Labour Code Changes and New Pay Equity Legislation

Authors: Eileen Libby, Q.C., Calen Nixon

This post follows our previous updates regarding important amendments to the Canada Labour Code which will come into force as a result of Bill C-86 receiving royal assent. These changes will affect federally-regulated employers in Canada.

In addition to sweeping changes to the Canada Labour Code regarding equal pay for equal work, Parliament has introduced a comprehensive Pay Equity Act and consequential amendments to the Canadian Human Rights Act.

Equal Pay under the Canada Labour Code

No earlier than September 1, 2019, new provisions in the Code will prohibit employers from paying employees differently based on differences in employment status if the employees perform the same or similar work.

Important exceptions will permit differential pay based on seniority, merit, work quantity or quality and other prescribed considerations. Employers are prohibited from reducing employees’ wages in order to comply with these amendments.

The new Division III provisions will also entitle employees ask their employer for a wage rate compliance review. The employer will have 90 days to respond that it is either increasing the wage to come into compliance (retroactive to the date the complaint was made) or, with reasons, that the employee’s current wage rate complies with the Code. Employers are prohibited from retaliating against employees for making wage rate review requests.

Similar provisions introduced in Division VI.1 will require temporary help agencies to similarly adhere to equal treatment requirements.

Employers who notify employees of opportunities for new positions or advancement in writing will be obligated to inform all employees, regardless of their employment statuses.

Pay Equity Act (not yet in force)

Bill C-86 also introduces new legislation which will overhaul the current regime for pay equity in federally-regulated workplaces with 10 or more employees. Similar legislation is already in force in Ontario and Québec. Some specific groups of employers will be exempt.

The Pay Equity Act, to be effective on dates to be set by Governor in Council, aims to proactively redress systemic gender-based discrimination experienced by employees in predominantly female job classes.

The Act will require employers to implement and support new workplace protocols, and will expand the jurisdiction of the Canadian Human Rights Commission as the oversight agency of the new regime. The Act will establish a Pay Equity Commissioner position and increase the maximum number of Commissioners to 18. Affected employers will have obligations which include reporting to the Pay Equity Commissioner annually as part of compliance reporting.

Employers with 10 or more employees will need to establish pay equity plans within three years after the legislation comes into force. Employers must review their equity plans every five years.

Unionized employers with more than 10 employees and non-unionized workplaces with more than 100 employees will need to establish pay equity committees. Pay equity plans are established by the pay equity committees or by employers if committees are not required.

Procedures for establishing pay equity plans include assessing and quantifying differences in compensation between predominantly female job classes and predominantly male job classes. Generally, the procedures under the Act require:

  • The committee (or employer, as the case may be) to identify job classes. Positions considered to be in the same job class have similar characteristics including similar duties and responsibilities, similar qualifications and are part of the same compensation plan and salary range;
  • Once job classes are determined, the committee or the employer must identify which of the job classes are predominately female or predominately male, based on the present-day or historical personnel composition of the job classes, in accordance with the Act;
  • If the committee or employer determines that there is at least one predominately female and at least one predominately male job class, they must determine the value of work and compensation paid, in dollars per hour, for each job class.
  • The criterion for determining the value of work is the composition of: the skill required to perform the work, the responsibility required for the performance of the work and the conditions under which the work is performed;
  • With values for the dollars per hour compensation in hand, the committee or employer must compare the compensation through one of two mathematical methods described in the Act.

If pay differences that adversely affect predominately female job classes are identified in pay equity plans, employer obligations are triggered to increase compensation to eliminate the differences. The obligations to increase pay are subject to timing and structure of payment increases. Generally speaking, employers are entitled to phase-in required increases pursuant to a pay equity plan, provided the increases are at least 1% of the employer’s payroll per year.

Employers cannot reduce compensation of any employee to permit compliance with the Act, and reprisal against any employee who has filed a complaint under the Act is prohibited.

Pay equity plans are required to detail the determinations of the pay equity committees or employers and identify the schedule of compensation increases, if any, that result from the plan. Draft plans are posted in the workplace, and employees have 60 days to provide written comments to the committee or employer before a final plan is posted.

Implications for Employers

While these provisions are not yet in force, federally-regulated employers should be mindful that these changes will be coming into effect in the near future.

Our team of labour and employment lawyers can answer questions and help your organization prepare for the upcoming changes to the Canada Labour Code and introduction of the Pay Equity Act.

Read the previous blogs in this series on Canada Labour Code amendments:

Note: This article is of a general nature only and is not exhaustive of all possible legal rights or remedies. In addition, laws may change over time and should be interpreted only in the context of particular circumstances such that these materials are not intended to be relied upon or taken as legal advice or opinion. Readers should consult a legal professional for specific advice in any particular situation.