What Employers Should Know About Ontario's Pay Equity Act
Aird & Berlis LLP | Aird & McBurney LP
Canada November 28 2019
Ontario employers are obligated to maintain practices that preserve pay equity. Despite the Ontario Pay Equity Act, R.S.O. 1990, c. P.7 (PEA) being in force since January 1, 1988, many employers remain unaware of their pay equity obligations and, also, the significant penalties for failing to do so.
The PEA applies to all employers in the public sector and all employers in the private sector who employ 10 or more employees. This includes employees who are employed on a full-time, part-time and seasonal basis.
However, the PEA does not apply to employers under federal jurisdiction including the federal government, banks, airlines and post offices. Federally regulated employers are subject to the federal Pay Equity Act which received royal assent on December 13, 2018, and is expected to come into force in 2020.
What is pay equity?
Contrary to popular belief, pay equity is not the same as "equal pay for equal work." Equal pay for equal work is a requirement under the Ontario Employment Standards Act, 2000, S.O. 2000, c. 41. This employment standard compares the pay of workers in the same employment position, for example, the pay of an accountant in one establishment and the pay of another accountant in another establishment.
Pay equity compares the pay for jobs usually done by women in one establishment with the pay for similarly valued jobs usually done by men in the same establishment. For example, in the context of an elementary school, the employer is required to compare the pay of a custodian male job class and the pay of a daycare worker female job class to determine pay equity.
In other words, "equal pay for equal work" compares the pay of workers in the same job across different establishments, while pay equity compares the pay of workers in different jobs of similar value within the same establishment.
Female, male job classes
It is the value attributed to female job classes and comparator male job classes that must be assessed when determining pay equity. As set out under subsection 5(1) of the PEA, the value of work is determined by assessing the skill, effort and responsibility normally required in the performance of the work as well as the conditions under which it is normally performed.
If an employee is in a female job class, that employee has a right to pay equity. A "female job class" is one in which at least 60 per cent of the positions are held by women. It is important to note that both men and women in an undervalued female job class are entitled to receive pay equity wage adjustments.
The PEA only requires that female job classes be paid the same as comparable male job classes. Since the purpose of the PEA is to correct systemic discrimination in compensation for female job classes only, the PEA does not entitle employees in male or gender-neutral job classes to pay equity. The PEA does not require an employer to determine pay equity between two similarly valued female job classes.
Achieving pay equity
To achieve pay equity, an employer must carry out the following steps. An employer must: (1) identify the job classes within the establishment, including the gender and job rate of the job classes; (2) ascribe the value of each job class based on skill, effort, responsibility and working conditions; (3) compare all female job classes by using the prescribed methodology of compensation; and (4) adjust the wages of underpaid female job classes accordingly so that those in the female job classes are paid at least as much as a comparable male job class.
Using the example from above, if custodians in a male job class are valued equally as daycare workers in a female job class by the employer of the elementary school but the pay for custodians is higher than the pay for daycare workers, then the PEA would require the wage of daycare workers be raised to at least the same wage as custodians to achieve pay equity.
Employers should note that, generally, external labour market information may not be relied on for valuing and comparing job classes and rates (though exceptions exist). The employer is required to evaluate job classes within the organization and compare the job rates of those similarly valued male and female job classes.
Maintaining pay equity
Employers' obligation does not end when pay equity is achieved. Employers have an obligation to maintain pay equity. Employers must be diligent in reviewing male and female job classes for changes in job rate, job value, duties and responsibilities as positions are added or removed. The purpose is to ensure that pay equity gaps that were closed remain closed.
Earlier this year, the Ontario Divisional Court made a ruling with respect to an employer's obligation to maintain pay equity, particularly in female-dominated workplaces such as nursing homes. The Divisional Court in Ontario Nurses' Association v. Participating Nursing Homes 2019 ONSC 2168, found that the Charter requires that women in predominantly female workplaces have continued access to male job class comparators to maintain pay equity.
If no male comparators exist, then employers must look at external comparator workplaces to conduct the exercise. In other words, employers may not rely on past pay equity reviews to determine future pay equity obligations on the basis that no comparable male job classes exist.
Further, even if no complaint has been filed, the Pay Equity Commission through its review officers may investigate and issue orders against employers. Employers should therefore maintain records demonstrating their ongoing pay equity undertakings. Helpful documents that should be kept include job descriptions and postings, personnel files, payroll, tax and accounting records and corporate documents such as board of directors' meeting minutes.
Retroactive payments, other liabilities
Employers should note that pay equity obligation exists: (1) the moment a private establishment of more than 10 employees is created; or (2) the moment a public establishment is created.
Employers who do not implement pay equity by the prescribed deadlines may be liable for making retroactive payments — to current and former employees — to the date on which the obligation is triggered.
If wage is owed to former employees, employers are obligated to locate these former employees to meet the obligation. Employers may also be liable for paying interest on such retroactive payments. There has been one instance where an employer had to pay retroactive pay equity adjustments to its employees of over $6 million to comply with the PEA (Windsor (City) v. Moor [2017] O.P.E.D. No. 6.
Employers should further note that it is an offence to intimidate or discriminate against an employee who exercises his or her rights to pay equity. Such offence may result in a fine of $50,000.
Due to the potential significant liability, employers should review their pay equity practices and ensure that their PEA obligations are met and maintained.
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