On September 10, 2019, the federal government announced the appointment of the first ever federal Pay Equity Commissioner. The Pay Equity Commissioner's role is to provide leadership and direction for the administration and enforcement of the new federal Pay Equity Act (the "Act"). The Act establishes a new pay equity regime which is aimed at reducing gender based pay discrimination by ensuring all federally regulated employers take proactive steps to ensure they are providing equal pay for equal value. While the Act has yet to take effect, the appointment of the Pay Equity Commissioner is a signal that the federal government intends to proclaim the Act in force in the near future.
Our advice to employers is: get ready! Federally regulated employers, such as banks, airports, airlines, crown corporations and telecommunications companies, will need to re-think how they determine job classifications and compensation.
Pay Equity Plan Requirements
Unlike most of the pay equity regimes that exist in the various provinces and territories, the new federal Pay Equity Act assumes employers are not paying employees equitably based on gender and requires them to rebut this presumption by mandating all employers with 10 or more employees to establish a pay equity plan. A pay equity plan must:
- Indicate the number of employees in the employer's business;
- Identify the job classes within the workplace;
- Identify whether each job class is male or female-predominant;
- Evaluate the value of the work performed by each class;
- Identify all compensation associated with each job class;
- Compare and detail the compensation associated with male and female-predominant classes of similar value;
- Identify which female-predominant job classes require an increase in compensation in order to achieve parity with male predominant job classes of a similar value;
- Identify when increases in compensation are due; and
- Provide information on dispute resolution procedures available to employees.
Employers will have to determine job classes as part of their pay equity plan. This will require evaluating different jobs taking into consideration the skills required, level of responsibility, physical effort and working conditions.
Determining whether a job class is male or female predominant will require an analysis of the historical and stereotypical profile of employees who hold that role and determining if 60% of more of those employees are of the same gender.
Employers will have to review and update their pay equity plans at least once every five years and must actively resolve gender based pay discrepancies as they are identified. Unionized employers with more than 100 employees are further required to establish a pay equity committee tasked with developing, implementing and updating the employer's pay equity plan. Finally, employers are required to post notices in the workplace setting out their statutory obligations and reporting on key milestones related to compliance with these obligations.
The Act has strict requirements on how employers measure a job's worth to the organization for the purpose of compensation. Setting compensation levels based on external market compensation rates will likely be found to be in violation of the Act, as many external market compensation rates are based on systemic gender discrimination that the Act is seeking to correct.
Employers will have three years to develop pay equity plans and to correct any gender pay gaps they identify. Employers cannot reduce compensation of any employees to permit compliance with the Act. The cost of non-compliance with the Act is not cheap. Employers who have between 10 and 99 employees and are found in violation of the Act could face a maximum penalty of $30,000 per day. The maximum penalty for employers with 100 or more employees is $50,000 per day.
The Act covers all forms of remuneration including, but not limited to, salaries, commissions, vacation pay, bonuses, employer contributions to pension plans and health insurance plans.
What This Means for Employers
All federally regulated employers with more than 10 employees must establish a pay equity plan within three years of the Pay Equity Act coming into force. This will be an onerous task and will likely involve engaging outside expertise to ensure that the plan complies with the stringent requirements under the Act. While the Act is not yet in force, all signs point to the fact that it will be proclaimed into force soon and we suggest that employers get a head start on developing their pay equity plans.
Unionized employers, take note – pay equity plans will supersede any existing collective agreement to the extent that the plan and agreement are inconsistent. Any increase in compensation under the Act is deemed to be incorporated into the collective agreement governing those employees.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.