Pay Equity Regulations Consultation - Discussion paper

From: Employment and Social Development Canada

On this page

• 1. Overview
• 2. Administrative Monetary Penalties (AMPs)
• 3. Maintaining pay equity and updating pay equity plans when there are no predominantly male job classes
• 4. Measuring the impact of the Pay Equity Act on the gender wage gap
• 5. Minor technical revisions to the Regulations
• 6. Concluding remarks
• Annex A - Privacy Statement

1. Overview

On August 31, 2021, the Pay Equity Act (the Act) and supporting Pay Equity Regulations (the Regulations) came into force. The Act applies to federally regulated private and public sector employers with 10 or more employees. The Act directs them to take proactive steps to ensure that they are providing equal pay for work of equal value. Most importantly, employers must establish a pay equity plan within 3 years of becoming subject to the Act. Establishing a plan requires employers to:

1. analyze whether there are gaps in compensation between predominantly female and male job classes that are determined to be of equal value, and
2. close any gender-based compensation gaps by increasing compensation in those predominantly female job classes

Once established, the employer must update the plan at least every 5 years to identify and close any gender-based compensation gaps that may have arisen.

The employer must also form a pay equity committee made up of employee and employer representatives to establish and update their plan when:

• they employ 100 of more employees, or
• where any of their employees are unionized

The Pay Equity Commissioner (Commissioner), who is a member of the Canadian Human Rights Commission (CHRC), administers and enforces the proactive pay equity regime. The Act equips the Commissioner with a broad range of enforcement powers to deal with complaints, workplace parties that do not comply with their requirements, and to settle disputes. These include the ability to carry out investigations and order-making powers.

The Act also establishes an administrative monetary penalties (AMPs) system to encourage parties to comply with the requirements of the new regime. Further regulations are required to fully operationalize the AMPs system.

The regime also applies to parliamentary workplaces through amendments to the Parliamentary Employment and Staff Relations Act. This is done in a way that respects parliamentary privilege.

Indigenous Governing Bodies (IGBs), such as First Nations band councils, are exempt from the application of the Act until the Governor in Council applies it to these workplaces by an Order in Council. This allows for further engagement with Indigenous partners so that any necessary adaptations to the regime can be made through regulations to ensure that proactive pay equity is a success in these workplaces. In the meantime, IGBs, in addition to federally regulated workplaces with fewer than 10 employees, remain covered by the pay equity provisions in the Canadian Human Rights Act.

For more information about pay equity, how it is enforced in federally regulated workplaces, and the Commissioner, please visit the Pay Equity section of the CHRC website.

To continue to implement the Act in federally regulated workplaces, additional regulations are needed. These regulations would:

• operationalize the AMPs system
• establish the process for updating pay equity plans where there are no comparator job classes that are mostly held by men
• enable the collection of wage gap data needed to measure the impact of the proactive regime on the gender wage gap, and
• make minor technical revisions to the existing regulations

1.1 Purpose of this paper

This paper sets out the Labour Program’s proposed approaches for developing the regulations outlined above. The purpose of this paper is to obtain stakeholder feedback through written submissions on these approaches. This consultation paper is available in both French and in English.

Written responses to this paper or questions regarding the consultation process should be sent no later than June 17, 2022 to the Labour Program’s Pay Equity mailbox: ESDC.PayEquity-EquiteSalariale.EDSC@labour-travail.gc.ca.

Participation in this consultation is voluntary. Your submission may be used and disclosed by Employment and Social Development Canada, including the Labour Program, for policy analysis, research and evaluation purposes. It may also be published – in whole or in part – on Government of Canada’s official website. Please review the Privacy Statement in Annex A for more information on how it could be used and shared, and your rights with respect to your personal information. If you consent to having your submission published and disseminated, please indicate this in your response (for example, ‘[name/organization name] consent to publishing and dissemination of the attached submission’). Publishing and sharing your feedback cannot be done without your consent.

If you would like to participate in these consultations but are unable to provide written feedback to this paper, you are encouraged to complete the online questionnaire for the proposed AMPs regulations.

The Labour Program will review all feedback and develop draft regulations. Stakeholders and the public will have an opportunity to provide further comments when the draft regulations are pre-published in Canada Gazette, Part I. This is anticipated to happen in late fall 2022.

2. Administrative monetary penalties

In this section

• 2.1 Legislative framework
• 2.2 Designation of violations
• 2.3 Classification of violations
• 2.4 Calculation of penalty amounts
• 2.5 Service of documents related to AMPs
• 2.6 Reduction of the penalty if paid early
• 2.7 When payment of the reduced penalty amount is deemed to have been made
• 2.8 Publication of information in relation to notices of violations that are issued
• 2.9 Other items concerning AMPs

An administrative monetary penalty (AMP) is a financial penalty to encourage compliance with a regulatory regime. AMPs are a tool used by a regulatory body as part of a compliance and enforcement continuum. They are also typically used when other voluntary compliance measures have failed. AMPs are not punitive, but create an incentive to comply that does not involve prosecution and court proceedings.

2.1 Legislative framework

The Commissioner administers and enforces the new proactive pay equity regime. This enables the Commissioner to issue AMPs to parties who fail to comply with one or more provisions of the Act or the Regulations.

Under Part 7 of the Act, the Commissioner may issue AMPs of:

• up to $30,000 to employers and bargaining agents for violations related to workplaces with between 10 and 99 employees, and
• up to $50,000 to employers and bargaining agents for violations related to workplaces with 100 or more employees

The Act extends liability for payment of AMPs to individual persons who committed the violation and otherwise directed, authorized, or participated in committing it. A group of employers recognized by the Commissioner could also be issued an AMP for failing to comply with its requirements.

To operationalize the AMPs regime, subsection 127(1) of the Act allows the Governor in Council to make regulations with respect to specific aspects of the AMPs regime, including how it is administered. The Labour Program is considering introducing regulations that would do the following:

1. designate which provisions under the Act or the Regulations will be considered a violation and thereby subject to an AMP when a party does not comply with the provision
2. classify violations as minor, serious or very serious
3. set penalty amounts for each violation classification,
4. determine how the Commissioner may serve notices of violation to parties who have violated the Act or the Regulations
5. set out the conditions where a party may pay a reduced penalty amount
6. determine when a reduced penalty amount is considered paid, and
7. set out what information the Commissioner may publish with respect to AMPs that the they have issued

Each of the following subsections provide the proposed approach or options for a proposed approach for developing regulations for one of the items above. Each subsection includes a description of the proposed policy approach and questions related to that item.

2.2 Designation of violations

The proposed regulations would designate failing to comply with provisions in the Act and the Regulations that either require parties to take certain actions or prohibit parties from taking certain actions as ‘violations’.

This would include, but would not be limited to:

• general requirements, such as:
  • requiring employers to establish a pay equity plan (sections 12 and 13 of the Act)
  • requiring that every employer who established a plan maintain it (section 64 of the Act), and
  • using the equal average or equal line compensation comparison methods (section 49 of the Act and section 27 of the Regulations)
• requirements related to establishing a pay equity committee, such as:
  • requiring employers to establish a committee (section 16 of the Act), and
  • providing information to the committee that is needed to establish a pay equity plan (section 23 of the Act)
• requirements related to the posting of documents, such as:
  • requiring employers to post draft pay equity plans for at least 30 days (section 33 of the Regulations), and
  • requiring employers to post notices of increases in compensation (section 56 of the Act)
• requirements related to making applications to the Commissioner, such as:
  • requiring the employer apply to the Commissioner in order to establish a pay equity plan without a committee (sections 25 and 29 of the Act)
• requirements related to record keeping and reporting, such as:
  • requiring private sector employers to retain records (sections 90 and 91 of the Act), and
  • requiring employers and groups of employers to report in their annual statement if they used predetermined values of work to establish or update their pay equity plan (section 53 of the Regulations), and
• requirements and prohibitions related to administrating and enforcing the regime, such as:
  • producing records ordered by the Commissioner (section 119 of the Act), and
  • obstructing the Commissioner in the performance of their duties (section 99 of the Act)

Designated violations would be subject to an AMP. However, designating a provision as a violation, does not mean that the Commissioner would be obligated to issue an AMP. Designating violations will enable the Commissioner to issue AMPs when they determine it is necessary.

Question concerning the designation of violations

• 2.2.1 In your opinion, are there provisions of the Act or the Regulations that should not be designated as violations?

2.3 Classification of violations

The proposed regulations would classify violations as being either minor, serious or very serious. Classifications would be based on the severity of the impacts of not complying with a provision. The proposed criteria for classifying violations are:

• the impact on parties’ ability to achieve pay equity or to establish or update pay equity plans
• the impact on the Commissioner’s ability to administer or enforce the pay equity regime, and
• the impact on workers’ interests (primarily economic)

Table 1 outlines the proposed classifications of violations with examples of potential provisions that might fall under each classification.

Table 1: Proposed classifications and related violations

Classification	Criteria for determining classifications	Examples of violations
Minor	Is unlikely to significantly impact the ability of workplace parties to achieve pay equity, or to establish or update a pay equity plan Is unlikely to significantly impact the Commissioner’s ability to administer or enforce the regime, or Is unlikely to significantly impact workers financially	Failure to post the notice of the employer’s obligation to establish a pay equity plan (Section 14 of the Act) Failure to post the notice of obligations in an accessible place (section 3 of the Regulations), or Failure to post the notice informing employees that the Commissioner has authorized the employer to establish a plan without a committee (sections 25, and 28 of the Act)
Serious	Will likely hinder the ability of workplace parties to achieve pay equity, or to establish or maintain a pay equity plan Will likely impact the Commissioner’s ability to administer or enforce the regime, or Will likely impact workers financially	Failure to make all reasonable efforts to establish a pay equity committee (subsections 16(1) and 67(1)), or Failure to provide information to a pay equity committee necessary to establish the pay equity plan (section 23 of the Act)
Very serious	Is likely to significantly impact the ability of workplace parties to achieve pay equity or to establish or update a pay equity plan Is likely to significantly impact the Commissioner’s ability to administer or enforce the pay equity regime, or Is likely to significantly impact workers financially	Reducing compensation payable to achieve pay equity (section 98 of the Act) Failure to increase compensation as required (subsection 88(1) of the Act), or Failure to comply with an order of the Commissioner (section 119 of the Act)

Questions concerning the classification of violations

• 2.3.1 In your opinion, are there other considerations that should be taken into account when establishing the criteria for classifying violations?
• 2.3.2 Do you generally agree with the classification of the example violations provided? If not, why?

2.4 Calculation of penalty amounts

Part 7 of the Act sets out the maximum penalties that may be issued to parties who commit a violation. The maximum penalty that may be issued to an employer or bargaining agent depends on the size of their workplace, as measured by the number of employees. A maximum penalty of $30,000 may be issued in relation to workplaces with 10 to 99 employees and up to $50,000 where there are 100 or more employees. Penalty amounts for specific violations may be established in regulations.

The proposed regulations would use a penalty range model to determine penalty amounts. This approach would ensure that the penalties issued are:

• transparent in order to clearly set out how a penalty amount is determined
• operational so they may be effectively applied by the regulator
• proportional to reflect the gravity of the conduct and the impact of the non-compliance by considering both aggravating and mitigating factors, and
• effective deterrent to sufficiently motivate compliance or reduce any financial motive for non-compliance

Penalty ranges would be based on the severity of the violation. The Commissioner would determine the penalty amounts, within the applicable ranges, on a case-by-case basis. The regulations would set out penalty ranges that apply to each classification of violation (minor, serious, or very serious) based on employer size and compliance history.

The Commissioner would determine penalty amounts by taking into account mitigating and aggravating ‘gravity factors’. Gravity factors describe circumstances that the Commissioner would take into consideration when determining the penalty amount within the relevant penalty range. The regulations would define the gravity factors and their related values. This model would give the Commissioner the flexibility to tailor penalty amounts to the circumstances of the violation.

Table 2.4.1 and table 2.4.2 outline potential penalty ranges.

Table 2.4.1 - Penalty Range for small workplaces (10-99 employees)

Violation classification	First violation	Second violation	Third or subsequent
Minor	$250 to $750	$500 to $1,500	$1,000 to $5,000
Serious	$1,500 to $4,500	$3,000 to $9,000	$6,000 to $15,000
Very serious	$5,000 to $10,000	$7,500 to $12,500	$10,000 to $30,000

Table 2.4.2 - Penalty Range for medium and large workplaces (100+ employees)

Violation classification	First violation	Second violation	Third or subsequent
Minor	$500 to $1,500	$1,000 to $2,500	$1,500 to $8,500
Serious	$2,500 to $7,500	$5,000 to $15,000	$10,000 to $25,000
Very serious	$8,500 to $16,000	$12,500 to $20,500	$16,500 to $50,000

The proposed gravity factors could include:

• the degree of negligence of the violating party
• the degree to which the violating party might derive strategic or economic advantage from continued non-compliance
• the manner in which the non-compliance came to the Commissioner’s attention, and
• the steps taken to mitigate/reverse the harm done by non-compliance

Questions concerning the calculation of penalty amounts

• 2.4.1 Do you agree with the penalty range approach for calculating penalties, as opposed to fixed amounts? If not, why?
• 2.4.2 Do you agree with the use of gravity factors for calculating penalties? If not, why?
• 2.4.3 In your opinion, are the proposed penalty ranges set out in tables 2.4.1 and table 2.4.2 of the discussion paper appropriate? If not, why?
• 2.4.4 In your opinion, should there be a penalty range just for individuals? If so, why?
• 2.4.5 In your opinion, should a violator’s compliance history be limited by certain criteria, such as only to violations committed in the past 5 years? If so, why?
• 2.4.6 In your opinion, are the proposed gravity factors appropriate? If not, why?

2.5 Service of documents related to AMPs

The service of documents refers to how the Commissioner delivers or ‘serves’ AMPs-related documents. These documents include:

• a notice of violation (section 132 of the Act)
• a notice cancelling a notice of violation (section 140 of the Act), and
• a decision of the Commissioner in response to a request for review (subsection 142(5) of the Act)

Service of document requirements also refers to when a document is considered delivered or ‘served’ and received by the recipient.

The proposed regulations would require the Commissioner serve documents in the following ways:

• leaving it with an authorized representative or a person who appears to be in control of the place of business, or in the case of a named individual, their place of residence
• sending it by registered mail or courier to an authorized representative or place of business, or in the case of a named individual, their place of residence or workplace, or
• by fax, email or other electronic means to an authorized representative, officer, or named individual

Documents would be considered served on the date set out on:

• a signed acknowledgement of service
• a certificate of service signed by the person who effected service, or
• the record of fax or electronic transmission

Question concerning the service of documents related to AMPs

• 2.5.1 In your opinion, are there any other considerations that should be taken into account when serving documents?

2.6 Reduction of the penalty if paid early

The proposed regulations may allow parties who receive an AMP to pay a reduced penalty when they make their payments promptly. Options being considered to reduce penalties are as follows:

• option 1 - reduce penalties for minor violations by 50% if the recipient pays the penalty within the first 15 days from the date the notice of violation is served. No reduction for serious or very serious violations
• option 2 - reduce penalties for minor and serious violations by 20% if recipient pays the penalty within the first 15 days from the date the notice of violation is served. No reduction for very serious violations

These options have been developed to support the intent of motivating compliance, both with the regulatory regime and with the AMPs.

Question concerning reducing penalties for early payment

• 2.6.1 Which option do you prefer and why? If you do not prefer either option, why?

2.7 When payment of the reduced penalty amount is deemed to have been made

If the regulations enable AMP amounts to be reduced when they are paid promptly (see options in section 2.6 above), the proposed regulations would also specify when such payment is deemed to have been made. This would enable the Commissioner to determine whether the deadline for payment was met. The proposed payment dates are as follows:

• when paid electronically - on the date indicated on the electronic system used by the Commissioner for receiving electronic payments
• when paid through regular mail - on the date received by the Commissioner, or
• when paid by registered mail or courier - on the date on the receipt issued by the post office or courier

The proposed regulations would only apply to paying the reduced amount. Otherwise, the notice of violation issued by the Commissioner would set out how and when an AMP must be paid.

Question concerning when a reduced penalty amount is deemed to have been paid

• 2.7.1 In your opinion, are there specific challenges with the proposed approach that you would like to make the Labour Program aware of?

2.8 Publication of information in relation to notices of violations that are issued

When the Commissioner issues an AMP, section 146 of the Act also allows them to publish information about the violation. Public naming is another enforcement tool aimed at deterring non-compliance. The Act enables the Commissioner to publish the following information:

• the name of the party that committed the violation
• the nature of the violation, and
• the penalty amount imposed

The proposed regulations would also allow the Commissioner to publish the following additional information:

• the city, town or other locality where the workplace is located
• when the AMP is the result of non-compliance with an order, the nature of the underlying order and details about the underlying contravention
• the date that the AMP became final (for example after all reviews have been exhausted or the period to request a review has elapsed)
• whether the party has addressed the cause of the violation and now complies with the regime, and the date of compliance
• whether the party has paid the AMP and the date it was paid, and
• whether a certificate has been issued confirming the penalty owed and registered with the Federal Court

This additional information would provide greater context in relation to the violation. It would include whether or not the violator had paid the penalty and if they had taken any steps to achieve compliance with the Act and the Regulations.

Question concerning the publication of information in relation to notices of violations issued

• 2.8.1 In your opinion, is there any additional information that the Commissioner should be able to publish with respect to parties who have received an AMP?

2.9 Other items concerning AMPs

• 2.9.2 Given the regulation making authorities under the Act, including those set out in subsections 127(1) and 181(1), are there other aspects of the AMPs regime or its administration that should be prescribed in regulations?

3. Maintaining pay equity and updating pay equity plans when there are no predominantly male job classes

The Regulations require employers and pay equity committees to follow 1 of 2 prescribed methods to establish their pay equity plan when they identify predominantly female job classes but no predominantly male job classes (sections 18 to 29, and 30):

• ‘Other Employer’ method, and
• ‘Fictional Job Classes’ method

Both methods set out the steps to create male job classes that may be used as comparators for the female job classes. For more information on how these methods work, please refer to the Pay Equity Act Legislative Guide prepared by the CHRC.

The Regulations also set out the process of updating pay equity plans using a ‘snapshot’ approach (sections 39 to 46) (see inset box for a summary of the snapshot approach ). However, the snapshot approach does not address how employers and committees without any male job classes are to update their plans. As such, regulations are needed to prescribe a process for updating pay equity plans when a plan has no male comparators.

The proposed regulations would require the snapshot approach to be used when that plan has no male comparator. This would require:

• workplaces that used the Other Employer or Fictional Job Classes methods to establish their plan to continue to use the male job classes they created for all snapshots, and
• workplaces that had male comparators when they established their plan but do not have a male job class in one or more snapshots when updating that plan to use the Other Employer or Fictional Job Classes methods to create male comparators for those snapshots

Questions concerning maintaining a pay equity plan when there are no predominantly male job classes

• 3.1 Did you use, or do you intend to use, the Other Employer or Fictional Job Classes methods to establish your plan?
• 3.2 If you use the Other Employer or Fictional Job Classes methods to establish a pay equity plan, can you foresee any challenges maintaining those male job classes to update the plan using the snapshot approach?
• 3.3 Do you believe there is a better way to maintain pay equity in a workplace when there are no predominantly male job classes? If so, please provide details

Summary of the snapshot approach

4. Measuring the impact of the Pay Equity Act on the gender wage gap

For every dollar earned by a man in Canada in 2021, a woman earned 89 cents as measured in average hourly wages for full-time and part-time workers. A primary objective of the new proactive pay equity regime is to reduce the gender wage gap by addressing the portion of that gap due to the undervaluation of work done by women. In order to determine the impact of the regime on the gender wage gap, the following information from pay equity plans is required:

• the dollar amount of the wage increases owed to each job class
• the date that those increases were made or, if the increases are being phased-in, the dollar amount of each annual increase and the date it is to be paid, and
• the number of women and the number of men holding positions in that job class

To collect this information, the proposed regulations would require employers submit it as part of their annual statements to the Commissioner.

Section 89 of the Act requires employers to start submitting annual statements 3 years after they became subject to the Act. The information provided in the annual statements will enable the Commissioner to gather information on the implementation of the regime in individual workplaces. A summary of the information that must be submitted through annual statements, is set out in the Pay Equity Act Legislative Guide prepared by the CHRC.

The proposed approach would require employers to:

• submit additional job class-specific data, and
• isolate the amount of the wage increase from the overall increase in compensation being paid to employees

Questions concerning measuring the impact of the Act on the gender wage gap

• 4.1 In your opinion, what are the challenges of providing the proposed new information in your annual statement?
• 4.2 Would you prefer to provide the additional information in another way to the Commissioner or Labour Program? If so, please explain your preferred method

5. Minor technical revisions to the Regulations

5.1 Calculating compensation for Fictional Job Classes

Section 23 of the Regulations requires employers or pay equity committees to use the minimum wage of the province when determining the hourly rate of pay for the male job classes the create using the Fictional Job Classes method. However, since the Act came into force, the Government of Canada introduced a new federal minimum wage of $15.00 per hour. Until December 29, 2021 when changes to section 178 of the Canada Labour Code (the Code) came into force, the Code required federally regulated employers to pay employees at least the minimum wage in the province where they worked. Since December 29, employers must pay their employees whichever is higher: either the new federal minimum wage or the provincial minimum wage.

The proposed revisions to the Regulations would align them with the new minimum wage requirements in the Code. An analysis of section 23 will also be done to ensure that the Regulations generate appropriate minimum hourly wages for the fictional male job classes.

5.2 Posting the notice of obligations – Group of employers

Subsection 8(1) of the Regulations requires employers who are members of a group of employers to post their notice of obligations 60 days after the date the group becomes subject to the Act. This mirrors the obligation for individual employers to post their notice of obligations within 60 days of becoming subject to the Act.

However, unlike individual employers, a group of employers’ coming into force date is decided by the Commissioner when they decide to approve the application. According to the Act, the date the Commissioner chooses must be:

1. after the day at least 1 member of the group became subject to the Act, and
2. the earliest day that would give the group sufficient time to meet its obligations under the Act (subsection 106(2) of the Act)

There is currently a tension between subsection 8(1) of the Regulations and subsection 106(2) of the Act. If the Commissioner were to assign the group a coming into force date that is more than 60 days before the date they approve the application, the group of employers would be in violation of the requirement to post their notice of obligations. In order to align these 2 provisions, the proposed revisions to the Regulations would require members of a group of employers to post their notices of obligations within 60 days of the day the Commissioner approves their application to form a group.

Questions concerning amendments to the Regulations

• 5.1 In your opinion, are there specific challenges with the proposed revisions that you would like to make the Labour Program aware of? If so, please explain.
• 5.2 In your opinion, should other amendments be made to the Regulations? If so, please explain which provisions and why

6. Concluding remarks

Thank you in advance for your participation in this consultation. The Labour Program looks forward to hearing your views.

Annex A - Privacy Statement

The submission you provide as part of this consultation is collected under the authority of the Department of Employment and Social Development Act (DESDA). It may be used and disclosed by Employment and Social Development Canada (ESDC), including the Labour Program, for policy analysis, research and evaluation purposes. However, these additional uses and/or disclosures of your personal information will never result in an administrative decision being made about you.

Participation in this stakeholder engagement process is voluntary, and acceptance or refusal to participate will in no way affect any relationship with ESDC or the Government of Canada.

Your submission may be published – in whole or in part – on the Government of Canada’s official website, included in publicly available reports on the consultation, and/or compiled with other responses in an open-data submission on the Open Government website. It may be shared throughout the Government of Canada, other levels of government, and non-governmental third parties. Your personal information is administered in accordance with the Privacy Act, the DESDA, and other applicable laws. You have the right to the protection of, access to, and correction of your personal information, which is described in the Personal Information Bank ‘Outreach Activities’ [PSU 938]. Instructions for obtaining this information are outlined in the government publication entitled Information about programs and information holdings. Information about programs and information holdings may also be accessed on-line at any Service Canada Centre. You have the right to file a complaint with the Privacy Commissioner of Canada regarding the institution’s handling of your personal information at: Office of the Privacy Commissioner of Canada.

If your submission includes unsolicited personal information for the purpose of attribution (for example, name, position), ESDC may choose to include this information in publicly available reports on the consultation and elsewhere.