Guideline # 2

Determination of Employer
and Employee

The employer is responsible for implementing and achieving pay equity. How the employer is defined, and who is deemed to be an employee, determines:

The Pay Equity Act does not specifically define the terms “employer” and “employee”.

Traditional employment structures and relationships are generally easy to identify, however, corporate ownership, organizational structure and financial interrelationships can sometimes make the employer more difficult to identify. For pay equity purposes, it may be correct to identify some workers, usually regarded as self employed or dependent contractors, as employees, even though they have not been treated as such in other circumstances.

In the majority of cases, employers, bargaining agents and employees know who the employer is. The issue usually arises when two or more related entities must resolve whether they are one employer or separate employers for pay equity purposes. When the identity of the employer is not clear, a number of tests or questions may be applied. No single factor, however, can determine the employer.

The Pay Equity Hearings Tribunal considers the purpose and objectives of the Pay Equity Act in arriving at a correct and purposeful determination. Therefore, the Tribunal is not limited to jurisprudence created in labour law. It may create its own tests, appropriate to the pay equity context. (see Haldimand-Norfolk No. 3).

The Pay Equity Hearings Tribunal has heard several cases on the question of "who is the employer". The tests that are applied, and the issues considered, cover areas such as who has overall financial responsibility, who has responsibility or authority for compensation practices, how closely related the entities are in terms of their core activities and integration of functions, and who exerts fundamental control.

Two Pay Equity Hearings Tribunal decisions, Thomson Newspapers (1993), 4 P.E.R. 21 and Hilton Works (No.3) (1994) 5 P.E.R. looked at private sector organizations which were divided into several business units or divisions. In both cases, the Tribunal considered whether the business divisions, even where they exercised considerable autonomy, were separate employers for pay equity purposes. The Tribunal concluded that the larger entity was the employer.

The Crown as the Employer

The Act was amended in 1991 to exclude the Crown (generally defined to mean the Government of Ontario and its agencies) as the employer of employees who are not defined as civil servants, public servants, or Crown employees under the Public Service Act. Exceptions to this rule involved cases prior to December 18, 1991.

Who Is Covered as an Employee?

While the Act does not specifically define employee, it does set out two circumstances where individuals do not have to be included under a plan: first, students employed over their vacation period need not be deemed employees, secondly, under very limited circumstances, it may be possible to exclude casual workers from pay equity determinations (see Guideline #5).

Because the term "employee" is not specifically defined under the Act, employers must consider whether some workers thought of as self-employed or dependent contractors are actually employees for pay equity purposes. This type of issue is not novel to pay equity; it also frequently arises in other areas of employment and labour law. The Pay Equity Hearings Tribunal has considerable latitude and expertise in determining employment status within the context of the purposes of the Act, and is not constrained by traditional notions of what employee status entails.

The Pay Equity Hearings Tribunal has considered factors from two common law tests; known as the Total Relationship Test and the Integration Test, in determining who is an employee.

The Total Relationship Test looks at:

The Organization, or Integration test, focuses on whether the work done is an integral part of the business, or only accessory to it. Factors include:

The Divisional Court in the Wellington case indicated that the Organization Test may give a more purposeful conclusion to this type of question.

New Employers

The Act recognizes two categories of employers:

The Act allowed employers who existed in 1988 reasonable timeframes to identify, and work towards correcting pay equity wage gaps which existed in their compensation practices. No wage gaps, which existed on January 1, 1988, could be widened, and no new wage gaps could be created anywhere. Consequently, employers who established their organizations after January 1, 1988 must achieve pay equity immediately.

It is not always clear whether or not an employer is a new employer for purposes of the Act. This is particularly the case where an organization is involved in a merger or an acquisition, and changes its name and other corporate characteristics after the effective date.

A new employer may exist where an entity purchases some or all of the physical assets of another company, incorporates under a new name, but does not retain, for example, employees or client lists. In such a case, pay equity must be achieved as of the date that the employer had 10 or more employees.

If the company is acquired through a purchase of shares, the old corporate entity continues as the employer, and maintains its pay equity plan or its pay equity comparisons.

Where there has been a sale of a business, the Act requires the purchaser of a business with an existing pay equity plan to make the adjustments on the dates specified in the plan (section 13.1). If the plan is no longer appropriate, a new one must be negotiated or prepared and posted, and is subject to the full posting and review process which applies to all pay equity plans.

Subsection 1(1)	Defines employee.
Subsection 1(2)	Defines the obligations of employers when posting documents.
Subsection 1(3)	Specifies the obligations of employers to provide copies of posted documents.
Subsection 1.1(1)-(5)	Sets out when the Crown is the employer.
Section 3	Defines which employers the Act applies to.
Section 7	Defines the obligations of employers to establish and maintain pay equity.
Section 9	Prohibits an employer from reducing compensation to achieve pay equity, and prohibits intimidation, coercion, etc.
Section 11	Defines which employers must post pay equity plans.
Section 12	Requires employers to compare female job classes with male job classes.
Section 13	Sets out the details of preparing pay equity plans and scheduling pay equity adjustments.
Section 13.1	Sets out the details of a sale of business.
Subsection 13.1(1)	Specifies who assumes pay equity obligations in the sale of a business.
Section 14	Sets out the requirements for negotiating pay equity plans with bargaining agents.
Section 15	Sets out the requirements for posting pay equity plans where there is no bargaining agent.
Sections 18 to 21	Sets out the choices available to employers with 10 to 99 employees regarding posting pay equity plans.
Subsection 21.11(1)	Defines potential proxy employer, seeking employer.
Subsection 21.17	Sets out how to get information from potential proxy employers.