Federal Income Tax Act a barrier to equality for same-sex spousal pension benefits

In a decision released on September 27, 1996, a Board of Inquiry under Ontario’s Human Rights Code has held that, although the denial of same-sex pension benefits violates the Code, it could not grant a full remedy because of the discriminatory effects of the federal Income Tax Act.

William Dwyer, the complainant in Dwyer v. Metropolitan Toronto, had unsuccessfully sought benefits for his same-sex spouse since 1986. Metro’s position was that it could not provide these benefits because the definition of “spouse” in the Municipal Act and the Municipality of Metropolitan Toronto Act denied it the legal authority to do so. Dwyer filed a complaint with the Human Rights Commission which encompassed the issues of extended health care benefits, pension benefits, and non-insured spousal-related benefits.

The most difficult problem for the Board was presented by the part of the complaint concerning pension benefits. Significant tax advantages flow from a pension plan being registered under the federal Income Tax Act, yet that Act contains an opposite-sex definition of “spouse” for pension purposes, and does not permit the payment of survivor benefits to same-sex spouses. Should a pension plan provide these benefits to same-sex spouses, it would lose its registered status and accompanying tax advantages. Recognizing this fact, the Commission requested as relief that Metro be ordered to establish for same-sex spouses an “off-side” arrangement, that is, a non-pension mechanism for providing pension-type benefits.


Section 5(1) of the Human Rights Code prohibits discrimination in employment on the basis of sexual orientation and marital status, among other grounds. However, the terms “marital status” and “spouse” are given opposite-sex definitions in s. 10(1) of the Code. As well, s. 25(2) provides that there is no discrimination in employment on the basis of marital status by reason of a pension plan or group insurance contract set up in compliance with the Employment Standards Act.

The Board accepted the Commission’s argument that the opposite-sex references in the Code, which authorized the denial of employment benefits to same-sex spouses, themselves violated the equality guarantee of s. 15 of the Canadian Charter of Rights and Freedoms. Because counsel for Metro and the Province had conceded that, if the Charter applied, the denial of benefits would infringe s. 15 equality rights, the issue to be decided was whether the discrimination could be justified as a reasonable limit of those rights under s. 1 of the Charter.


The Board held that the restrictions could not be justified. The objective of the provisions at issue – to extend employment benefits to female spouses and ameliorate female poverty – was an important one. However, the benefits conferred by these provisions went to male spouses as well, and were also made available to spouses who were financially secure. On the other hand, same-sex spouses of either gender were denied benefits, no matter how great their need. In terms of their objective, therefore, the provisions were both overinclusive and underinclusive.

The Board rejected the government’s argument that it should follow the approach adopted in the 1995 Supreme Court of Canada decision in Egan v. Canada, and grant the government leeway as to the pace at which it chooses to extend social benefits. The Board responded that this situation was different, in that Egan was concerned with social benefits, whereas here the issue was employment benefits.


The Board held that the Human Rights Code was to be “read down” to eliminate the discriminatory effect of the opposite-sex references. It then directed the Province to interpret and apply legislative definitions of “spouse” in relation to insured and uninsured benefits in accordance with the Code as “constitutionally corrected”, and ordered Metro to provide such benefits to same-sex spouses.

On the same analysis, the Board held that the opposite-sex definitions in provincial pension legislation violated the Code. However, it pointed to the many difficulties involved in compelling the municipality to establish off-side arrangements for the provision of same-sex spousal survivor benefits:

“It is apparent that an order directing the establishment of a [Registered Compensation Arrangement] by Metro would involve significant costs and problems of integration and portability. … It is not unreasonable to conclude that the difficulties and costs involved would likely result in the winding up of [Registered Pension Plans] by small employers, at the very least. That is a serious prospect which would entail considerable disadvantage to the employees. … For all of these reasons, I conclude that the remedy sought would be disproportionate to the objectives.”
The cause of the difficulties was a factor entirely beyond Metro’s control: the discriminatory language in the federal Income Tax Act. The Board therefore directed that, once the Income Tax Act was either judicially or legislatively altered, the offending language in provincial pension legislation should be read so as not to discriminate against same-sex spouses.


Although the Board in this case ordered the employer to provide insured and uninsured benefits to employees’ same-sex spouses, it noted that it could not follow the result in Leshner v. Ontario, and order Metro to provide an off-side arrangement. This was because the employer in Leshner was the provincial government itself, and had financial resources not available elsewhere in the public or private sector.

The result in this case appears designed to increase pressure on the federal government to amend the Income Tax Act to enable these benefits to be extended without deregistration of pension plans. Before this happens, however, that Act may be judicially amended. The case of Rosenberg v. Canada, involving a challenge to the opposite-sex language in the Income Tax Act, is currently being appealed to the Court of Appeal (see “Ontario Court of Appeal hands big victory to same sex couples in pension benefits case” on our Publications page).

For more information on this subject, please contact Lynn H. Harnden at (613) 563-7660, Extension 226.