Federal Pay Equity Act came into force August 31, 2021 – what employers need to know

The Pay Equity Act[1] (the “Act”), which received royal assent in December 2018, finally came into force nearly three years later on August 31, 2021. As a result, federally regulated employers with 10 or more employees have a number of obligations intended to ensure equal pay for work of equal value in federally-regulated workplaces.

Notably, the Act permits two or more employers that are subject to the Act to form a “group of employers” by applying to the Pay Equity Commissioner. Should such a request be granted, the “group” would be treated as a single employer for the purposes of the Act. 

Pay equity committee required for some employers

The obligations under the Act are imposed on the employer or, if applicable, the pay equity committee established by the employer. A pay equity committee is required in the following circumstances:

1. Where the employer or recognized group of employers is considered to have 100 or more employees; or
2. Where the employer or recognized group of employers has 10 to 99 employees, and some or all of the employees are unionized on the date the Act comes into effect. In the case of a group of employers, only one of the employers in the group must have unionized employees on the date the Act comes into effect in order to a pay equity committee to be required.

For any employers or group of employers with 10 to 99 non-unionized employees, establishment of a pay equity committee is optional. Employers that choose to establish a committee must notify the Pay Equity Commissioner that they have done so.

Committees must be composed of at least three members and must meet the following requirements:

• At least two-thirds of the members must represent the employees to whom the pay equity plan relates;
• At least 50% of the members must be women (in other words, even the smallest possible committee must have at least two women);
• At least one member must be a person selected by the employer to represent it;
• If some or all of the employees to whom the pay equity plan relates are unionized, there must be at least the same number of members to represent those employees as there are bargaining agents; and
• If some or all of the employees to whom the pay equity plan relates are non-unionized, at least one member must be a person selected by those employees to represent them.

Employers that are not able to establish a pay equity committee that meets the requirements of the Act must apply to the Pay Equity Commissioner for authorization to establish a committee with different requirements.

Employers have 60 days to post a notice outlining their obligations

Within 60 days of the Act coming into force (so on or before October 31, 2021), employers or each employer in a group of employers – must post a notice stating their obligations under the Act, including:

• The employer’s obligation to establish a pay equity plan;
• That the employer is in a group of employers (if applicable);
• If a pay equity committee is required:
  • the employer’s obligation to make all reasonable efforts to establish a pay equity committee,
  • the requirements for the committee’s membership, and
  • the employee’s right to designate the committee members or, for unionized employees, the right of the bargaining unit to select the committee members;
• If a pay equity committee is voluntarily established:
  • the requirements for the committee’s membership, and
  • the employee’s right to designate the committee members.

This notice must remain up until the final version of the employer’s pay equity plan is posted.

Three years to develop pay equity plans

The most significant obligation under the Pay Equity Act is the requirement on employers to develop and implement pay equity plans. By the third anniversary of the Act coming into force (i.e., August 31, 2024), employers or each employer in a group of employers – will need to post a final version of their pay equity plan.

Employers or, if applicable, the pay equity committee start the process of establishing their pay equity plans by identifying the job class of positions occupied by employees to whom the pay equity plan will relate. Once all such job classes are identified, the employer or pay equity committee will need to determine which job classes are predominantly female job classes and which are predominantly male job classes. If it is determined that there is at least one predominantly female job class and at least one predominantly male job class, the employer or pay equity committee must then determine the value of the work performed in each predominantly male and predominantly female job class. The employer or pay equity committee can then calculate the compensation associated with each job class. These calculations are ultimately compared for the purpose of determining whether there is any difference in compensation between the job classes, in accordance with the equal average method prescribed in the Act.

Through the above process, employers will gather the information that must be included in the pay equity plan, including:

• The number of pay equity plans required to be established in respect of the employer’s employees;
• The number of employees that the employer is considered  to have for the purposes of determining whether a pay equity committee must be established (more on this below);
• Whether a pay equity committee has been established and, if so, if it meets the requirements set out in the Act;
• A list of the job classes that have been identified to be job classes of positions occupied or that may be occupied by employees to whom the pay equity plan relates;
• Whether any such job classes were determined to be predominantly female job classes or predominantly male job classes, and if so a list of those job classes;
• Whether a group of job classes has been treated as a single predominantly female job class and, if so, a list of the job classes included in the group of job classes and which individual predominantly female job classes fall within the group;
• For each job class for which there was a determination of the value of work performed, the method of valuation used and the results of that valuation;
• Any job classes in which differences in compensation have been excluded from the calculation and the reasons why;
• If a comparison of compensation was made, which of the prescribed methods were used to make the comparison and the results of the comparison, or if neither prescribed method was used the reasons why not and what method was used (along with the results of the comparison);
• Each predominantly female job class that requires an increase in compensation under the Act and how the employer will increase the compensation in that job class and the amount of the increase;
• The date on which the increase in compensation (or first increase, if applicable) is payable; and
• The dispute resolution procedures available under the Act to employees to whom the pay equity plan relates, including any timelines.

Draft pay equity plan must be posted for employee comment

At some point during the initial three-year period, once the employer or pay equity committee has prepared its draft of the pay equity plan, the draft plan must be posted for comments from employees, who then have 60 days to provide their written comments to their employer.

The employer or pay equity committee must consider any comments provided when preparing the final version of the pay equity plan.

Timing for required payment of increases in compensation

If the employer’s pay equity plan discloses differences in compensation between predominantly female job classes and predominantly male job classes, the employer must increase the compensation for the predominantly female job classes the day after the third anniversary of the Act coming into force (i.e., by September 1, 2024).

In some circumstances, the increase in compensation may be significant. Contemplating that, the Act provides that if the total amount (in dollars) of the increase required is more than 1% of the employer’s payroll for the year that immediately precedes the year in which the pay equity plan is posted, the employer can opt to phase in the increase. The phase must over a period of six years (if the employer or group of employers is considered to have 100 or more employees) or eight years (if the employer or group of employers is considered to have 10 to 99 employees).

Plan maintenance, annual statements and penalties

Once established, like anything worthwhile, a plan requires maintenance. The maintenance requirements are set out by the Act, including similar requirements with respect to notices, pay equity committees and employee comments on drafts.

Employers also have an obligation to submit to the Pay Equity Commissioner annual statements on or before June 30 of each year, with the first statement due on or before June 30, 2028 for employers that become subject to the Act on August 31, 2021.

In addition to introducing significant obligations for federally regulated employers, the Act also introduces serious penalties for failing to comply with such obligations; the maximum penalties range from CA$30,000 to CA$50,000.

Key takeaways for federally regulated employers

Employers should carefully review the detailed requirements outlined in the Pay Equity Act and start considering how they will address their new obligations. Employers will want to give themselves plenty of time to meet the deadlines set out in the Act, and should avoid leaving the preparation of their pay equity plans to the end of the three-year period.

For more information on the requirements under the Act, or advice on how to commence the process of preparing pay equity plans, please contact a member of the Dentons Employment and Labour group.

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[1] S.C. 2018, c. 27, s. 416.