The Federal Pay Equity Act: From Theory to Practice

National HR

Denise Perron, CPHR, President and Consultant, AEQUITAS Group (expert pay equity services in Canada), and former Employer Commissioner, Pay Equity Commission of Quebec

The Pay Equity Act is now in effect in Canada. It applies to federally regulated employers with 10 or more employees in the private and public sector.

Purpose of the Act

The objective of the federal Pay Equity Act (PEA) is similar to that of the Ontario and Quebec acts of the same name: ensure that female jobs are not paid less than male jobs of equal value due to systemic discrimination. A series of steps (pay equity plan) must be completed to assess the current situation and any wage gaps for female jobs must be eliminated.

A tight deadline

A draft of the plan's results must be submitted to employees by June 5, 2024, and the final results by September 4 of the same year, which means that companies should have already started the process several months ago.

A familiar process

Companies in Ontario and Quebec, which are already required to develop pay equity plans (programs) with pay equity committees, are familiar with the steps in the process:

  1. Identify the job classes;
  2. Determine their predominance (female, male, or neutral);
  3. Evaluate the job classes to establish their relative value, by factoring in the required qualifications, assigned responsibilities, required efforts, and working conditions;
  4. Calculate the total compensation (direct and indirect);
  5. Estimate the wage gaps in order to determine whether adjustments need to be made to the compensation paid for female jobs.

PEAs are considered proactive laws, or laws that impose a series of complex steps that employers (or their pay equity committees) must carry out in order to meet the stipulated requirements. This makes them somewhat difficult to implement, and the federal PEA is no exception in that regard.

In this article, we discuss two of the difficulties: forming a pay equity committee and implementing a single pay equity plan.

  1. Forming a pay equity committee

Even though employers are alone responsible for carrying out the pay equity process, their pay equity plan generally needs to be prepared by a pay equity committee. In fact, companies with 100 or more employees and those with 10 to 99 at least partially unionized employees are required to form a pay equity committee.

The composition of the pay equity committee is subject to strict rules:

  • At least 3 people;
  • At least 2/3 of the committee members represent the employees covered by the plan;
  • At least 50% of the members are women;
  • At least one member, chosen by the employer, represents the employer.

There are other stipulations too. For instance, the PEA sets minimum requirements for the representatives of unionized and non-unionized employees among the committee members. For unionized employees, each bargaining agent designates their representative(s). Non-unionized employees must choose their representative(s) themselves. However, the real challenge may be representing executives, a topic we will discuss later.

An arduous task

Considering the scope of certain federally regulated companies (wide range of activities, multiple bargaining units, geographical spread, etc.) and the multiple steps that must be taken, it is clear that developing a single plan is no easy task, because it involves:

  • gathering the committee members and selecting the methodology;
  • choosing or developing a common evaluation tool;
  • agreeing on evaluations for various job classes;
  • measuring the value of various compensation elements;
  • agreeing on a compensation comparison method;

This is at least what Quebec companies have experienced when implementing a single plan (program) for all of their employees rather than separate plans for unionized groups.

The challenging case of executives

Executives are covered by the PEA and their jobs will likely be impacted by the pay equity plan. What role will executives have on the committee? Can they represent employees covered by the plan?

Without going into all the legal details – which are not the focus of this article* – we can safely say that the terms employee and non-unionized are not casually used in the PEA. This raises questions about the composition of the pay equity committee, and we are not alone in asking them.

Indeed, some rely on a strict interpretation. Executives may be chosen by non-unionized employees to represent them. However, they may not participate in the selection of the representatives themselves. In other words, if non-unionized employees who are not executives do not choose an executive to represent the company’s non-unionized employees on the committee, executives will not be represented, even though this committee will be examining their jobs.

For others, the conditions set out in the PEA for the composition of the pay equity committee are minimum requirements. If these conditions are met, employers may appoint additional representatives for non-unionized employees. Employers may designate executives or allow them to choose their representative. Regardless of the situation, executives participate in the analysis of their jobs.

For all these reasons, forming a pay equity committee is not quite as simple as it would seem at first glance. Employers may have to deal with executives who are unhappy about their jobs being subject to a pay equity plan without being represented on the committee.

  1. Implementing a single pay equity plan

The PEA allows employers, bargaining agents and non-unionized employees to request authorization from the Pay Equity Commissioner (Canadian Human Rights Commission) to implement more than one pay equity plan within their company. This flexibility could help expedite the multi-step process so that it can be completed in less time.

The multiple pay equity plan approach is not new. Ontario’s Pay Equity Act requires one plan (program) per union and one plan for non-unionized employees. Similarly, Quebec’s Pay Equity Act provides for a general plan (program), but accredited associations may demand separate programs for the employees they represent (which most have done incidentally).

Requirements for multiple plans

When requesting multiple plans, the number of desired plans and the number of employees covered in each plan must be provided.

The Pay Equity Commissioner asks two questions when receiving a request for multiple plans:

  • Are there enough male comparators?
  • Is it appropriate to approve the request given the described circumstances?

If there is a range of predominantly male job classes in each plan, the Commissioner may agree that wage comparisons are possible.

Furthermore, the PEA allows the Commissioner to reject a request whenever a situation of multiple plans would make it impossible to identify enough predominantly male job classes to allow for compensation comparisons with predominantly female job classes.

Yet, to our knowledge and based on the decisions rendered to date, it appears that even if the parties agree on the need to implement multiple plans, the Commissioner tends to reject this option, even when there are enough male comparators to conduct wage comparisons. The Commissioner seems to be of the opinion that it has not yet been demonstrated that multiple plans can proactively remedy gender-based discrimination.

In some cases, it will be necessary to demonstrate that the objective of the PEA will be achieved while taking into account the employer's needs, the expectations of the bargaining agents, and those of non-unionized employees.

Time is running out

As we previously mentioned, final pay equity plans must be completed by September 4, 2024, and staff must be familiar with the draft plans by June 5, 2024.

If the employers concerned hope to achieve this, they will need to ask and resolve some important questions and get to work!

*The PEA has many distinctive features. For more information and advice, we recommend that employers consult a specialist.

The Carrefour RH website of the Ordre des conseillers en ressources humaines du Québec published an earlier version of this article in January 2024.