Pay equity between women and men is the order of the day around the globe, and Canada is no exception.

The Canadian government made a commitment to the International Labour Organization to adopt equal pay legislation before the end of 2018.

Mission accomplished: The Act to Establish a Proactive Pay Equity Regime within the Federal Public and Private Sectors (Pay Equity Act) received Royal Assent on December 13, 2018.

A regulation will soon provide some methodological details, but the Act already includes all the provisions from which the work of employers can be aligned.

Background Around the New Pay Equity Act                  

In federally regulated sectors, the right to pay equity managed on the basis of complaints submitted under the Canadian Human Rights Act does not appear to be effective. The law will now require employers to ensure, through proactive means (in other words through a structured approach), that employees occupying positions in predominantly female job classes receive equal pay for performance work of equal value by employees occupying positions in predominantly male job classes.

It appears that the “proactive” Ontario approach, much like that of Quebec, served as a model for the federal Pay Equity Act; the latter, however, contains provisions make its application quite unique.

Who is Subject to the New Act?

Federally regulated organizations with 10 or more employees including:

• The federally regulated private sector
• Employers whose rights and responsibilities are defined in the Canada Labor Code and include: banks, air transportation, rail and road transportation across provincial or international borders, shipping, pipelines that cross provincial boundaries, animal feed, flour, seeds and grains, grain elevators, telecommunications and broadcasting and Crown corporations.
• The federal public service
• Parliamentary institutions
• The Prime Minister and Ministerial offices

And, provincially regulated companies if they are subject to the Federal Contractors Program in the context of employment equity.

6 Key Employer Obligations Under the Pay Equity Act

To ensure that pay equity is achieved in female-dominated job classes, the employers’ primary obligation is to establish a pay equity plan and update it periodically.

1. A Pay Equity Committee for Certain Companies

The establishment of a pay Equity committee is optional in companies with 10 to 99 non-union employees. However, in all companies with 100 or more employees and 10 to 99 employees with a unionized workforce (or part thereof), employers must, unless specific conditions apply, put in place a pay equity committee whose responsibility is to develop the pay equity plan. The committee must also update the pay equity plan on a five-year basis.

General rule for the composition of the pay equity committee, which must have at least 3 members:

• Employer representatives
• The representatives of any bargaining agent for the unionized employees covered by the plan;
• Representatives of non-union employees covered by the plan.

At least 50% of the members must be women and at least 2/3 of the members must represent the employees.

2. Pay Equity Plan Within Three Years

Following the implementation of the Act, employers or pay equity committees have a maximum of 3 years to determine whether or not there are pay gaps with respect to predominantly female job classes. At the exact end of these 3 years, the employer will have to post the final version of the pay equity plan.

In principle, the employer must implement a single pay equity plan in his or her company. However, non-unionized employees, a bargaining agent or the employer may apply to the Pay Equity Commissioner (attached to the Canadian Human Rights Commission and responsible for the administration of the Act) for authorization to establish a separate pay equity plan.

The steps to follow are set out in the pay equity plan:

1. Identify job categories and determine prevalence by sex;
2. Establish the value of work according to qualifications, effort, responsibilities and working conditions;
3. Calculate total compensation (salary rates, premiums, bonuses, and other benefits);
4. Compare compensation using salary gap estimation methodologies prescribed by the Act.

3. Posting

As a participatory legislation, the Act provides for a series of announcements, including:

• Notice advising employees of the requirement to establish an equity plan and outlining the rules governing the composition of the pay equity committee (if applicable);
• Posting of the draft pay equity plan content and notice to employees covered by the plan about their rights to provide comments;
• Final posting of the content of the pay equity plan which takes into account, if necessary, changes made as a result of comments made by employees when the draft plan is posted.

4. Increase in Compensation

When there is a pay gap for a predominantly female job class, the general rule is that the correction must begin by the end of three years set aside for the full implementation of the pay equity plan. Arrangements for phasing in compensation increases are possible if they exceed 1% of the employer’s annual payroll. For companies with 10 to 99 employees, the maximum phase-in period is 5 years. It is 3 years for companies with at least 100 employees.

5. Annual Statement

The Pay Equity Act requires employers to file with the Pay Equity Commissioner a detailed annual statement on the pay equity process, including increases in pay for predominantly female job classes.

6. Pay Equity Plan Update

An update of the pay equity plan is required on a 5-year basis beginning no later than 5 years after the posting of its final version. The employer or the pay equity committee must then proceed in the same steps as when the initial pay equity plan was completed, and identify the pay gaps that would have emerged since the previous posting.

Point of No Return

Let’s face it: far from fading, the principle of pay equity is becoming a reality.

Senior management has started to realize this, and is demanding more and more accountability from HR/Compensation managers. For the latter, a reflection must therefore begin on the current state when it comes to wage policies (increases, bonuses, benefits, etc.), wage structure (or lack thereof), value of jobs, management-labour relations and communication style with employees, etc.

The 3-year term may seem long. But it is not. It would be reckless not to prepare a work plan right now to ensure successful completion of the pay equity project. This is the only way to manage the task at hand … or we run the risk of being managed by the events…

*Note: The purpose of this note is to provide an overview of the general scope of the federal Pay Equity Act and is not a legal interpretation. Many particularities apply. For advice or more information, contact us.

Other articles on pay equity include:

B.C. Still Has A Lot Of Work To Do Regarding Pay Equity & Transparency

About the author: Denise Perron, CHRA, is a consultant and President of Groupe AEQUITAS, a consulting firm offering full expert pay equity services. With her team, she works with companies across Canada. From April 1997 to May 2004, Denise Perron was Commissioner of the Pay Equity Commission of Quebec. Ms. Perron is the spokesperson for CPHR Canada on the issue of pay equity with the federal government. She can be reached by e-mail at denise.perron@groupeaequitas.com or by phone at +1-514-844-1828 Website: www.groupeaequitas.com

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