What Employers Should Know About the Pay Equity Act

The Pay Equity Act, which was part of the Budget Implementation Act, 2018, No.2, received Royal Assent in December 2018. The legislation’s purpose is to ensure that men and women in federally regulated workplaces earn equal pay for equally valuable work. These workplaces include parliamentary offices, ministers’ offices, the prime minister’s office, and work environments in federal public and private sectors. The act will also address the broad under-compensation for work that women predominantly perform.

The act and its regulations will go into force later in 2021, so employers are encouraged to understand the guidelines and begin planning to achieve compliance. Once those regulations are in force, employers will have three years to create and implement their pay equity plans.

The Issue

According to recent data, a woman in Canada earns 89 cents for every dollar earned by a man. This wage gap is unfair to women, leaving them at a disadvantage when trying to save, invest, support their families, and pay everyday bills.

New Regulations

Employers with ten or more employees must develop a pay equity plan that identifies and then corrects gender-based wage gaps for those in predominantly female job classes. For employers with more than 100 employees or employees who are unionized, a committee must carry out this pay equity exercise. Given their myriad interests and decision points, employers with multiple bargaining units may find this task to be challenging. Employers with fewer than 100 non-unionized employees may voluntarily establish a pay equity committee.

According to the act, each committee must include at least three members. Two-thirds of the members must represent employees under the plan, and half of the members must be women. At least one member must represent the employer. If applicable, each bargaining unit is allowed to appoint a committee member.

Within the committee, it is important to note that the employee group, as a whole, has one vote, and the employer representative group has one vote. If the committee members disagree on an issue, the employer’s vote takes precedence. The groups may also approach the pay equity commissioner regarding any matters upon which they cannot agree.

The Pay Equity Plan

When the committees develop their pay equity plans, they are to focus on job classes instead of individuals. Their goal is to ensure that predominantly female job classes are paid as well as predominantly male job classes.

To this end, committees are encouraged to follow these steps:

  • Review workplace job classes and determine their gender predominance.
  • Consider each job class’s skills, responsibilities, and efforts, and determine the value of the work.
  • Review the total compensation for each job class, including salary, benefits, leave, pension fund contributions, and other factors (and keep such information confidential).
  • Compare the predominantly female job classes’ compensation to that of the predominantly male job classes, using methods provided to them, and identify any wage gaps present for the predominantly female job classes.

Once a pay equity plan is drafted, the employer must provide it to employees for input. After this 60-day feedback period, the employer must consider those comments and prepare a final version. This final version is due within three years of the act coming into force. Compensation adjustments must be made by the day after that deadline. If these adjustments are more than 1% of the employer’s total payroll, they can be phased in gradually.

Employers with unionized employees are required to ensure the pay equity plan is consistent with their collective agreements. If it is not, the pay equity plan takes precedence.

Pay equity plans must be reviewed and updated at least every five years.

Looking Ahead

Employers are advised to begin reviewing compensation issues and consider the formation of the necessary committees now. They may also benefit from obtaining legal counsel or working with a pay equity consultant.

In addition to these new regulations, the government is developing workplace violence and harassment prevention measures, pay transparency requirements, and more enforcement of the Canada Labour Code. These interconnected efforts are intended to create better-regulated workplaces so employees can feel both valued and safe. Such environments will benefit not only employers and employees but also the Canadian economy.

Disclaimer: The information contained in this article is for general educational information only. This information does not constitute legal advice, is not intended to constitute legal advice, nor should it be relied upon as legal advice for your specific factual pattern or situation.

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