Canada: New federal pay equity rules are in effect

Employer Action Code: Act

Most provisions of the Pay Equity Act, as well as its supporting regulations, took effect on August 31, 2021. The act, passed in 2018, applies to federally regulated employers (such as banks, telecommunications and airlines) and replaced the prior complaint-based pay equity process with a proactive regime. It requires employers to identify and correct any pay differences between male- and female-dominated positions for work performed of equal value. Related amendments to the Canadian Human Rights Act took effect on the same day, establishing the position of commissioner, Pay Equity Unit and Pay Equity Division.

Key details

Federally regulated employers with 10 or more employees are required to:

• Inform employees, by November 1, 2021, of the employer’s obligations under the act via a posted notice (print or electronic).  
• Finalize a pay equity plan (within three years of becoming subject to the act) that examines any differences in compensation between positions of equal value mostly held by women and those mostly held by men. A draft of the plan must be provided to employees for comment (within a 60-day window) before the plan can be finalized. Employers that either have 100 or more employees or are unionized must establish a committee to develop the plan; the act specifies representation requirements for the committee.
• Eliminate any differences in compensation identified in the plan by providing compensation to impacted jobholders (over the course of three to five years depending on the size of the employer and the total amount of the wage adjustments due). Compensation may take the form of wage adjustments or lump sum payments. Under the terms of the act, specific requirements may apply depending on the specific reason staff members are compensated.
• Review pay equity plans every five years to ensure that no gaps have been reintroduced and to close them if they have. In addition — once plans have been implemented — employers must provide annual progress reports to the pay equity commissioner.

Employer implications

While only an estimated 6% of the total workforce is employed by federally regulated companies, it’s possible that the new legislation could have a broader influence over time. Though the deadline for covered employers to complete their initial pay equity plan is three years out, doing so may involve a substantial effort, and employers would be advised to begin the process, keeping employees informed and involved as appropriate.