Canada: Federal Pay Equity Comes Into Force August 31

The Canadian government has announced that the Pay Equity Act (the Act) will come into force on August 31, 2021. The purpose of the Act is to redress systemic gender-based discrimination in compensation practices by ensuring that employees in predominantly "female dominated" job classes receive equal compensation for work of equal value. The final Pay Equity Regulation, which supports the implementation of the Pay Equity Act, is also now available.

Federally regulated employers ought to be aware of two significant obligations that, subject to the size of their workforce, may be applicable to them pursuant to the Act: (i) the establishment of a pay equity plan; and (ii) the establishment of a pay equity committee.

1.  Pay equity committee

Employers which have 100 or more employees, or which have 10 to 99 employees if some or all of its employees are unionized as of August 31, 2021, must make "all reasonable efforts" to establish a pay equity committee. Non-unionized employers with 10 to 99 employees who voluntarily establish a pay equity committee must notify the Pay Equity Commissioner if one is established. The process for establishing a pay equity committee is set out in the Act, along with other rules that govern its operation.

Committee Requirements

The Act contains the following requirements for a pay equity committee:

• the committee must be composed of at least three members;
• two-thirds of the members must represent the employees to whom the pay equity plan relates;
• at least half of the members must be women;
• at least one member must be selected by and represent the employer;
• if some or all of the employees to whom the pay equity plan relates are represented by a bargaining unit, there must be at least the same number of members to represent those employees as there are bargaining agents (each bargaining agent selects at least one person to be a member and to represent employees who are members of their bargaining unit); and
• if some or all of the employees to whom the pay equity plan relates are non-unionized employees, at least one member must be a person selected by those employees to represent them by a majority of votes cast in accordance with the requirements of the Act.

If an employer cannot meet the above requirements, the employer may apply to the Pay Equity Commissioner for authorization to establish a committee that varies from such requirements.

Posting Requirement

Employers must post a notice with the following information:

An employer may post required documentation in printed or electronic form, provided it is readily available to all employees to whom the document relates, and is in a form accessible to employees with disabilities.

2.  Pay equity plan

Employers with 10 or more employees have three years (i.e. until August 31 2024) to develop and implement a pay equity plan. The Act does not apply to employers with fewer than 10 employees.

Multiple employers can also apply to be recognized as a single employer for the purposes of the Act, and the Act contains specific obligations in such situations.

Establishing a pay equity plan

The Act contains detailed steps and requirements for establishing a pay equity plan. At a high level, the steps that must be followed are:

• Identify job classes within the workplace. Employees are considered to be in the same job class if they have similar duties and responsibilities, require similar qualifications, are part of the same compensation plan, and are within the same range of salary rates.
• Identify predominantly female and predominantly male job classes (or groups of job classes). Whether a job is considered to be a predominantly female job class or predominantly male job class must be determined in accordance with the procedure set out in the Act.
• Determine the value of the work performed in each of the predominantly female and predominantly male job classes, based on the composite of the skill required to perform the work, the effort required to perform the work, the responsibility required in the performance of the work, and the conditions under which the work is performed.
• Calculate the compensation associated with each job class for which the employer has determined the value of the work performed.
• Compare the compensation associated with the predominantly female job classes with the compensation associated with the predominantly male job classes, and consider whether there is any difference in compensation between those job classes using the methods of comparison set out in the Act.

Increases in Compensation

If a pay equity plan discloses differences in compensation between predominantly female job classes and predominantly male job classes, the employer must increase the compensation that is payable to its employees in the predominantly female job classes for which an increase in compensation is required to be made. Notice of any such increase must be posted on or before the date on which the increase takes effect. The Act contains requirements governing the timing of any such pay increases.

Pay equity plan requirements

The pay equity plan to be prepared and posted by the employer must:

• Indicate the number of pay equity plans required to be established.
• Indicate the number of employees considered for the purpose of determining whether a pay equity committee was required to be established.
• Indicate whether a pay equity committee has been established and, if so, whether it meets the requirements of the Act (or, if not, whether authorization from the Pay Equity Commissioner was obtained to establish a pay equity committee with different requirements).
• Set out a list of the job classes that have been identified to be job classes of positions occupied (or that may be occupied) by employees to whom the pay equity plan relates.
• Indicate whether any job classes were determined to be predominantly female job classes and/or predominantly male and, if so, set out a list of those job classes.
• Indicate whether a group of job classes has been treated as a single predominantly female job class and, if so, set out a list of the job classes that are included in the group of job classes and identify the individual predominantly female job class within the group.
• Describe the method of valuation that was used and the results of the valuation of the work performed in each job class.
• Indicate any job classes in which differences in compensation were excluded from the calculation of compensation and why.
• Indicate the method used to make any comparisons of compensation and the results of the comparison.
• Identify each predominantly female job class that requires an increase in compensation under the Act and describe how the employer will increase the compensation in that job class, the amount in dollars per hour of the increase, and the date on which the increase (or the first increase) is payable under the Act.
• Provide information on the dispute resolution procedures that are available to employees to whom the pay equity plan relates, including any timelines.

An employer must also post the draft pay equity plan and notice to employees of their right to provide comments on the draft. Employees must have 60 days to provide written comments on the draft and the employer or (if applicable) the pay equity committee must consider any comments that are provided while preparing the final version of the plan. The final version of the plan must be posted within three years of the date the employer became subject to the Act (subject to any extension that is obtained from the Pay Equity Commissioner).

Updates to pay equity plan

The Act contains a procedure for maintaining and updating the employer's pay equity plan, which includes requirements to post a notice setting out its obligations that is similar to the notice described above for the initial development of the plan.

Annual Statement

Employers must submit an annual statement regarding their pay equity plan to the Pay Equity Commissioner on or before June 30 in the calendar year following the year in which the employer is required to post a pay equity plan (or such other period that is prescribed by regulation), and June 30 of each calendar year thereafter. For most employers to whom the Act applies, the first annual statement must be submitted by June 30, 2025.

3.  Other Provisions

The Act contains further provisions of which employers ought to be aware.

Anti-reprisal, enforcement and penalties

The Act contains anti-reprisal provisions that prohibit reprisal against any person who participates in a proceeding under the Act or otherwise files a complaint, exercises a right, or takes any action in compliance with the Act (or refuses to take any action that would result in non-compliance).

The Pay Equity Commissioner also has broad authority under the Act to conduct investigations and compliance audits in connection with the Act. In connection with this authority, the Pay Equity Commissioner may, among other things, enter workplaces, examine records and access electronic data to verify compliance with the Act. The Act also contemplates monetary penalties that may be imposed through regulation. While no specific penalties have yet been put in place, the maximum monetary penalties that may be fixed pursuant to regulation range from $30,000 to $50,000 per violation.

Sale of business

The Act contains specific requirements that apply in the event that all or part of the employer is leased or transferred, pursuant to which the "new employer" effectively assumes the business of the former employer and is liable for the former employer's obligations under the Act.

The Act and its regulation represent the continued focus that the federal government has placed on addressing gender issues in workplaces. Previously, the federal government updated its framework for addressing harassment and violence in workplaces, which was also linked, in part, to gender issues. 

Federally-governed employers should take the time to review their current compensation practices and plans and create a plan for implementing the applicable provisions of the Act in their workplaces.

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.