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Part II: Requirements for Implementing Pay Equity for Certain Employers/Unions

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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. ​

 

Part II employers are defined as:

  • public sector employers who were in existence on January 1, 1988 or came into existence by July 1, 1993;
  • private sector employers who employed 100 or more employees on January 1, 1988 and
  • private sector employers who employed 10 to 99 employees on January 1, 1988 and chose to post a plan before December 31, 1993 [11].

Re​​quirement to use job–to–job before proportional value method

For Part II employers, the job-to-job comparison method of pay equity must be applied first. If after applying the job-to-job comparisons, there are female job classes that do not have a male comparator; the employer is required to use the proportional value method to achieve pay equity for the remaining unmatched female job classes [21.2 (1)].

Part II employers may apply proportional value comparisons to all their job classes even though male comparators were found for some female job classes using a job-to-job method. However, the pay equity adjustments under proportional value must be at least equal to the amount the employee would have received using job-to-job comparisons [21.2 (2)] since the Act specifies that Part II employers must conduct job-to-job comparisons first before the employer proceeds with proportional value comparisons.

Requirement t​​o notify the Commission if pay equity cannot be achieved

Employers subject to Part II of the Act must notify the Office if pay equity cannot be achieved by either job-to-job or proportional value comparisons [21.2 (5)] by completing a Notice of Inability to Achieve Pay Equity form.

Re​​​quirement to use a Gender Neutral Comparison System

Part II employers must use a Gender Neutral Comparison System (GNCS) to do job comparisons for pay equity purposes. This system should value the scope of the work of an organization or, in the case of a bargaining unit, the scope of the work done by the bargaining unit and evaluates aspects of both female and male jobs. In determining value of work performed for pay equity job comparisons, the factors of skill, effort, responsibilities and working conditions must be applied.

The type of GNCS must be described in the pay equity plan. The Act requires the use of one GNCS per pay equity plan.

Pay Equity P​​​lans

What is a pay equity plan?

A key component of Part II of the Act is the pay equity plan. Pay equity plans provide employees with information about how pay equity was done in their establishment. The Act requires that pay equity plans be posted in prominent places in each establishment and that copies of a plan be provided upon request to bargaining agents or non–union employees.

Which employers are required to post a pay equity plan?

All Part II employers are required to post a pay equity plan. Private sector employers who employed 10 to 99 employees as of January 1, 1988 may have chosen to post a plan in order to phase in pay equity adjustments. However, after January 1, 1994 when Part III of the Act was repealed, the option to post a plan for these smaller employers no longer existed. Currently, the only employers required to post plans are large private sector employers who had employees on January 1, 1988, and public sector employers that existed on the effective date or July 1, 1993. New private sector employers, regardless of size, are not required to post plans.

What were the deadlines for posting pay equity plans?

See What are the compliance deadlines?​ for dates for posting pay equity plans. An employer who was required to post a plan but missed the posting deadline must develop the plan, make adjustments and achieve pay equity as if the process proceeded on time.

How many pay equity plans are required?

Employers who were required to prepare pay equity plans must have at least one pay equity plan for each establishment. If the workplace was unionized at the effective date, there must be separate plans for each bargaining unit, the contents of which must be negotiated [14. (4)], and one for all non-union employees [14. (1)].

What are the contents of pay equity plans?

The Act specifies what must be contained in a pay equity plan for job-to-job plans [13], for proportional value plans [21.6], and for proxy plans [21.18]. Job-to-job plans must:

  • Identify the establishment and the group of employees covered by the plan (i.e. non-union or bargaining unit employees).
  • List all female job classes covered by the plan and all male job classes that were evaluated as potential comparators.
  • Describe the gender neutral comparison system used to do the job comparisons.
  • List the results of pay equity comparisons, including:
    • all the female job classes and the male job classes found to be equal or comparable in value;
    • the difference in job rates between each female job class and its male comparator, or a statement that pay equity already exists for the female job class;
    • a list of female job classes that did not find male comparators.
  • Explain any permissible differences in compensation relied on to explain differences between female job classes and their male comparators.
  • Describe how compensation will be adjusted to achieve pay equity.
  • Note the date on which the first adjustments will be effective (and effective dates of any adjustments made retroactively if the plan was posted late).
  • Describe the method used to achieve pay equity, either job-to-job or proportional value comparison, for each female job class.
  • Describe the method used to carry out the proportional value calculations.
  • List of the male job classes that made up the representative group and how they were selected.
  • Identify how the relationship of job rate to job value was determined for the representative group of male job classes.
  • Describe any revisions made to the original job-to-job pay equity plan.

How long should the pay equity plan be posted for?

The Act does not state how long employers must post pay equity plans or keep other pay equity documents. The law does state that employers who are required to post a pay equity plan shall provide a copy to bargaining agent or employees upon request [1. (3)]. The Commission recommends that the plan be posted until pay equity is achieved or the plan is amended. It is advisable to keep records of the pay equity plan and its posting date.

What is a "deemed ap​​proved" pay equity plan?

The Commission does not approve employers' pay equity plans and employers are not required to send their pay equity plans to the Commission. The Act sets out the process by which pay equity plans are deemed approved depending on whether or not the plan was developed with a bargaining agent.

In unionized settings, where a plan has been negotiated with the bargaining agent, it is deemed approved by the Commission when both parties sign it [14. (5)]. The employer must then post a copy in the workplace.

A pay equity plan is binding on both the employer and the bargaining agent and prevails over relevant sections of an existing collective agreement. The adjustments to rates of compensation are considered to be incorporated into the collective agreement [13. (10)].

For non-unionized settings, employees are entitled to review, comment, and object to the plan. The employer may amend the plan. Plans covering non-union employees must initially be posted for 90 days, during which time employees affected by the plan may comment on it to the employer. Employers then have seven days to prepare and post a notice stating whether the plan has been amended and, if so, to post copies of the amended plan with the changes clearly noted. From the date of the second posting, employees have 30 days to file an objection to the plan with the Commission. If no objection is filed within the 30-day period, the plan is deemed approved [15. (8)].

What is the sig​​nificance of a "deemed approved" pay equity plan?

The Tribunal explained the significance of a deemed approved plan in Ottawa Board of Education v. Ontario Secondary School Teachers' Federation 1996 CanLII 7947 (ON PEHT):

  • "Once the plan which is in formal compliance with s.13 has been executed or, posted and the objection period has passed, it is deemed approved. That is, it is treated by the law as if it had been approved by the Commission. Subsection 13(9) and 13(10) set out the significant consequences of this approval: the plan is binding on the employer and employees, and their bargaining agent, if any; and, it prevails over and forms part of the collective agreement. Future actions of the parties are governed by what the plan provides. The plan is to be implemented according to its terms, and failure to do that can be the subject of a complaint under subsection 22.(2)(a)."

Further, in Niagara (Regional Municipality) v. CUPE, Local 1287, 1999 CanLII 14829 (ON PEHT), the Tribunal stated:

  • "The legislation does not allow the Tribunal to require an amendment to a deemed approved pay equity plan, which has been fully implemented and maintained, where there has been no contravention of the Act [22.(1)] and where there are no "changed circumstances" which have had the effect of making the plan inappropriate for the female job classes [22.(2)(b)]."

Is it possible to make a complai​​​nt about a deemed approved plan?

Even though a plan is "deemed approved" it is not insulated from a complaint or from a review by the Office or Tribunal. In Ottawa Board of Education v. Ontario Secondary School Teachers' Federation, 1996 CanLII 7947 (ON PEHT), the Tribunal set out when a complaint about a deemed approved plan could be made:

  • "While deemed approval of the plan binds the parties, it is not a certification that the plan fully complies with the Act. It does not mean that it necessarily conforms to the statute, or that the minimum constituent elements of pay equity, set out in Part I of the Act, have been correctly implemented."
  • "Where an applicant alleges that a deemed approved plan contravenes the Act, the applicant must show how the compensation practices established in the plan fail to provide for pay equity and must do so by reference to the specific provisions of Part I of the Act. In reviewing a deemed approved plan the Tribunal is less concerned with the process by which the plan was created and more interested in whether the result is consistent with the objectives of the Act. The Tribunal recognized that certain provisions of Part I require exact application while other sections leave some discretion to the parties. The standard of review reflects this duality. The Tribunal will apply a reasonableness test to review of decisions on those aspects of the Act which permit discretion. Where the Act imposes an exact requirement, the relevant portion of the plan will be reviewed for correctness."

In the decision, the Tribunal also set out the standard of proof required to establish a complaint:

  • "In some instances, proof that Part I has been contravened may be quite straight forward and achieved by reference to the plan alone. This is more likely when the provision alleged to be contravened sets out an exact standard. In other cases, it may be necessary to examine the documents behind the plan or provide an expert opinion in order to have a fuller understanding of the alleged violation. More significantly, it may be necessary to call experts to provide objective evidence, external to the plan and its development, to establish whether or not the plan's result is reasonable."

To summarize, in order to be successful in challenging a deemed approved plan, the complaint must be able to show that the plan contains a specific contravention of the minimum requirements of Part I.

Employees and/or their bargaining agents may bring complaints about deemed approved plans under [22] of the Act (See Enforcement and Complaints​).

When can a "dee​​med approved plan" be amended or a new plan developed?

Part II of the Act provides that deemed approved plans may be amended where there have been "changed circumstances" [14.1, 14. 2].

Part II also provides that a new plan may be developed where a "sale of business" has occurred [13.1].

Changed Cir​cumstances

What are "changed circumstances"?

The Act does not specifically define "changed circumstances", however, this term can be used to describe a number of scenarios, including the addition or deletion of a large number of jobs, restructuring, the acquisition or selling of divisions, or accumulated changes over time that could not be dealt with through regular maintenance. To apply the provision of "changed circumstances" as a basis for amending a pay equity plan, the Tribunal has stated in Hilton Works v. MacDonald, 1993 CanLII 5422 (ON PEHT): "The plain language of sections 14.1 and 14.2] requires the Tribunal to look not simply at the fact of changed circumstances, but at the impact of the changed circumstances on the appropriateness of the plan."

The decision as to whether a deemed approved plan is no longer appropriate for the establishment or the bargaining unit because of changed circumstances depends solely on the facts of each case and the degree of change.

What can be amended?

Where a deemed approved plan is found to be inappropriate because of changed circumstances, the employer or the employer and the union cannot make changes to the gender neutral comparison system that was in the original plan.

What is the process for amending a deemed approved plan due to changed circumstances?

In unionized settings, either the employer or the union can notify the other party that it considers the plan to be no longer appropriate for the bargaining unit because of changed circumstances [14.1]. If the parties are unable to agree, either party may file an application with the Pay Equity Office. Giving notice under [14.1] does not automatically mean that the plan is no longer appropriate. A Review Officer investigating such a matter will first require proof that the plan is no longer appropriate for the bargaining unit before taking further steps.

In situations where there has been a change in circumstance but the change is such that the pay equity plan is still applicable for comparing job classes and identifying pay equity gaps in the establishment, the Review Officer will terminate his/her involvement in the matter.

Where a Review Officer finds that the plan is no longer appropriate for the bargaining unit, he/she may order that the parties negotiate the required amendments or may make such other orders as may be necessary to amend the plan. A plan that has been amended either by agreement or ordered becomes deemed approved once signed or ordered

In non-unionized settings, an employer may amend a deemed approved plan where in the employer's view the plan is no longer appropriate for the establishment. The employer is required to post the amended plan and the employees will have an objection period that mirrors the objection period that were available when the original plan was developed. The amended plan becomes deemed approved once all objection periods have expired.

In either setting, an existing deemed approved pay equity plan is binding on the parties it covers [13. (9)] until such time that an amended plan becomes deemed approved.

It must be noted that if the employer is still in the process of achieving pay equity and the plan is amended because of changed circumstances, the amount of a pay equity adjustment for any female job class cannot be less than it was under the plan before it was amended [14.1 (7), 14.2 (3)].

Sale o​​​f Business

The Act outlines what can occur when a Part II employer sells a business [13.1]. A "sale of business" includes any form of transfer or disposition, including a lease or a sale of all, part or parts of a business.

What happens to pay equity plans as a result of a sale of business?

When a sale occurs, pay equity plans that are in effect may no longer be appropriate for either the seller or the purchaser due to changes in the composition of their workforces that make the existing plan(s) incapable of valuing and comparing the female job classes in the new organization(s). In the case of The Child's Place v. Fitzpatrick, 2002 CanLII 49459 (ON PEHT), the Tribunal stated:

  • "…if the sale of business renders either the purchaser or the seller's plan no longer appropriate then each is required to prepare a new plan. No doubt the need for new plans is more likely in a sale of part of a business where the seller's business contracts and the purchaser's expands, with the attendant loss or gain of employees. But in any event, a consideration of whether a new plan is required only occurs after the sale of business when the consequences of that transaction are apparent to both the vendor and purchaser."

If a new plan is required in non-unionized settings, the employer prepares it. In unionized settings, the bargaining agent and employer negotiate and agree to a new plan for its bargaining unit. In both cases, the new plan is subject to the "deemed approved" as previously described.

Who is responsible for paying adjustments under the pay equity plan?

Although a vendor would be normally responsible for the adjustments owing under its pay equity plan, a purchaser may be liable. The Tribunal commented on the potential liability of a purchaser in Child's Place v. Fitzpatrick, 2002 CanLII 49459 (ON PEHT) by stating:

  • "…it is possible to read section 13.1 as placing an obligation on a purchaser to make payments under pay equity plans that the seller failed to make in a timely way. But it is difficult to read section 13.1 as absolving a seller of liability for outstanding adjustments at the point a sale is made. Indeed, it is possible to read section 13.1 in a manner that places joint and severable liability on both the seller and the purchaser."

If this issue arises in the course of an investigation of a complaint, a Review Officer will likely ask for copies of the pay equity plan, proof of adjustments paid, and the purchase and sale documents to determine liability. Purchasers should therefore be mindful of potential pay equity liabilities and obtain the necessary advice to protect themselves from assuming liability for payment of adjustments that are owed by the vendor.

Q&As Pay Eq​uity Plans

1. Is it a requirement to include all jobs in the pay equity plan?

The Act requires all job classes that were compared to be identified in a pay equity plan. However, nothing prevents an employer from listing gender neutral job classes as well as male job classes even if they were not used as comparators.

2. If there are only female jobs or only male jobs in an establishment, is there any need for an employer to take further action?

If only female job classes or only male jobs classes exist in the establishment, the employer is still required to post a pay equity plan that includes a statement about the lack of female or male job classes. These employers are required to notify the Office by completing a "Notice of Inability to Ac​hieve Pay Equity​​" form.

3. How should an employer describe the gender-neutral comparison system in the plan?

If a point-factor job comparison system was used it is recommended that the employer describe the sub–factors used to evaluate job classes and explain how they were weighted. If a ranking system was used, describe the methodology. A definition of equal or comparable value, point banding, ranking, or any other method used to determine job classes of equal or comparable value should be included. If the proportional value method of comparison was used, the plan must identify the male job classes used in the comparison.

Pay Equity Adjust​ments

Once pay equity job comparisons have been made, the Act requires employers to increase the job rates of female job classes to be at least as much as the job rate of the comparable male job classes. These increases are referred to as pay equity adjustments.

Compliance ​deadlines for making pay equity adjustments

Part II employers who were required or chose to post a pay equity plan were allowed to phase in pay equity adjustments by set deadlines. Part II employers who did not meet their original deadline for posting a pay equity plan or achieving pay equity must pay any adjustments that are owed immediately: these employers are not allowed to phase in adjustments as they are now overdue. If an employer did not implement and achieve pay equity when it was required, that employer must determine the adjustment amounts based on the pay equity gaps that existed at the time their plans should have been posted. Retroactive payments should be calculated as if the adjustments were paid on time.

See What are the Compliance Deadli​nes? for dates for posting pay equity plans, making adjustments and achieving pay equity.

Minimum amount for pay equity adjustments

Employers who were required, or opted to post pay equity plans, were allowed to phase in pay equity adjustments, in an amount that is not less than the lesser of either 1% of the employer's total Ontario payroll costs of the previous year, or the amount required to achieve pay equity [13. (4)–(6)].

"Payroll" means the total of all wages and salaries payable to the employees in Ontario of the employer [13. (8)].

The minimum amount is applied to all of the employer's pay equity plans. The entire amount must be spent on pay equity adjustments. Payments must be made on the anniversary of the legislated first adjustment date [13. (5)] until pay equity is achieved.

Depending on the employer's circumstances, the size of its payroll may have fluctuated from year to year, and thus, the money that was available for pay equity adjustments may have also varied. Regardless of any yearly fluctuations, a minimum of 1% of payroll was required to be spent for adjustments.

Compounding effect of retroactive payments

Pay equity adjustments form a regular part of wages. That is, a pay equity adjustment added to the base pay rate, increases incrementally with each yearly adjustment until the pay equity rate has been achieved. There is a compounding effect when calculating retroactive payments.

Rules for distributing the adjustments

The Act sets out rules for distributing adjustments among the female job classes. Employers were required to make payments such that:

  • All female job classes due adjustments within a pay equity plan must receive an adjustment until pay equity is achieved for the job class [13. (2), 13. (5)].
  • All incumbents of a female job class due adjustments must receive the same adjustment in dollar terms [9. (3)].
  • Within a pay equity plan, the lowest paid female job class must receive a larger adjustment than the other job classes, or the complete adjustment [13. (3)].

As long as the above rules are met, employers were allowed to decide how they wanted to distribute the adjustments.

Reduction in Compensation to Achieve Pay Equity is NOT allowed

The Act specifies that employers cannot reduce compensation for any position in order to achieve pay equity or to offset pay equity adjustments to female job classes [9. (1)].

Q&As Pay Equity Adjus​​​tments

1. If an employee leaves a position or job class but stays with the company and the job class she previously occupied requires pay equity adjustments, does the pay equity adjustment stay with the job class or is it paid to the employee?

Pay equity adjustments are attached to a job class and have the effect of increasing the job rate of the job class until the job rate reaches the job rate of the comparable male job class. If an employee leaves a female job class that is in the process of achieving pay equity, the employee will only be entitled to any retroactive payments that may be owing but will not be entitled to the benefit of ongoing pay equity adjustments that relate to the female job class the employee is leaving.

2. Is it necessary to show the pay equity portion separately on employees' pay stubs?

Only wage adjustments that are designated as pay equity are considered to be pay equity adjustments. General wage increases or cost of living allowances cannot be considered as pay equity adjustments. Employers should have proof that wage increases were pay equity adjustments; this could be done by recording the amount separately on employee pay stubs or attaching a letter to properly identify it as a pay equity adjustment.

3. Are employers required to pay interest on overdue pay equity adjustments?

A Review Officer or the Pay Equity Hearings Tribunal has the authority to order employers to pay interest on retroactive payments.


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