The Federal Government has announced the Pay Equity Act (“Act“) will come into force on August 31, 2021. In addition, the Regulations under the Act have now been published and are available here.

The Act provides that most federally-regulated employers with 10 or more employees in 2021 will have 3 years from August 31, 2021, to develop a pay equity plan for the workplace. It should be noted that the governments of Yukon, the Northwest Territories and Nunavut and Indigenous governing bodies are currently exempt from the application of this Act.  An Employer must post a detailed Notice, described in the Act, within 60 days of becoming subject to the Act, that sets out its obligations to establish a pay equity plan and establish a pay equity committee.

This announcement is a very significant development for federal sector employers. The Act imposes onerous new obligations on employers to proactively examine their compensation practices and ensure that they are free of gender based pay inequity and otherwise in compliance with the Act. This approach reflects a major shift from the federal “complaint-driven” model that required employees and unions to raise the issue first if it was believed that the employer’s compensation scheme was inequitable.

The Pay Equity Process

The Act sets out a process for establishing a pay equity plan, which includes the following steps.  The first critical step is to establish a pay equity committee

Pay Equity Committee

Employers with 100 or more employees are required to make all reasonable efforts to establish a pay equity committee, as are employers with 10 to 99 employees if some or all of the employees are unionized. The Act sets out specific requirements for the composition of the committee, including that there be at least one member from each bargaining unit for unionized employers, an elected member representing non-union employees, at least one member representing the employer, at least 50% of the committee members must be women and at least two-thirds must represent the employees to whom the pay equity plan relates. The Act sets out specific responsibilities for the committee.

Pay Equity Plan

The basic steps required to prepare a pay equity plan include:

• Identify job classes (i.e. positions that share similar duties, responsibilities and the same compensation plan and range of salary rates)
• Determine which job classes are predominantly male and predominantly female
• Value the work done in each job class
• Calculate the total compensation for each job class (must be calculated in dollars per hour even if employees are paid by salary, piecework, commission, etc.)
• Identify job bands
• Compare compensation between predominantly male and predominantly female job classes and determine if there are differences.  The methodology for this is set out in the Act and its Regulation.
• Prepare and post a pay equity plan.

The requirements for each of these steps is described in detail in the Act and its Regulation.  Once a draft pay equity plan is posted, employees must have 60 days to review and comment on the proposed pay equity plan.  Once the final version of the pay equity plan is posted, employers are required to close any pay equity gaps. Once a plan is prepared and posted, each employer must submit a detailed annual statement as set out in the Act.  A pay equity maintenance review must be undertaken at least every five years.

Tips to Get Ready

While the Act allows three years for affected employers to develop and implement a pay equity plan, the process can take considerable time and resources. Using an existing pay equity plan may not be sufficient as it may not have been created in compliance with the Act.

As a starting point, affected employers should consider the implications of the composition of a pay equity committee, if one is required. Consideration should also be given to whether there may be justification for having more than one pay equity plan.  The default under the Act is a single pay equity plan for an entire organization; that is, for all unionized employees from various bargaining units and non-unionized employees together.  Application must be made to the Pay Equity Commissioner for approval to create multiple plans for an employer.  The Commissioner has indicated that only in circumstances where it may be reasonable based on a number of articulated factors, including the fact that multiple plans would not compromise the availability of male comparators, would approval for multiple plans be considered. 

Creating or updating job descriptions may help to facilitate the development of a pay equity plan though, in some circumstances, the committee’s involvement in review of the job descriptions may be required. Affected employers should consider gathering data, such as lists of job positions and employees holding each position, their gender, hours of work, and compensation schemes, that will ultimately be used to determine whether adjustments in compensation will be required.

Unionized employers facing upcoming collective bargaining should expect issues related to the Act and Regulations to be raised at the bargaining table.  It is highly recommended to conduct a proactive review of the current compensation and job evaluation systems under the collective agreement prior to the commencement of collective bargaining so that bargaining positions are informed by the new statutory requirements.

If you have any questions about the Pay Equity Act or the Regulations, or any questions relating to workplace law in the federal sector generally, please do not hesitate to contact a Mathews Dinsdale lawyer.