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[HR] Pay Transparency Act, 2018: Considerations

On March 20th, 2018, the Ontario government introduced Bill 3, the Pay Transparency Act, 2018, which received Royal Assent on April 7th 2018. It was previously introduced on March 6th, 2018, as Bill 203, but was lost along with all other bills pending before the legislature when, on March 15th, 2018, the Lieutenant Governor of Ontario, on the Premier’s advice, prorogued the legislature. Bill 3 was then reintroduced when the legislative session resumed the following week.

It goes into effect January 1st 2019, creating certain requirements for employers regarding compensation information and its disclosure to employees and potential employees.

Reasons for the Bill

  • The goal of the province, in introducing Bill 3, is to address biases in hiring and in pay-setting and thereby promote fairer compensation practices.
  • Belief that the requirements introduced by Bill 3 would help address and hopefully narrow the gender wage gap
  • Belief that it would ensure that all Ontarians, including other disadvantaged groups in the workplace, have equal opportunity to get hired, negotiate fair wages, and progress in their career based on merit.
  • An existing difference in compensation, as high as 30% in some work sectors, between male and female employees — a figure that has not budged in the last decade.
  • The principle of this act is informed and supported by countries with similar laws, such as Australia, Britain and Germany.

Key requirements under the Pay Transparency Bill include:

  • prohibit employers from seeking the compensation history regarding a potential employee, although that person may voluntarily make such a disclosure (Section 4-1)
  • require job postings to include information about expected compensation or the range of expected compensation for the position (section 5)
  • require prescribed employers to prepare a pay transparency report that complies with the regulations, is for a prescribed reporting period and contains prescribed information relating to: the employer, the composition of the workforce, the differences in workplace compensation regarding gender and other characteristics (Section 6-1)
  • require employers to submit the pay transparency report to the Minister and post it online or in a conspicuous location in the workplace (Section 6-2)
  • requires the employer to post the report online or in at least one conspicuous place in every workplace of the employer where employees can view it. (Section 6-3)
  • permit the Minister to publish the pay transparency report (Section 6-4, 5)
  • prohibits reprisal measures by employers regarding inquiries/disclosures made by employees under the legislation. (Section 7)
  • Allows an affected employee who believes reprisal has taken place to have the matter dealt with by arbitration or through filing a complaint with the Ontario Labour Relations Board. (Section 8)
  • empowers the province to appoint compliance officers with requisite powers and duties, among other things, to conduct compliance audits and investigations in the course of the audits. (Sections 8 – Section 12)

Current Considerations for Pay Transparency

  • Ontario’s existing pay equity legislation (Pay Equity Act (R.S.O. 1990)) already applies to businesses with 10 or more employees.
  • the Pay Transparency Act, 2018 goes into effect January 1st 2019
  • it would be rolled out to first to the Ontario Public Service.
  • then in May 2020 it will be a requirement to file the report, for those companies with 250 employees or more .
  • the first report is due for all employers with 100 employee or more by May 2021
  • The Provincial Government would also encourage small businesses with less than 100 employees to follow suit after this.
  • Pay Transparency and disclosure is already required among unionized employers and the public service.
  • Public sector salary disclosure happens through the annually published “Sunshine List” for any individual that earns over $100,000 per annum.

Employer Considerations When Bill is in Effect

  • Employers will have to take steps to change their hiring practices to ensure compliance with the new legislation.
  • Larger and public-sector employers to which the pay transparency reporting obligations would apply would be put to the task of creating and posting those reports.
  • Since employees would become aware of compensation trends in their workplaces based on the content of the pay transparency reports, those larger and public-sector employers would likely face an increase in demands for pay increases by their employees.
  • Those employers that are not currently in full compliance with the existing Pay Equity Act may also face litigation related to that legislation after posting their pay transparency report.
  • The Pay Equity Act (R.S.O. 1990), already requires employers in Ontario, with more than 10 employees, to identify and correct gender discrimination that may be present in their compensation practices and to adjust the wages of employees so that both female and male job classes are equal, when they are comparable in value based on skill, effort, responsibility and working conditions.
  • It is unclear how the bill will affect those who work in smaller businesses (less than 250 employees), where disclosure is not yet expected to be required.