Proactive Pay Equity regulations – Discussion paper

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Introduction

Preface

On December 13, 2018, An Act to Establish a Proactive Pay Equity Regime within the Federal Public and Private Sectors (referred to as the Pay Equity Act) received Royal Assent, as part of Bill C-86, Budget Implementation Act, 2018, No. 2. The Pay Equity Act establishes a proactive pay equity regime requiring employers with 10 or more federally regulated employees to examine their compensation practices to ensure that women and men receive equal pay for work of equal value. The Pay Equity Act will apply to the federal public and private sectors, and the Prime Minister’s and ministers’ offices. In addition, the regime will apply to parliamentary workplaces through amendments to the Parliamentary Employment and Staff Relations Act in a manner tailored to respect parliamentary privilege.

Before the Pay Equity Act can come into force, regulations must be developed to allow employers, bargaining agents and employees to be able to fulfill their obligations under it.

Purpose of this paper

The purpose of this discussion paper is to solicit the opinions of stakeholders and Indigenous partners on six topics. Stakeholders to be consulted include employer, labour and advocacy stakeholders, as well as pay equity professionals and experts. These opinions will contribute to the development of regulations that respond to the varied experiences and circumstances of employees and employers who will be subject to the Act.

Structure of this paper

The discussion paper provides:

  • a general overview of the Act; and
  • a breakdown of the regulatory provisions that may be developed.

Any regulatory proposal set out in this discussion paper has been developed for consultation purposes only, and should not be interpreted as representing the final views of the Minister of Employment, Workforce Development and Labour or the Government of Canada.

Responding to this paper

Questions asked in this discussion paper are meant to guide and facilitate stakeholder input. Feel free to provide comments on all or some of these questions, or on any other related issues that you consider relevant.

In addition, please keep the following general questions in mind:

  1. What might be the impact of any of the proposed regulations on employees or employers?
  2. Do you have any concerns or suggestions related to implementing the proposed regulatory provisions?
  3. Is there anything that should be clarified either in regulations or through the publication of guidance materials? If so, please describe the issue and the best way to address it.

Please send your written responses, as well as questions or comments about the consultation process, by email or by mail to:

Pay Equity
165 l'Hôtel-de-Ville Street
Place du Portage Phase II 9th floor mail box L901
Gatineau, QC  K1A 0J2

The deadline for sending your response is June 28, 2019. The Labour Program thanks all individuals and organizations for the input that they have provided to date in the development of the Act and its supporting regulations, and for their participation in this next stage of consultations on regulatory proposals.

This consultation paper is available in English and French.

The Pay Equity Act

At the federal level in Canada, the right to equal compensation for men and women working in jobs of equal value has been recognized and protected under the Canadian Human Rights Act since 1977.

The Canadian Human Rights Act places the burden on employees to make complaints to the Canadian Human Rights Commission if they believe that their right to pay equity has been violated. The new Pay Equity Act (the Act) will instead introduce a proactive system requiring employers to ensure that their compensation practices provide men and women with equal pay for work of equal value.

The proactive pay equity regime under the Act will require federally regulated employers with 10 or more employees to establish a pay equity plan for their workplace. The steps to establish a plan will include:

  • identifying job classes by grouping positions that have similar duties and responsibilities, require similar qualifications, are part of the same compensation plan, and are within the same range of salary rates;
  • using the criteria set out in the Act to determine the gender predominance of job classes;
  • determining the value of work performed by each predominantly female and male job class and calculating the compensation associated with those job classes; and
  • determining whether there are differences in compensation that need to be addressed by comparing the compensation of predominantly female and predominantly male job classes that are of equal or comparable value.

Once the pay equity plan has been established and posted in the workplace, the employer will also be required to:

  • increase the compensation of employees in predominantly female job classes for which a difference in compensation has been identified; and
  • review and update the pay equity plan at least once every five years after the final version of the initial plan is posted in the workplace and, if pay equity gaps have appeared since the plan was last posted, provide retroactive payments and increases in compensation.

The following employers must establish a pay equity committee comprised of employer and employee representatives to establish and update the pay equity plan:

  • employers with 100 or more employees; and
  • employers with 10 to 99 employees, some of whom are unionized.

An employer with 10 to 99 employees, none of whom are unionized, is not required to establish a pay equity committee.

A Pay Equity Commissioner will be appointed within the Canadian Human Rights Commission to administer and enforce the Act by assisting workplace parties in understanding their rights and fulfilling their obligations, including through the development of tools and education materials, investigating complaints and considering applications, and facilitating the resolution of disputes.

The Pay Equity Regulations

Additional requirements for using predetermined values of work

Under the Act, an employer or a pay equity committee will be required to determine the value of work for all the predominantly female and male job classes identified in their pay equity plan. When valuing the work of job classes, an employer or pay equity committee must use a job evaluation method that:

  1. accounts for the skill, effort and responsibility required to perform the work and the conditions under which the work is performed;
  2. does not discriminate on the basis of gender; and
  3. is able to determine the value of work for all the predominantly female and male job classes identified.

Public sector

In addition, subsection 41(2) of the Act allows an employer or a pay equity committee in a public sector workplace to use values of work that have already been determined using a previously established evaluation method, as long as the method meets the three requirements and any additional requirements that may be set out in regulations.

Question 1:

Should the regulations prescribe any other requirements for an employer or pay equity committee in a public sector workplace to use a previously established job evaluation method to determine the value of work of gender predominant job classes? Please explain.

Private sector

The flexibility to allow an employer or pay equity committee to use predetermined values of work when evaluating job classes could be extended to the federally regulated private sector by bringing into force section 417 of the Budget Implementation Act, 2018, No. 2.

Question 2:

Has your workplace used, or does it use, a job evaluation method that you believe meets the three requirements set out above? If so, please describe the evaluation method.

Question 3:

Would there be any benefits or risks to permitting federally regulated private sector workplaces to use predetermined values of work?

Question 4:

If federally regulated private sector workplaces were permitted to use predetermined values, would there be a need for any other requirements to be prescribed in regulations? Please explain.

Comparing compensation

The Act requires an employer or pay equity committee to compare the compensation between predominantly female and male job classes to identify any pay equity gaps. This can be achieved using either the equal average or the equal line method set out in the legislation. If differences in compensation are identified, an employer or pay equity committee will need to apply a mathematical “factor” to determine the size of the pay equity gap and the increase in compensation owed.

The factor for use with the equal average method

Section 49 of the Act sets out rules to follow when using the equal average method to compare the compensation of predominantly female and male job classes that fall within the same band.Footnote 1 In particular, paragraph 49(1)(c) indicates that the compensation of a predominantly female job class is to be increased when:

  • its compensation is lower than the male average; and
  • the average compensation of all predominantly female job classes is lower than the male average.

Paragraph 49(1)(d) indicates that the increase is to be calculated by multiplying (i) the factor calculated in accordance with the regulations by (ii) an amount equal to the difference between the compensation of the predominantly female job class and the male average compensation.

Applying the factor ensures that once the increases in compensation are provided, the average compensation of predominantly female and predominantly male job classes within the band are equal, in accordance with paragraph 49(1)(e).

Given these principles, regulations could ensure that predominantly female job classes that fall further away from the male average (within the band) receive the largest adjustments.

Question 5:

Are there other objectives that the factor should address? If so, what objectives would you propose?

The factor for use with the equal line method

Section 50 of the Act sets out rules to follow when making pay equity comparisons using the equal line method. This involves calculating regression lines that represent the relationship between job value and hourly rates of compensation for all predominantly female and predominantly male job classes, respectively.

In particular, paragraph 50(1)(b) indicates that the compensation of a predominantly female job class is to be increased when:

  • it is located below the male regression line; and
  • the female regression line is entirely below the male regression line.

Paragraph 50(1)(c) indicates that the increase is to be determined by multiplying (i) the factor calculated in accordance with the regulations by (ii) an amount equal to the difference between the compensation of the female job class and the compensation that it would earn if it were on the male regression line.

Applying the factor ensures that once the increases in compensation are provided, the female regression line coincides with the male regression line, in accordance with paragraph 50(1)(d).

Given these principles, regulations could set out a formula for calculating the factor that would ensure that:

  • the factor would progressively increase or decrease with job value, so as to provide similar treatment across predominantly female job classes; and
  • predominantly female job classes—with the same job value—that fall further away from the male regression line receive larger adjustments.

Regulations would accommodate equal line comparisons using “straight” (linear) regression lines.

Question 6:

Are there other objectives that the factor should address? If so, what objectives would you propose?

Question 7:

Could the equal line method be adapted for use with non-linear regression lines—for example, by converting them into linear lines—using appropriate statistical methods? Do you have other suggestions for dealing with non-linear regression lines?

Crossed regression lines

Subsection 50(2) indicates that if the female regression line crosses the male regression line, an employer or pay equity committee must apply the rules prescribed by regulations for comparing compensation.

Question 8:

What approaches would you suggest to address situations when the male and female regression lines cross?

Developing a pay equity plan when there are no predominantly male job classes

To be able to identify and address any pay equity gaps, an employer or pay equity committee will need to have a predominantly male job class in their organization to use as a comparator for the predominantly female job classes. Without a male comparator, the employer or pay equity committee will not be able to compare compensation and carry out the rest of the steps to establish and maintain their pay equity plan.

To ensure that every employer and pay equity committee is able to complete a pay equity plan, the regulations will prescribe a process or processes to follow when developing or updating a pay equity plan where there are no male comparators.

Proactive pay equity regimes in Quebec and Ontario provide employers and pay equity committees with processes to follow to compare compensation when there are no male comparators.

Quebec’s Pay Equity Act provides two processes that can be followed in both the private and public sectors:

  1. Regulations provide employers or pay equity committees with job information and a method for determining the compensation for two typical predominantly male job classes—a Foreman and a Maintenance worker—so they can create two male comparators in their own plans that they will then use to complete the legislated steps of comparing compensation and identifying any pay equity gaps.
  2. An employer or pay equity committee can also “borrow” job and salary information related to two or more predominantly male job classes from another “proxy employer” to create two male comparators in their own plans that they will then use to complete the legislated steps of comparing compensation and identifying any pay equity gaps.

The second process relies on the willingness of a proxy employer to share job and compensation information with a “borrowing employer”. In workplaces where the pay equity plan is developed without a committee, a borrowing employer must request permission from the Commission des normes, de l'équité, de la santé et de la sécurité du travail (the Labour Standards, Pay Equity and Workplace Health and Safety Board) to rely on proxy comparators. In their application, the borrowing employer must demonstrate that their workplace and the proposed proxy workplace share similar characteristics such as their size, region and industry sector.

The first process has supported the achievement of pay equity across the network of early childhood centres in Quebec. The second process has also been used, though in a more limited manner, in certain workplaces where separate businesses operated as franchisees under the same chain of business.

Ontario’s Pay Equity Act allows certain public sector employers to borrow job descriptions and compensation information from a proxy employer. This process has been applied in a number of predominantly female workplaces in the public sector in Ontario, such as nursing homes.

Question 9:

Is it likely that your workplace will have at least one predominantly female job class but no predominantly male job classes to serve as male comparators?

Question 10:

What opportunities and challenges might the typical job class or proxy employer approach present for federally regulated employers and pay equity committees that do not have any male comparators?

Question 11:

Would your business or organization be willing to act as a proxy employer for a borrowing employer for pay equity purposes? Why or why not?

Question 12:

Should the regulations specify factors that must be taken into account to allow an employer to borrow information from a proxy employer? For example, should a proxy employer’s information pertain only to unionized employees if the borrowing employer’s workforce is unionized?

Question 13:

Bearing in mind the Pay Equity Commissioner’s mandate, what role, if any, should the Commissioner play in the process of either authorizing or facilitating the use of any prescribed methods? Should this role vary based on whether the pay equity plan is developed with or without a pay equity committee? If so, how?

Question 14:

In your view, would another process be more appropriate for federally regulated workplaces than either the typical job class or the proxy employer approach? If so, please explain.

Updating and maintaining pay equity plans

The Act will require employers to update their pay equity plans no more than five years after posting the final version of that plan, and at least every five years after that. To update a pay equity plan, an employer or pay equity committee will be required to identify and address any new differences in compensation between predominantly female and male job classes of equal value that have emerged as the result of a change that has occurred since the plan was last posted.

Changes to consider in updating the pay equity plan

Subsection 78(1) of the Act stipulates that—when reviewing and updating their pay equity plans—employers or pay equity committees must identify differences in compensation between predominantly male and predominantly female job classes resulting from workplace changes that are “likely to have had an impact on pay equity, other than any change excluded by regulation.”

Question 15:

Should the regulations include criteria to guide the employer or pay equity committee in identifying changes that meet the threshold of being “likely to have had an impact on pay equity”? If so, what criteria would you propose?

Question 16:

Should the regulations set out an exhaustive list of types of workplace changes that should be considered when the plan is updated? If so, what types of changes would you propose? Alternatively, should this be left to the employer or committee to determine?

Question 17:

Are there any types of workplace changes that should be excluded from the scope of the maintenance analysis? If so, what exclusions would you propose?

Question 18:

In some circumstances, subsection 62(4) of the Act allows for the first set of wage adjustments to be phased-in over time. Should the regulations specify that the unpaid portion of the initial wage adjustment being phased-in not be considered a pay equity gap when the plan is updated?

Timing of analysis

As part of the process for updating a pay equity plan, subsection 78(1) directs the employer or pay equity committee to identify differences in compensation between gender-predominant job classes that emerged “as of the times or in the circumstances that are prescribed by the regulations”.

The regulations could require that the employer or committee collect annual, point-in-time workplace information during the maintenance period (for example, information related to job class compensation and gender predominance).

The information would be analysed to identify any pay equity gaps that had emerged. The results of each point-in-time analysis could be treated as representative of the workplace for the preceding year (in other words, any pay equity gap found at that point in time would be deemed to have existed for that entire period).

Question 19:

What are your views on an annual point-in-time approach?

Question 20:

If an annual point-in-time approach is adopted, should the regulations also set a fixed date each year to collect the information (for example, the anniversary of posting the plan)? Alternatively, should the employer or committee have discretion on timing, provided that the information is analyzed once per fiscal or calendar year?

Question 21:

Are there any forms of compensation or other relevant workplace data that do not lend themselves well to an annual point-in-time approach?

Question 22:

Are there any other times or circumstances that should trigger a requirement to collect point-in-time workplace information?

Impact of collective bargaining

Many federally regulated employers have unionized employees. In some cases, their workforce is divided into more than one bargaining unit. In these workplaces, collective bargaining for each individual bargaining unit may proceed on separate tracks and collective agreements may have different effective dates.

In workplaces with multiple bargaining units, it is possible that—at a given point in time—some employees’ rates of pay will be current (in other words, reflected in a collective agreement that is in effect), while other employees’ rates of pay are subject to a statutory freeze because collective bargaining is ongoing. If this situation arises during the pay equity maintenance process, it could lead to a situation where current rates of pay for some job classes are being compared to frozen rates of pay for other job classes.

Paragraph 181(1)(b) of the Act provides regulatory authority to prescribe a manner for determining the monetary value of any form of remuneration payable for work performed by an employee, for the purpose of calculating the compensation of a job class.

To ensure an “apples to apples” comparison, in cases where an employer or pay equity committee encounters both current and frozen rates of pay during their maintenance analysis, the regulations could prescribe a manner for determining the monetary value of the rates of pay that would be used in calculating and comparing compensation.

Question 23:

Should the regulations set out the manner of determining the monetary value of the rates of pay to address these types of situations? If so, what should it be?

Time limits for applications and notices

The Act requires employers, and in certain situations bargaining agents and non-unionized employees, to apply to the Pay Equity Commissioner for authorization to vary certain requirements in the pay equity process—for example, establishing a plan without a pay equity committee or obtaining an extension for posting the final pay equity plan. Similarly, the Act requires employers to notify the Pay Equity Commissioner in certain circumstances, such as when an employer has decided on its own initiative to establish a pay equity committee.

The Act provides the authority to establish regulations specifying the time limits for submitting these notices and applications to the Pay Equity Commissioner. As these applications and notices are likely to have an impact on the timelines associated with developing and maintaining a pay equity plan, it is important to determine whether there should be time limits for submitting any or all of the applications and notices.

The section below lists the applications and notices for which time limits could be prescribed in regulations, and proposes a time limit—or, in some cases, more than one time limit—for an application or notice.

Question 24:

Where there is only one time limit proposed for an application or notice, do you agree with the proposal? Please explain.

Question 25:

Where there is more than one proposed option for an application or notice, which option, if any, do you prefer? Please explain.

Potential time limits

  1. A group of employers may submit an application to the Pay Equity Commissioner to be recognized as a single employer...
    • Option 1: …within six months of the date the employer became subject to the Act.
    • Option 2: …within 12 months of the date the employer became subject to the Act.
    • Option 3: …within 18 months of the date the employer became subject to the Act.
    • Option 4: …before the deadline for posting the final version of their plan.
    The related provision of the Act is subsection 4(1).
  2. An employer must submit a notice to the Pay Equity Commissioner when they voluntarily establish a pay equity committee to develop or update a pay equity plan…
    • Option: …within 90 days of informing its employees of its intention to establish a pay equity committee as per subsections 14(2), 15(2), 65(2), or 66(2) of the Act.
    The related provisions of the Act are subsections 16(3), 17(3), 67(3) and 68(3).
  3. An employer must submit an application to establish or proceed with a pay equity committee whose composition is different than what is required in the legislation…
    • Option 1: …without delay.
    • Option 2: …within 60 days of the day that the employer became aware, or should have become aware, of their need to submit the application.
    • Option 3: …within 90 days of the day that the employer became aware, or should have become aware, of their need to submit the application.
    The related provisions of the Act are subsections 19(3), 67(6) and 68(6), and sections 27 and 75.
  4. An employer must submit an application to establish a pay equity plan without a pay equity committee.
    • Option 1: …without delay.
    • Option 2: …within 60 days of the day that the employer became aware, or should have become aware, of their need to submit the application.
    • Option 3: …within 90 days of the day that the employer became aware, or should have become aware, of their need to submit the application.
    The related provisions of the Act are sections 25, 26, 28, 29, 73, 74, 76 and 77.
  5. An employer must submit an application to use a method other than the equal average or equal line methods to conduct the comparison of compensation...
    • Option 1: …without delay.
    • Option 2: …within 60 days of the day that the employer became aware, or should have become aware, of their need to submit the application.
    • Option 3: …within 90 days of the day that the employer became aware, or should have become aware, of their need to submit the application.
    The related provision of the Act is paragraph 48(2)(a).
  6. An employer may submit an application to the Pay Equity Commissioner to phase in increases in compensation over a longer phase-in period than that set out in the legislation…
    • Option 1: …before the end of the time limit for the phase-in period as prescribed in paragraph 61(2)(c) or (d) of the Act.
    • Option 2: …before the employer posts the schedule for the increases in compensation as per paragraph 61(2)(a) of the Act.
    The related provision of the Act is subsection 63(1).
  7. An employer, bargaining agent or non-unionized employee may submit an application to the Pay Equity Commissioner to establish more than one pay equity plan for the same employer...
    • Option 1: …within 12 months of the employer becoming subject to the Act.
    • Option 2: …within 18 months of the employer becoming subject to the Act.
    The related provisions of the Act are subsections 30(1) and (2).
  8. An employer must notify the Pay Equity Commissioner that they have identified at least one predominantly female job class but no predominantly male job class…
    • Option: …within 90 days from the day on which the employer knew, or ought to have known, that there is at least one predominantly female job class but that there are no predominantly male job classes in their plan.
    The related provision of the Act is section 39.
  9. An employer may apply to the Pay Equity Commissioner for an extension to the date required to post the final version of the initial or updated pay equity plan…
    • Option: …before the expiry of the time limit for the employer to post the final version of the respective plan. In addition, the Pay Equity Commissioner would have the authority to extend this time limit.
    The related provisions of the Act are subsections 57(1) and 85(1).

Posting documents in the workplace

Under the Act, employers will be required to post a variety of documents in the workplace. These include notices, as well as draft and final versions of both their initial and updated pay equity plans. These could also include documents issued by the Pay Equity Commissioner or the Canadian Human Rights Tribunal (for example, decisions, orders, notices of violations).

Documents posted in the workplace concerning the development of their pay equity plan will be an important source of information for employees, especially non-unionized ones. How and when these documents are posted, and for how long they remain posted, will be key to ensuring transparency in the pay equity process and ensuring that documents are accessible.

Two series of regulatory options are presented below. The following section proposes options related to the form, the dating and accessibility of all documents posted under the Act. The section titled “Potential timeframes” sets out the list of documents to be posted in the workplace and regulatory options for when and for how long these documents must remain posted.

Potential requirements for all documents posted under the Act

All documents required to be posted under the Act must be:

  • posted in either printed or electronic form;
  • dated to allow for the tracking of postings; and
  • made available in an alternative format for employees with special needsFootnote 2 where the employer is, or ought to be, aware of the need.

The related provisions of the Act are:

  • Sections 14, 15, 25, 26, 28, 29, 52, 53, 55, 56, 65, 66, 73, 74, 76, 77, 80, 81, 83, 84,176;
  • Subsections 57(2) and (3), 85(2) and (3), 158(4), and 167(2); and
  • Paragraph 94(1)(b).

Question 26:

What are the benefits and downsides to making postings available to employees in either printed or electronic form (for example in a situation where an employee works remotely)?

Question 27:

What are the benefits and downsides of the proposed approach to making postings available in an alternative format?

Question 28:

Should any other requirements or flexibilities be prescribed in regulations for the posting of documents in the workplace?

Potential timeframes

  1. All final versions of a pay equity plan, including changes to a final plan identified by the Pay Equity Commissioner, and all documents to be posted at the same time as a final pay equity plan (in other words, document of changes) must remain posted…
    • Option: …until the next final updated version of the pay equity plan is posted (in other words, up to five years).
    The related provisions of the Act are sections 55 and 83, paragraphs 57(2)(b), 85(2)(b), and 94(1)(b), and subsections 57(3), 85(3) and 158(4).
  2. All draft versions of a pay equity plan, and all documents to be posted with a draft version of a pay equity plan (in other words, notices of an employee’s right to comment on the draft and draft document of changes) must remain posted…
    • Option: …for at least 60 days from the day the draft version of the pay equity plan is posted.
    The related provisions of the Act are sections 52,53, 80 , and 81.
  3. Notices regarding an employer’s obligation to establish and update a pay equity plan must be posted…
    • Option: …as soon as possible after the employer becomes subject to the Act and remain posted until the final version of the relevant pay equity plan is posted.
    The related provisions of the Act are sections 14,15, 65 and 66.
  4. Notices informing employees that the Pay Equity Commissioner has authorized a change to the employer’s obligations under the Act (in other words, to establish a pay equity plan without a pay equity committee or to extend the date for posting the final version of their pay equity plan) must be posted…
    • Option: …as soon as possible after the employer receives authorization from the Pay Equity Commissioner, and must remain posted until the final version of the relevant pay equity plan is posted.
    The related provisions of the Act are sections 25, 26, 28, 29, 73, 74, 76, 77, and paragraphs 57(2)(a) and 85(2)(a).
  5. Notices regarding the date any increases in compensation, or any lump sum payments, are payable, must remain posted…
    • Option: …for at least 60 days or until the increases in compensation are paid in full, whichever period is longer.
    The related provisions of the Act are sections 56 and 84.
  6. Copies of a determination of the Canadian Human Rights Tribunal regarding an inquiry into a question of law or jurisdiction, and copies of a decision, order, notice of violation or other document issued by the Pay Equity Commissioner must remain posted…
    • Option: …for the period of time specified by the Tribunal or Commissioner.
    The related provisions of the Act are section. 176 and subsection 167(2).

Question 29:

Do you agree/disagree with any of these proposed timeframes for the posting of documents in the workplace? Please explain.

Conclusion and next steps

Your responses to the questions raised in this discussion paper will contribute to the development of regulations needed to bring the Act into force. Input from federal jurisdiction stakeholders and Indigenous partners will ensure that regulations take into account the diverse needs and circumstances of federal jurisdiction workplaces.

The Labour Program will analyse the responses and determine whether additional targeted consultations are needed on specific regulatory items.

Additionally, you will have the opportunity to provide comments on the draft regulations after their pre-publication in Part I of the Canada Gazette.

Question: 30

Are there other matters that should be considered in the design of pay equity regulations?

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