Pay transparency and pay equity legislation is coming to the forefront across North America, and corporate policies concerning those topics, irrespective of legislative action, will be important due to the tight labour market caused by the pandemic and the retirement of the Boomer generation. Here is a primer on pay transparency and equity developments in Ontario and federally in Canada.
Pay transparency legislation in Ontario (and Canada) is intended to:
- Promote gender equality and equal opportunity in employment and in the workplace, including equal compensation, through increased transparency of workforce compensation;
- Increase disclosure of inequities related to employment and compensation that women and other Ontarians may experience to encourage removal of these inequities;
- Promote the elimination of gender and other biases in hiring, promotion, employment status and pay practices; and
- Support open dialogue and workplace consultation between employers and employees, including with respect to compensation and equal opportunity.
For Provincially Regulated Employers and Employees
The Ontario Pay Transparency Act, 2018 (“PTA”) has been passed, but will not come into force until proclaimed. That proclamation has been delayed pending the Government of Ontario’s consideration of the public’s response to the Ministry of Labour’s Pay Transparency Consultation Paper, which was issued on February 19, 2019.
The PTA will establish new pay transparency obligations for provincially regulated employers:
- Salary rates or ranges must be stated in all publicly advertised job postings;
- Employment candidates may not be asked about their past compensation;
- Reprisals cannot be taken against employees who discuss or disclose compensation;
- Employers with 100 or more employees, as well as certain prescribed employers, must track and report compensation gaps based on gender and other prescribed characteristics;
- Employers with 100 or more employees must post their transparency reports online, or at least in one conspicuous place in every workplace of such employers; and
- The Province will also publish such transparency reports, which may be done online.
Employers in two categories (250 or more employees and 100 to 249 employees) will be required to submit an initial pay transparency report by a date to be set at or after proclamation of the PTA.
Under Ontario’s Employment Standards Act, employees have a right to “equal pay for equal work.” This means that an employer cannot pay different wages to two employees who are performing the same work solely based on their gender.
In contrast, under Ontario’s Pay Equity Act, provincially regulated employers must pay equal wages to employees in female-dominated job classes if the value of work performed is equal to other job classes. Factors such as skill, effort, responsibility, and working conditions are considered in assessing value. Consequently, provincially regulated employers are required to:
- Determine job classes, including gender and job rate of job classes;
- Determine the value of job classes based on skill, effort, responsibility and working conditions using a gender-neutral comparison tool;
- Conduct job comparison for all female job classes using job-to-job and/or proportional value method of comparison;
- Identify and adjust the compensation of underpaid female job classes so that they are paid at least as much as an equal or comparable male job class or classes; and
- Provide payroll summary and proof of payment as required by Ontario’s Pay Equity Office.
For Federally Regulated Employers and Employees
On October 29, 2018, the Canadian government introduced the Budget Implementation Act, 2018 No. 2 (“BI Act #2”), which proposed that federally regulated employers will be required to evaluate their compensation practices to ensure that they are providing equal pay for work of equal value. The BI Act #2 was passed and proclaimed in force on August 31, 2021.
Within three years from the date that they become subject to the BI Act #2, federally regulated employers with ten or more employees will be required to establish a pay equity plan. In establishing this plan, such employers will be expected to:
- Identify job classes within their workplace;
- Determine the gender predominance of each identified job class;
- Determine the value of work performed by each job class;
- Identify the level of compensation associated with each job class;
- Compare the compensation associated with the predominantly female job classes with the compensation associated with the predominantly male job classes of similar value; and
- Identify predominantly female job classes that require an increase in compensation and also the date on which the increases in compensation will be payable.
Employers with 100 or more employees will be required to establish a pay equity committee to develop and update the pay equity plan.
Employers were required to post a notice by November 1, 2021, outlining their pay equity obligations under BI Act #2, and their eventual draft pay equity plans must be posted for employee comment 60 days prior to implementation.
Once an employer has adopted a final pay equity plan, it must submit an annual statement to the Pay Equity Commissioner. Pay equity plans must be reviewed and updated at least once every five years.
Recommendations
Although the PTA is not yet in force and the BI Act #2 plan implementation is still in progress, it is recommended that employers be proactive and (1) prepare updated policies and practices relating to hiring, pay, and promotion; (2) identify compensation gaps based on gender and get ready to make any necessary adjustments, (3) review workplace policies to remove any prohibition on employees sharing compensation information.
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About the Author:
Eric Kay is a partner in firm’s Toronto office. He may be reached at 416-777-4011 or ekay@dickinson-wright.com.
Dickinson Wright Summer Student Juli Kim assisted in the preparation of this article.