Canada’s New Pay Equity Act Has Come Into Force
On August 31, 2021, the Pay Equity Act, S.C. 2018, c. 27, s. 416 (the “Act”) came into force and effect in Canada. The primary purpose of the Act is to achieve pay equity by taking proactive steps to correct systemic gender-based discrimination in compensation that has traditionally been experienced by employees working in predominantly female “job classes.” The steps prescribed by the Act aim to ensure that employees in such roles receive equal compensation for work that is of equal value to work performed in job classes that are not historically predominantly female.
Who Does the Act Apply To?
The Act applies to workplaces that are federally regulated under the Canada Labour Code, who have workforces comprising of ten or more employees. This includes the public sector (i.e. government workplaces) and a number of industries in the public sector, including but not limited to aviation, banks, Crown corporations (such as Canada Post), broadcasting, telecommunications, and railways or road transportation services that cross provincial or international borders.
What is Required of Workplaces Subject to the Act?
The first obligation imposed upon employers that are subject to the Act is to post a Notice in the workplace, which explains that the employer is obligated to make reasonable efforts to establish a Pay Equity Committee that will be responsible for establishing a Pay Equity Plan for the workplace. This Notice must be publicly-posted in all affected workplaces by October 31, 2021.
Pay Equity Committee
Federally-regulated employers with 100 or more employees, or between 10-99 employees where at least some of the employees are unionized, are required to form a Pay Equity Committee. Such committees must include at least one member who represents the employer, at least one “bargaining agent” representing unionized employees (if there are unionized employees in the workplace), and at least one member who is elected to represent non-union employees. No more than one-third of the committee’s membership may represent the employer and at least half of the committee’s members must be female.
Pay Equity Plan
The information that must be included in a workplace’s Pay Equity Plan is set out in the Act. In developing a Pay Equity Plan, employers must group the positions in its workplace into job classes, based on positions that have similar duties and responsibilities, require similar qualifications, and are part of the same compensation plan within the same range of salary rates. Next, employers must determine which of its job classes are classified as predominantly female and which are classified as predominantly male. A job class will be predominantly male or female if at least 60% of the positions in the job class are occupied by one of those two genders, if at least 60% of the positions in the job class have been historically occupied by one of those two genders, or the job class is commonly associated with one of those two genders due to gender-based occupational stereotyping.
After job classes have been classified as predominantly female or male, employers must determine the value of the work performed by each of these job classes. The criteria to be used in determining the value of work performed by a job class is the composite skill required, the effort required, the responsibility required, and the conditions under which work is performed by members of the job class. Next, the employer must calculate the compensation associated with each job class, using the highest rate in the range of salary rates for positions in each job class. Finally, the employer must compare the compensation provided to employees in its female job classes to the compensation provided to employees in its male job classes, which perform work of an equal or comparable value. This is done to determine whether there is any difference in the compensation provided to comparable female and male job classes.
Period of Employee Review
Once a Pay Equity Plan has been drafted, an employer must post the draft in the workplace, in a location where employees will be able to review the draft. Along with the draft, the employer must post a notice informing employees that they have the right to provide comments on the draft to the employer or the Pay Equity Committee. Employees will have 60 days after the draft is posted to provide their written comments to the employer or the Pay Equity Committee. The employer is required to consider all employee comments when preparing the final draft of its Pay Equity Plan.
The final draft must be posted in the workplace no later than the third anniversary of the date the workplace became subject to the Act. If a workplace was not subject to the Act at the time it came into effect on August 31, 2021, but later increases its workforce to include 100 or more employees (or 10-99 employees where some are unionized), the workplace will be considered to have become subject to the Act on the first day of the following year. Once a Pay Equity Plan comes into effect, the employer must review and update its Pay Equity Plan at least once every five years.
If the comparison of compensation between female job classes and male job classes reveals that any female job classes received less compensation than male job classes, which performed work of equal or comparable value, the Pay Equity Plan must specify that each such female job class requires an increase in compensation in order to achieve pay equity. The Pay Equity Plan must specify the date upon which any increase in compensation will be payable. For the majority of affected workplaces, the first pay increase in compensation must be paid by the day after the third anniversary of the workplace becoming subject to the Act. It is worth noting that employers are prohibited from reducing the amount of compensation payable to any job class or individual employee in order to achieve pay equity.
If the amount of compensation increases required to achieve pay equity meets or exceeds 1% of the employer’s total payroll, the employer will be permitted to make annual compensation increases to phase in pay equity over time. In these cases, if the employer has 100 or more employees, the final compensation increase must be paid no later than the day following the sixth anniversary of it becoming subject to the Act. For employers with 10-99 employees, the final compensation increase must be paid no later than the day following the eighth anniversary of it becoming subject to the Act.
A Pay Equity Commissioner Will Administer and Enforce the Act
The Government of Canada has appointed a member of the Canadian Human Rights Commission to act as the nation’s Pay Equity Commissioner. The Pay Equity Commissioner will have the authority to conduct audits and investigations to determine whether employers have acted in compliance with the Act. The Pay Equity Commissioner will also have the authority to require employers to perform their own internal audits and report the results of such audits.
Workplaces May be Subject to Monetary Penalties
Where it is found that a workplace has contravened the Act’s requirements, administrative monetary penalties may be imposed. The maximum monetary penalty that may be imposed upon an employer with 10-99 employees, or upon a bargaining agent representing unionized employees in such a workplace, will be $30,000. For workplaces with 100 or more employees, an employer or bargaining agent representing unionized employees in such a workplace may be subject to a maximum monetary penalty of $50,000. Those found to be in violation of the Act my request a review, within 30 days of receiving a Notice of Violation, of the circumstances that led to the violation, the amount of a penalty imposed, or both. Unsuccessful reviews of violations may be appealed to the Canada Human Rights Tribunal.
Employers who are, or may become subject to, the Act will have a great deal of obligations imposed upon them. Since there are deadlines in place, by which such employers must bring their workplace in compliance with the Act, it would be wise for such employers to begin taking steps to become compliant as soon as possible. This article is not meant to provide an exhaustive or comprehensive summary of the requirements imposed by the Act, nor does it constitute legal advice. If you are an employer whose workplace is, or may become subject to, the Act, we strongly recommend seeking the advice of a workplace lawyer to guide you through the process of bringing your workplace in compliance with the Act.