The Pay Equituy was introduced as part of Bill C-86, the Budget Implementation Act, No. 2 and received royal assent in December 2018.

The purpose of the Act is to achieve pay equity by redressing the systemic gender-based discrimination in the compensation practices so that women and men receive equal compensation for work of equal value, while taking into account the diverse needs of employers.

It is important to consider right now that the Pay Equity Act refers to “compensation” including remuneration and benefits provided to employees for the work they perform, as salaries, commissions, vacation pay, severance pay and bonuses, payments in kind, employer contributions to pension funds or plans, long-term disability plans and all forms of health insurance plans and any other advantage received directly or indirectly from the employer. 

On 13 November 2020, the Government published the proposed Pay Equity Regulations in Part I of the Canada Gazette to provide interested parties with the opportunity to review and provide feedback during a 60days period.

On 7 July 2021, the Minister of Labour, Filomena Tassicommented that“[e]veryone deserves an equal opportunity to succeed—and that means paying women equally for work of equal value. Today’s announcement that the Pay Equity Act will be coming into force at the end of this summer is a significant step forward towards reducing the gender wage gap and creating the kinds of long-term, sustainable change that will enable all workers to succeed in our workplaces for generations to come. It is not just the right thing to do; it is the smart thing to do.”
Karen Jensen, Pay Equity Commissioner, commented that “[t]he Pay Equity Act is essential to closing the gender wage gap, advancing gender equality and promoting workplaces where every employee is valued and engaged. Greater equity and inclusion in Canadian workplaces will make businesses and the economy stronger and more resilient”. 

Under the federal Pay Equity Act, federally-regulated employers with 10 or more employees will be required to develop a pay equity plan for the workplace. The employers must post a detailed noticed within 60 days of becoming subject to the Act, that sets out its obligations to establish a pay equity plan and, if applicable, a pay equity committee. 

The pay equity plan process is subject to a very detailed and prescriptive set of rules under the Pay Equity Act and its Regulation, including the requirements to: 

·       identify “job classes” and determine their gender predominance (if any)

·       value the work done in each job class

·       calculate the total compensation for each job class (to be calculated in dollars per hour)

·       compare compensation between predominantly male and predominantly female job classes and identify any pay equity gaps that apply to predominantly female job classes

·       prepare and post a draft pay equity plan, and provide employees the opportunity to comment within the following 60 days

·       once the final version of the pay equity plan is posted, employers are required to close any pay equity gaps, implementing the plan within three years

·       maintain pay equity, submitting a detailed annual statement, and review the pay equity plan at least once every five years.

Employers with more than 100 employees or unionized employees have to establish a pay equity committee to develop the required pay equity plan. Non-unionized employers with fewer than 100 employees may voluntarily establish a pay equity committee, upon notice to the Pay Equity Commissioner (“Commissioner”). The Act sets out specific requirements related to the composition of the Committee, whose members will work together to develop the process for identifying and correcting any gender-based wage gaps for predominantly female job classes. The Committee has to include 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 2/3 of them has to represent the employees to whom the pay equity plan concerned. 

This committee process will be particularly challenging for unionized employers who have multiple bargaining units, given the diversity of interests and the number of decision points to be considered.

An employer interested in creating create multiple equity pay plans can submit a specific application to the Pay Equity Commissioner for approval.   

The Act may require significant planning and efforts to proactively address the pay equity gaps and introduce significant penalties for lack of proactive compliance.

In fact, the federal government appointed a Pay Equity Commissioner to verify employer compliance with the obligations under the Act. The Commissioner can order employers to conduct internal audits or to prepare reports on the results of a pay equity plan and has the power to issue monetary penalties, ranging from CAD $30,000 to $50,000, for noncompliance with the Act or the orders. The Act also establishes a dispute resolution mechanism overseen by the Commissioner to resolve any pay equity dispute between an employer and its employees (or unions) during the development of a pay equity plan and thereafter. 

In this new context, employers should start to take the first steps to address their new pay equity obligations, to ensure they have enough time to become compliant with the new legislation and to put in place any corrective measures within the statutory three-year period.