Federally Regulated Employers: The Pay Equity Plan Deadline and Beyond

Pay Equity Act reaffirms Canada’s commitment to ensure “equal pay for work of equal value”

September 3, 2024, marked a significant milestone for federally regulated employers in Canada, as it was the final deadline for posting the first pay equity plan under the Pay Equity Act (the Act) and ensuring that their pay equity plans are accessible to all employees. This important legislation, which came into force on August 31, 2021, aims to address gender-based wage disparities in workplaces with 10 or more employees, both in the public and private sectors.

Furthermore, for many employers, the following day, September 4, 2024, brought the additional responsibility of implementing compensation increases where wage gaps had been identified. Understanding the requirements of the Act, its objectives, and the necessary steps moving forward is critical to ensuring compliance and maintaining equitable workplaces.

Understanding the Pay Equity Act

The Pay Equity Act was introduced as part of Bill C-86, the Budget Implementation Act, 2018, No. 2, and it aims to promote gender equality by addressing pay disparities between male and female employees doing work of equal or comparable value. The Act applies to federally regulated employers, including those in industries like banking, telecommunications, and transportation, and covers both public and private sectors, as well as parliamentary workplaces and ministers’ offices.

The primary objective of the Act is to eliminate gender-based wage gaps, reaffirming Canada’s commitment to ensuring “equal pay for work of equal value.” To achieve this goal, the Act mandates that employers must establish a pay equity plan and maintain it with periodic updates to ensure the continued identification and correction of any wage gaps.

Key Requirements of the Pay Equity Plan

Under the Act, federally regulated employers are required to take the following steps:

Job Classification: Employers must identify and categorize job classes within their workplace, determining whether each class is predominantly male, predominantly female, or gender neutral.
Value Assessment: For predominantly female or male job classes, employers are required to determine the value of the work based on various criteria, such as skill, effort, responsibility, and working conditions.
Compensation Comparison: Employers must compare the compensation between predominantly female and male job classes that perform work of equal or comparable value.
Compensation Increases: Where wage gaps are identified, employers are required to implement compensation increases for the affected predominantly female job classes. These increases must ensure that female employees are receiving equal pay for work of equal value to their male counterparts.

Employers had a three-year window from the Act’s effective date to develop and finalize their pay equity plans, making September 3, 2024, the final deadline for posting the plan.

Addressing Compensation Gaps

In instances where pay equity gaps are identified, federally regulated employers were required to implement the necessary compensation increases by September 4, 2024. However, the Act allows for a phase-in period in certain cases. Specifically, if the total compensation increase owed to employees exceeds 1% of the employer’s previous year’s payroll, the employer is permitted to phase in the increases over several years. This phase-in period must be completed by 2029 at the latest, ensuring that all compensation adjustments are finalized within five years.

It is important to note that these compensation increases are not discretionary but a legal obligation under the Act. Employers must ensure that they are compliant with these requirements to avoid penalties and legal challenges.

Ongoing Obligations: Reporting and Updates

The initial posting and implementation of pay equity plans do not mark the end of a federally regulated employer’s responsibilities under the Act. Starting on June 30, 2025, and annually thereafter, employers must submit a declaration confirming their ongoing compliance with the Act. This includes verifying that any identified wage gaps have been addressed and that pay equity is being maintained.

Additionally, employers are required to update their pay equity plans at least once every five years. These updates are essential for identifying and addressing any new wage gaps that may have emerged and ensuring that pay equity is sustained over time. Employers should be proactive in reviewing their compensation structures and adjusting their plans as necessary to maintain compliance with the Act.

The Role of the Pay Equity Commissioner

The administration and enforcement of the Pay Equity Act are overseen by the Pay Equity Commissioner. The Commissioner is responsible for providing guidance and tools to help federally regulated employers and employees understand their rights and obligations under the Act. Additionally, the Commissioner plays a key role in resolving disputes and ensuring compliance with the Act.

On November 1, 2023, Lori Straznicky was appointed as Canada’s federal Pay Equity Commissioner for a five-year term. The Commissioner’s office, part of the Canadian Human Rights Commission, offers resources to support employers in their efforts to establish and maintain pay equity in the workplace.

Why Pay Equity Matters

The Act’s focus on ensuring “equal pay for work of equal value” reflects Canada’s broader commitment to gender equality in the workplace. By addressing gender-based wage disparities, the Act not only supports fairness but also promotes a more inclusive and productive work environment. Federally regulated employers that comply with the Act can enhance employee morale, reduce turnover, and improve their corporate reputation.

From a legal perspective, employers must be aware that failure to comply with the Act can result in penalties and enforcement action. The federal government is serious about holding employers accountable for achieving pay equity, and non-compliance could result in significant financial and reputational costs.

At Minken Employment Lawyers, we are ready to assist employers in navigating the complexities of the Pay Equity Act and ensuring compliance with its requirements. Whether you need help developing your pay equity plan, addressing compensation issues, or understanding your ongoing reporting obligations, our team has the expertise to guide you every step of the way.

For expert legal advice and support in navigating pay equity issues, contact Minken Employment Lawyers (Est. 1990) at 905-477-7011 or email us at contact@minken.com. Our experienced team is here to help you with your employment practices to ensure you understand your rights and obligations under the law.

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Please note that this article is for informational purposes only and does not constitute legal advice.