The federal Pay Equity Act (the "Act") came into force on August 31, 2021. The Act requires most Canadian federally regulated workplaces with 10 or more employees to develop and implement a pay equity plan and address any pay equity gaps in their compensation structure within three years. For most employers, that deadline is September 3, 2024.
At the moment, Indigenous governing bodies and the governments of Yukon, the Northwest Territories and Nunavut are exempt from these requirements.
Employer responsibilities
Under the Act, federally regulated employers with 100+ employees are required to establish a pay equity committee with a certain ratio of representatives from the employer, non-unionized employees and, if applicable, unionized employees. The committee's purpose is to develop a pay equity plan. To be in compliance with the Act, this requires the committee to fulfill a number of steps, including:
- identifying job classes in the workplace;
- determining which of the identified job classes are currently, historically or commonly held by women and men;
- determining the value of the work done by each job class;
- calculating the total compensation for each job class; and
- determining whether there are any discrepancies in compensation for predominantly female job classes in comparison to predominantly male job classes of equal work.
A draft of the committee's pay equity plan must be provided to all employees with 60 days to review and provide comments on the draft. The final pay equity plan must then be posted in the workplace and notice given to employees about any applicable pay increases resulting from the plan.
The increases in compensation are due and payable in full the day after the final version of the pay equity plan is posted and notice is given, unless the employer qualifies or applies to make payments in a phased-in approach.
If an employer fails to pay their employees any amounts due by the set deadline, the employer is required to pay interest on the unpaid amounts.
Once the pay equity plan is completed, annual statements must be submitted to the Pay Equity Commissioner and the plan must be updated every five years.
Multiple plans and group of employers
The Act requires each employer to develop one plan. In limited circumstances, the Pay Equity Commissioner may permit an employer to develop multiple pay equity plans, or to develop a single pay equity plan in conjunction with another employer. An employer must make an application to the Pay Equity Commissioner for a determination of whether a change to the development of the pay equity plan is appropriate in the circumstances.
A group of two or more employers may be considered a single employer for the purposes of the Act if, in the Pay Equity Commissioner's opinion, the employers are:
- part of the same industry (i.e., a group of enterprises with substantially identical lines of work, which provide closely related products, goods or services);
- have similar compensation practices; and
- have positions with similar duties and responsibilities.
Additionally, the Pay Equity Commissioner may permit a single employer to establish multiple plans to better represent their workforce and will consider the following factors in making this determination:
- the impact multiple plans will have on reinforcing occupational gender segregation;
- whether multiple plans will proactively redress systemic pay-based gender discrimination in the workplace; and
- whether the employer attempted to develop a single plan.
These decisions are at the Pay Equity Commissioner's discretion and a request will be granted only if the Commissioner is of the opinion that such approval aligns with the purposes of the Act. It should be noted that the decisions released to date by the Commissioner regarding multiple plan requests indicate that it is difficult for an employer to be successful in such applications.
Extensions
Employers who require more time to complete their pay equity plan can submit a request for an extension to the Pay Equity Commissioner. Consideration of whether an extension will be granted includes an assessment of the time and resources an employer has dedicated to the pay equity exercise as well as whether meaningful steps have been taken to establish a pay equity committee within the legislated timelines.
Takeaways for employers
The deadline to post the final pay equity plan is quickly approaching. To allow for the set employee review time and implementation of any compensation changes, employers should take steps to appoint and begin work with their pay equity committees as soon as possible.
To understand more about the potential impact the Act may have on your workplace, or for advice at any stage of the pay equity process, please contact our labour and employment group.
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.
