Evolution Of The Legislative Landscape
Pay equity and pay transparency laws in Canada have evolved significantly over the last fifty years. The framework we know today is based on the Canadian Human Rights Act, the first federal anti-discrimination law in Canada, passed in 1977, which gave some recourse for pay discrimination. However, the Act was based on complaints, so it put the onus on employees to report pay discrimination rather than on employers to proactively prevent it.
In the late 2010s, the federal government began to develop legislation that would move pay equity in a new direction and eventually supersede the Human Rights Act. This resulted in the Pay Equity Act (the Act), which received royal assent in December 2018 and come into force on August 31, 2021. It established a proactive approach to pay equity rather than one based on complaints from employees. The responsibility is now on employers.
The Act imposes new proactive pay equity obligations on federally regulated employers with 10 or more employees in both the public and private sectors. Specifically, each employer must develop a pay equity plan for its employees within three years of becoming subject to the Act. If the employer employs 100 or more employees or is unionized, it will need to establish a pay equity committee to develop the pay equity plan. The Act prescribes composition requirements for such a committee, including that 50% of committee members be women and at least two-thirds of the members represent employees under the plan. In unionized workplaces, each bargaining agent must select at least one representative for the employees of its bargaining unit.
Importantly, by November1, 2021, employers should have prominently posted a notice in the workplace informing their employees of their obligations under the Act. This notice must remain posted until the plan is completed or employer obligations change. Template notices are available via web links in the “Resources” section at the end of this article.
Preparing An Internal Pay Equity Plan
This is no insignificant task. It involves:
1. Identifying job classes in the workplace.
o identify positions with similar duties, responsibilities, and qualifications that form a job class. This may first require a review and update to existing job descriptions that are out of date or inaccurate.
2. Determining the gender predominance of each job class, specifically, whether a job class is predominantly female, predominantly male, or gender neutral, based on prescribed factors; A job class is to be considered predominant in one gender if:
o at least 60 percent of the positions in the job class are occupied by one gender at the time of the review,
o at least 60 percent of the positions in the job class were historically occupied by one gender, or
o the job class is one that is commonly associated with one gender due to gender-based occupational stereotyping.
3. Evaluating the work done in each of the predominantly male and predominantly female job classes based on an assessment of skill, responsibilities, effort and working conditions.
o compare the compensation associated with female-predominant and male-predominant job classes of similar value to determine if any female-predominant job classes require an increase in compensation. Employers must use one of two methods provided for in the act to calculate the comparison of compensation between predominantly-female and predominantly male classifications.
4. Calculating total compensation for each predominantly male job class and predominantly female job class.
o determine the value of the work and calculate the total compensation associated with each gender-predominant job class. (The act requires an hourly rate of pay for comparison purposes, even if employees are paid by salary, commission, etc.)The criteria that employers must apply to determine the value of work is the skill, effort, and responsibility required to perform the work, and the conditions under which the work is performed.
5. Comparing compensation to determine whether there are any differences in compensation between predominantly male and predominantly female job classes of equal value using the methods prescribed in the Act or another method approved by the Pay Equity Commissioner.
o compare the compensation associated with female-predominant and male-predominant job classes of similar value to determine if any female-predominant job classes require an increase in compensation. Employers must use one of two methods provided for in the act to calculate the comparison of compensation between predominantly-female and predominantly male classifications.
6. Identifying wage gaps for predominantly female job classes.
7. A draft of the pay equity plan, along with a notice to employees of their right to provide comments, must be posted before the pay equity plan can be finalized. This final version must be posted by September 3, 2024, for employers who became subject to the Act on August 31, 2021.
8. The Act prescribes annual reporting requirements and a five-year maintenance cycle intended to ensure employers review their plans to identify and close any pay gaps that may have emerged.
o Once an employer has developed a final plan, it must submit an annual statement to the “pay equity commissioner”—a new government position created under the Pay Equity Act—regarding the status of its pay equity plan. The statement must contain the following:
i. the name of the employer.
ii. the date on which the employer became subject to this Act.
iii. an indication as to whether the version of the pay equity plan most recently posted was established or updated, with or without a pay equity committee.
iv. the number of employees employed by the employer on the last day of the year immediately before the year in which the annual statement is submitted & the number of predominantly female job classes for which an increase in compensation is required in accordance with the version of the pay equity plan most recently posted.” This includes reporting the increase in compensation and the aggregate amount of all lumpsums paid.
v. the total number of employees occupying positions in that job class who are entitled to the increase and lumpsum & the total number of employees in that job class who are women.
Pay Equity Committee
The act requires employers with 100 or more employees, as well as employers with 10 to 99 employees if some or all of their employees are unionized, to form a pay equity committee that would be responsible for developing and implementing the pay equity plan. The committee must “be composed of at least three members and must also meet the following requirements:
· at least two-thirds of the members must represent employees to whom the pay equity plan relates.
· at least 50 percent of the members must be women.
· at least one member must be” an employer representative.
· in unionized workforces, representation must be equal between all bargaining units.
The committee is responsible for developing a pay equity plan and identifying pay equity gaps that exist between predominantly male and female job classifications of equal value. Furthermore, the committee will determine any wage increases owed to employees in job classifications where pay gaps are identified. Employers will have to make retroactive lump-sum payments for any pay equity gaps identified and implement ongoing wage adjustments as needed. These obligations begin once employers post their updated pay equity plans.
Enforcement Under The Act - Pay Equity Commissioner
Under the new act, the federal government appoints a pay equity commissioner who is responsible for ensuring compliance with obligations under the act. The commissioner may order an employer to conduct internal audits or to prepare reports on the results of pay equity plan. Additionally, the commissioner has the power to issue monetary penalties, ranging from $30,000 to $50,000, for noncompliance with the act or the commissioner’s orders. The act also establishes a dispute resolution mechanism overseen by the commissioner if a pay equity dispute arises between an employer and its employees (or union) during the development of a pay equity plan and thereafter.
Key Considerations For Employers
The new act introduces stringent additional obligations on federally regulated employers that may require significant planning and efforts to proactively address the pay equity gaps that may exist in their workplace. The act also introduces significant penalties for lack of proactive compliance. Employers may want to take steps to address their new pay equity obligations to ensure they have enough time to become compliant with the new posting and plan development requirements within the three-year buffer period.
The Pay Equity Act is a significant step aimed at achieving gender equality in the Canadian workforce. Employers have important obligations under this act to promote fair compensation practices and eliminate gender-based pay disparities. By taking proactive steps to comply with the act and prioritize pay equity in their organizations, employers can create a more equitable and inclusive work place for all employees.
Limitations Of The Act & Provincial Legislation
One limitation of the federal regulations—both the Pay Equity Act and the preceding Human Rights Act—is that they were written to apply to only federally regulated industries in Canada. (This includes banking, communications, and transportation companies as well as government departments and institutions.) Some provinces (like Ontario and Québec) created legislation that applies to public sector employers as well. The Federal Pay Equity Act does not currently apply to the governments of Yukon, the Northwest Territories and Nunavut.
All of Canada’s jurisdictions have human rights legislation prohibiting discrimination in employment and which, in the absence of — or in addition to — pay equity legislation, can be a tool for addressing discriminatory pay practices. Provinces have also identified other ways to reduce pay discrimination and pay inequality. Some implemented or developed their own specific pay equity laws. Others broadened their focus to pay transparency.
Alberta is the only province that has neither passed pay equity legislation nor developed a pay equity negotiation framework.
Seven Canadian provinces have enacted specific pay equity legislation for the public sector. In British Columbia, Ontario and Quebec, pay transparency & pay equity legislation also applies to the private sector:
· British Columbia (Pay Transparency Act)
· Manitoba (Pay Equity Act; Pay Transparency Act)
· Ontario (Pay Equity Act; Pay Transparency (Schedule 2 of the Working for Workers Act)
· Quebec (Pay Equity Act)
· New Brunswick (Pay Equity Act)
· Nova Scotia (Pay Equity Act)
· Prince Edward Island (Pay Equity Act, Pay Transparency)
Two provinces have yet to enact pay equity laws, but have developed policy frameworks for negotiating pay equity with some specific public sector employees:
· Saskatchewan(Pay Transparency)
· Newfoundland and Labrador (Pay Equity & Transparency Proposed legislation)
Resources – Canadian Human Rights Commission (CHRC)
To assist and provide guidance federally-regulated employers, in understanding their obligations and to take a proactive approach to correct gender wage gaps within their organization, the Canadian Human Rights Commission (CHRC) website has a Pay Equity Subsite that houses resources like:
