Information contained in this publication is intended for informational purposes only and does not constitute legal advice or opinion, nor is it a substitute for the professional judgment of an attorney.
Canada’s federal Pay Equity Act (Act) received Royal Assent on December 13, 2018. The purpose of the Act is to create a proactive pay equity regime within the federal public and private sectors to ensure that federally regulated workplaces provide equal pay to men and women for work of equal value. On July 7, 2021, Canada announced that it would bring the Act and the supporting Pay Equity Regulations (Regulations) into force on August 31, 2021.
The pay equity model under the Canadian Human Right Act (CHRA) is a complaint-based system, i.e., once an employee files a claim, the employer is required to prove that it complied with pay equity rules under the CHRA. Under the Act, the onus is shifted to the employer, which is required to proactively analyze its compensation practices to ensure they are equitable and in compliance with the Act.
The Act’s pay equity regime applies to federally regulated workplaces with 10 or more employees. Federally regulated workplaces are those subject to the employment standards set forth in the Canada Labour Code. These workplaces include those in the private and public sectors (including, but not limited to, air transportation, banks, most federal Crown corporations, radio and television broadcasting, telecommunications), parliamentary workplaces, and the Prime Minister’s and ministers’ offices.
Federally regulated employers with less than 10 employees remain subject to section 11 of the CHRA, which requires employers to respond to pay equity complaints.
The governments of Yukon, the Northwest Territories and Nunavut, and Indigenous governing bodies that are employers are exempt from the Act’s application.
Within 60 days of August 31, 2021, employers must post a Notice setting out their obligations to establish a Pay Equity Plan and to make all reasonable efforts to establish a Pay Equity Committee for that purpose.
Pay Equity Committee
The Act requires the following employers to make reasonable efforts to establish a Pay Equity Committee:
- Employers with 100 or more employees; and
- Employers with 10 to 99 employees if some or all employees are unionized.
The Pay Equity Committee must include:
- At least one committee member from each bargaining unit in a unionized context;
- A committee member who is elected to represent non-unionized employees; and
- At least one committee member who represents the employer.
Furthermore, 50% of committee members must be women, and at least 2/3 of committee members must represent affected employees.
An employer’s Pay Equity Committee will be responsible for developing the employer’s Pay Equity Plan.
Pay Equity Plan
The key feature of the Act is that it requires most federally regulated employers with 10 or more employees to develop a proactive Pay Equity Plan for its employees. The Act outlines the content that must be included in the Plan.
If there is an inconsistency between a Pay Equity Plan and any collective agreement governing employees to whom the plan relates, the Pay Equity Plan will prevail to the extent of the inconsistency.
An employer—or in the case of a group of employers, each employer in the group—must post the final version of the Pay Equity Plan no later than the third anniversary of the date on which it became subject to the Act.
Employers with, on average, 10 or more employees in the year before the Act comes into force, will become subject to the Act on August 31, 2021, and they will be required to develop a Pay Equity Plan within three years of that day, i.e., by August 31, 2024.
When an employer comes to employ, on average, 10 or more employees at any time after August 31, 2021, it will become subject to the Act on January 1 of the following year, and will be required to develop a Pay Equity Plan within three years of that day.
An employer must take the following steps to develop a Pay Equity Plan:
- Identify the different job classes made up of positions in its workplace;
- Determine whether each job class is predominantly male, predominantly female, or gender neutral;
- Determine the value of work of each predominantly female or male job class;
- Calculate the compensation of each predominantly female or male job class; and
- Compare the compensation between predominantly female and male job classes doing work of equal or comparable value.
Employee review and comment
Within 60 days after their Pay Equity Plans are developed, employers must post them for employee review and comment.
Once an employer’s Pay Equity Plan is established, the employer will be required to increase the compensation of any predominantly female job classes receiving less pay than their male counterparts. Certain employers may be entitled to phase in such compensation increases over three to five years.
Pay Equity Plan review and update
Employers will be required to update their Pay Equity Plans every five years to ensure that they are maintaining pay equity and that any new pay gaps are closed.
Pay Equity Commissioner
The responsibilities of a Pay Equity Commissioner (Commissioner) will include:
- The administration and enforcement of the Act;
- Assisting persons to understand their rights and obligations under the Act; and
- Facilitating disputes relating to pay equity.
The Commissioner, who will be a member of the Canadian Human Rights Commission, will have the power to conduct a compliance audit, an investigation, and to order an employer to conduct an internal audit and report the results.
Decisions of the Commissioner may be appealed to the Canadian Human Rights Tribunal.
Administrative Monetary Penalties
To promote compliance with the Act, the Commission may impose significant administrative monetary penalties for violations of the Act.
Bottom Line for Employers
As the establishment of a Pay Equity Plan involves many complex steps that can be time-consuming and involve many individuals within the workplace, employers subject to the Act should avoid waiting until the last minute to begin the process. Accordingly, we encourage employers to establish a Pay Equity Committee reasonably soon if required to do so, and to soon begin to take the steps involved in developing their Pay Equity Plans.