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Disclaimer: This Guide gives an overview of the minimum requirements of the Pay Equity Act as interpreted by the Pay Equity Office. The interpretations are drawn from our own experiences and by applying the key rulings of the Pay Equity Hearings Tribunal and the courts and is current to the date of publication.
Which employers must comply with the Pay Equity Act?
The Act covers all employers in Ontario except for private sector employers with fewer than ten employees.
The minimum requirements set out in Part I of the Act apply to all employers. The provisions in Part II apply only to certain employers that were in existence when the Act came into effect to provide them with a timeframe within which to implement pay equity in unionized and non-unionized environments.
Part I(a): Requirement for ALL Employers to Achieve Pay Equity
Every employer shall establish and maintain compensation practices that provide for pay equity in every establishment of the employer [7. (1)].
No employer or bargaining agent shall bargain for or agree to compensation practices that, if adopted, would cause a contravention of subsection (1)[7. (2)].
For the purposes of this Act, pay equity is achieved in an establishment when every female job class in the establishment has been compared to a job class or job classes under the job-to-job method of comparison or the proportional value method of comparison or, in the case of an employer to whom Part III.2 applies, the proxy method of comparison, and any adjustment to the job rate of each female class that is indicated by the comparison has been made [5.1 (1)].
To meet the minimum requirements and to show that pay equity has been achieved, all employers covered by the Act MUST have carried out each of these activities for each of their establishments:
- Determine job classes, including the gender and job rate of job classes.
- Determine the value of job classes based on factors of skill, effort, responsibility and working conditions.
- Conduct comparisons for all female job classes using job–to–job, proportional value or proxy method (proxy is for public sector only and of limited application).
- Adjust the wages of underpaid female job classes so that they are paid at least as much as an equal or comparable male job class or classes.
Q&As: Achieving Pay Equity
1. All of the employees of a fast food company are paid minimum wage. Does pay equity apply to this business?
Yes. All private sector employers with ten or more employees are required to comply with the Act. At a minimum, employers must analyze their job classes and make the necessary pay equity job comparisons. If the female job classes and similarly valued male job classes in an organization are all paid minimum wage, this is a situation where no pay equity gaps exist and thus, there will be no requirement to adjust wages. It may be advisable however for all employers to set up their pay equity process so that as new job classes emerge the employer has a mechanism in place to ensure ongoing compliance.
2. If an organization does not have any male job classes, can pay equity be done?
No. If a private sector employer with ten or more employees has only female job classes or only male job classes, pay equity cannot be achieved because no comparisons between male and female job classes are possible. However, as soon as either a female or male job class is created, this employer would be required to achieve pay equity.
Part I(b): Requirement for ALL employers to MAINTAIN pay equity
Once pay equity is achieved, all employers subject to the Act are required to maintain pay equity for the employees in female dominated job classes. However, the Act does not stipulate specific procedures or schedules to follow for maintaining pay equity. The purpose of maintaining pay equity is to ensure that pay equity gaps that were closed are not re-opened or widened as a result of changes to job values and job rates and that new gaps are not created.
Maintaining pay equity is an ongoing process whereby employers must review job classes for changes in job rate, job value, duties and responsibilities as positions are added or eliminated. In a unionized environment, employers and unions are prohibited from agreeing to terms that, if implemented, would mean that the minimum requirements of the Act are not met.
Part II: Specific requirements only applicable for employers subject to Part II of the Pay Equity Act
Part II of the Act sets out specific requirements that only apply to certain large private sector and public sector employers that existed on January 1, 1988. The legislature understood that employers had existing compensation practices, some of which had been negotiated with their bargaining agents. In order to achieve pay equity in existing workplaces, the Act laid out a process to be implemented by existing employers, or existing employers and their bargaining agents, within specified time frames.
Who are "Part II employers"?
- Private sector employers that had 100 or more employees on January 1, 1988.
- Private sector employers, employing 10 to 99 employees on January 1, 1988 that chose to post a pay equity plan no later than December 31, 1993.
- Public sector employers that had employees on January 1, 1988.
- Public sector employers that did not have employees on January 1, 1988 but that had employees on July 1, 1993.
What are the Part II requirements?
Employers subject to Part II of the Act must:
- compare job classes using a gender-neutral comparisons system if both male and female job classes exist ;
- prepare and post pay equity plan(s) according to the requirements in ;
- negotiate all aspects of the pay equity plan with their existing unions in establishments with bargaining agents ;
- follow the process for accessing the Commission to resolve impasses in the negotiation process prior to the deemed approval of pay equity plans [16,17];
- follow the process for amending a pay equity plan in situations where changed circumstances in the organization cause the initial plan to no longer be appropriate [14.1, 14.2];
- ensure that pay equity obligations are met when there is a "Sale of Business" , including following the process for developing a new plan if necessary [13.1];
- spend a minimum of 1% of the previous year's payroll for pay equity adjustments until pay equity is achieved within the timelines set by the Act [13(4–6)]; and,
- meet the original compliance deadlines for implementing pay equity.
NOTE: This may require the payment of pay equity related wages that are owed retroactive to the date when first adjustments were due or when pay equity should have been implemented or achieved.
Counting employees to determine applicable requirements
Employers need to count the number of employees in order to determine whether the Act applies to them. Employers in existence on the effective date of the Act also need to count employees to determine whether Part II of the Act applies.
An employer must count ALL its full–time and part–time employees except for students employed for their vacation period (See Who is an employee?).
What happens if the number of employees changes?
Private sector employers with ten or more employees must comply with the Act. Once a private sector employer employs ten employees, that employer remains subject to the Act even if there are fewer than ten employees in the future.
How does the employer count the number of employees?
The actual number of persons employed, as opposed to full–time equivalents, must be counted.
Employers that existed when the Pay Equity Act came into effect must count number of employees in 1987
For private sector employers that existed on January 1, 1988, the number of employees is the average number of employees employed from January 1 to December 31, 1987 [1 (4)]. The method used to calculate the average must be reasonable and provide a fair representation of the actual number of employees that takes into account employment fluctuations throughout the year. For these employers, the number of employees during 1987 determines whether they are subject to Part II requirements and their deadlines for posting plans and first adjustments.
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