault LLP or any member of the firm on the points of law discussed.
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