Federal employers, the wait is over: New federal pay equity regime coming August 31

Since the Pay Equity Act (the Act) received royal assent in December 2018, its coming into force has been highly anticipated. On June 24, 2021, by Order-in-Council, the federal government announced that the Act will come into force on August 31, 2021.

As discussed in our previous publication, the Act imposes new proactive pay equity obligations on federally regulated employers with 10 or more employees in both the public and private sectors. Specifically, each employer must develop a pay equity plan for its employees within three years of becoming subject to the Act. 

Notably, if the employer employs 100 or more employees or is unionized, it will need to establish a pay equity committee to develop the pay equity plan. The Act prescribes composition requirements for such a committee, including that 50% of committee members be women and at least two-thirds of the members represent employees under the plan. In unionized workplaces, each bargaining agent must select at least one representative for the employees of its bargaining unit.

Importantly, by November 1, 2021, employers must post a notice informing their employees of their obligations under the Act. This notice must remain posted until the plan is completed or employer obligations change. The government has published template notices here.

Preparing a pay equity plan is not an insignificant task. It involves:

• Identifying job classes in the workplace;
• Determining the gender predominance of each job class and, in particular, whether a job class is predominantly female, predominantly male, or gender neutral, based on prescribed factors;
• Evaluating the work done in each of the predominantly male and predominantly female job classes based on an assessment of skill, responsibilities, effort and working conditions;
• Calculating total compensation for each predominantly male job class and predominantly female job class; 
• Comparing compensation to determine whether there are any differences in compensation between predominantly male and predominantly female job classes of equal value using the methods prescribed in the Act or another method approved by the Pay Equity Commissioner; and
• Identifying wage gaps for predominantly female job classes.

A draft of the pay equity plan, along with a notice to employees of their right to provide comments, must be posted before the pay equity plan can be finalized. This final version must be posted by September 3, 2024, for employers who became subject to the Act on August 31, 2021.

The Act also prescribes annual reporting requirements and a five-year maintenance cycle intended to ensure employers review their plans in order to identify and close any pay gaps that may have emerged. 

Regulations

To accompany the Act, final pay equity regulations have been published in the Canada Gazette Part II and will also come into force on August 31, 2021. The draft regulations were pre-published in late 2020 and are open for public consultation until mid-January 2021. The final version reflects certain changes, including:

• changes to the provisions regarding how and for how long certain documents must be posted in the workplace; 
• eliminating certain time limits for filing applications and notices, including eliminating the 12-month time limit for filing an application for authorization to develop more than one pay equity plan; 
• changes to the process for maintaining pay equity, including the steps for taking workplace information “snapshots,” analyzing the workplace information collected in the snapshots, and comparing compensation for each snapshot; and
• changes to the provisions addressing the application of the Act to bargaining units where wages are frozen.

Takeaways

As the Act will soon be in force, many federally regulated employers will soon be facing a new and robust set of obligations. These employers are encouraged to begin reviewing the legislation and its accompanying regulation to fully understand their obligations under this regime, and should prepare to comply within the legislated timeframes. 

Employers subject to the Act may also want to start considering the composition of a pay equity committee, if required, collect and update existing compensation and job data that may be relevant to the pay equity process, and determine whether to seek authorization from the Pay Equity Commissioner to create multiple pay equity plans (as the presumption under the Act is that there is one plan for an entire organization, even in unionized workplaces with multiple bargaining units).