Pay Equity Christopher Rootham, Nelligan O Brien Payne LLP Introduction This paper is designed to provide a brief introduction and overview of the Ontario Pay Equity Act. It is important for both employers and unions to remain aware of the provisions of the Pay Equity Act, even if they have already completed a pay equity plan. The obligations of the Pay Equity Act are ongoing, and include the obligation to maintain pay equity. It is easy to unintentionally run afoul of the obligation to maintain pay equity, and this paper describes some pitfalls to look out for. What is Pay Equity? There are three discriminatory pay practices that the law seeks to remedy. First, women may get paid less for doing the same job as men. In Ontario, this right to equal pay for equal work is protected by the Employment Standards Act, 2000, s. 42: 42(1) No employer shall pay an employee one sex at a rate of pay less than the rate paid to an employee of the other sex when, (a) they perform substantially the same kind of work in the same establishment; (b) their performance requires substantially the same skill, effort and responsibility; and (c) their work is performed under similar working conditions. Second, women may be subject to discriminatory job placement opportunities. These could include men only job positions, or positions that require qualifications that, while neutral on their face, could only be filled by men. For example, many height or strength conditions for jobs are discriminatory because most women could not meet them. This type of discrimination is forbidden by the Ontario Human Rights Code. The third type of pay discrimination is more subtle and more difficult to defeat. It involves the undervaluation of jobs performed by women. This is also referred to as equal pay for work of equal value, or pay equity. This form of pay discrimination is dealt with in the Pay Equity Act. That Act sets out a regulatory scheme to prevent this form of pay discrimination and require employers to provide equal pay for work of equal value. What are the initial obligations under the Pay Equity Act? The first item that needs to be recognized is that the Pay Equity Act is still in force. The Conservative Party in Ontario campaigned on a platform of repealing so-called quota laws during the 1995 election. Those laws were contained in the Employment Equity Act. Many people confused the Pay Equity Act with the Employment Equity Act. The Employment Equity Act established targets for hiring that would eventually require employers workforces to reflect the gender and racial diversity of the area they
operated in. The Pay Equity Act, as described above, deals only with pay. The Employment Equity Act was repealed; the Pay Equity Act survived. a) To whom does it apply? The Pay Equity Act applies to all employees, whether full time, part time or seasonal. It does not, however, apply equally to all employers. The Act does not apply at all to employers with fewer than ten employees. If the employer has 10 or more employees but fewer than 100, then the employer must institute pay equity, but need not make or publish a pay equity plan. If the employer has 100 employees or greater, then the employer is required to create and then publish a pay equity plan. b) Primary focus: comparison between job classes in an establishment The primary obligation under the Pay Equity Act is to ensure that women are paid equally with men for work of equal value. This comparison is done between job classes, not on a person-by-person basis. A male-dominated job class is a position staffed by at least 70% men. A female-dominated job class contains at least 60% women. There is also a provision to take account of historical incumbency of a position: those positions with a historical pattern of being dominated by a certain gender are deemed to be either a female or male job class. For example, where library staff have been historically a female - dominated field, but the current female incumbency has dipped below 60%, the Act still considers the position to be a female job class. An employer must compare the work done by each male and female job class. However, an employer need not compare all job classes of all employees. Instead, it need only compare job classes within each establishment. An establishment is not the entire corporation or employer, but only that part of an employer within a certain specific geographic area. For example, a female job class in Sudbury would not be compared to a male job class in Toronto. This geographic definition of an establishment was designed in recognition of the higher administrative and secretarial salaries paid in Toronto. The employer begins by designing a Gender-Neutral Comparison System (GNCS) that uses four criteria to evaluate and compare jobs: 1) skill; 2) effort; 3) responsibility; and 4) working conditions. The GNCS is called gender-neutral because not only is it completed in an effort to create pay equity, but the criteria used must themselves be non-discriminatory. This means that traditionally male skills such as physical strength or aggressive leadership must not predominate over other assessment criteria in the GNCS. If an employer is unionized, then it must negotiate the GNCS with the union. Then it applies the GNCS to jobs within the bargaining unit. If there are no comparable job classes within the bargaining unit, then you must look to the entire establishment. c) Methods of comparison: direct, proportional, and proxy -2-
After designing a GNCS, the employer must undertake one of three types of comparison: direct comparison, proportional value comparison, or proxy comparison. The employer s first method of comparison is to compare a female job class with all male job classes with similar scores on the GNCS. The employer may then chose the male job class with the lowest pay (or the lowest salary at the top of a pay range). If the female job class with the same GNCS score is being paid less than the male job class, then the employer must make up the difference. As for the timing of the catch-up, public sector employers must have already made up the difference according to the Act. Private sector employers need only spend 1% of their payroll each year in making up the difference if they post a pay equity plan. This means that smaller employers who opt not to post a plan must institute pay equity immediately. An employer may not lower the wages of the male comparator in order to achieve pay equity. The employer must compare all compensation earned, which includes both salary and benefits. In 1993, the Pay Equity Act was amended to add a second method to compare job classes: the proportional value method. Where there is no comparable male job class within the establishment, then the employer must undertake a proportional value comparison. The proportional value method permits comparisons of the relative worth to an employer of female and male job classes even though their jobs are not perfectly matched. Proportional value looks at the relationship between the value of the work performed and the compensation received by male job classes and applies the same principles and practices to compensating female job classes. The proportional value method begins by identifying unmatched female job classes. The employer then selects a representative group of male job classes. Then, it determines the relationship between the value of the work performed and the job rates. It then calculates the adjustments for female job classes by determining if the same pay relationship or pattern applies to the job rates of female job classes. If the female job classes are lower paid than the representative group of male job classes, pay equity adjustments must be paid. For example, suppose there are three male job classes with three different GNCS values and three different rates of pay. The employer then draws a line on a graph linking these three different values and rates of pay. The employer then places each female job class on that line to determine what their rate of pay should be. Usually, the analysis is more sophisticated than that: the employer will hire an expert to undertake a regression analysis to ensure the proper pay rate for each female job class. To give an even more simplistic example, suppose an establishment has only two job classes, one male and one female. The male job class was given a score of 10 on the GNCS and is paid $45,000 per year. The female job class was given a score of 8, and is paid $30,000 per year. Under the direct comparison system, no pay equity adjustment is required. Under the proportional value method, however, the female job class must be given a pay raise to $36,000 a year to reflect the pay to GNCS score ratio of the male job class. The third method of comparison was also added in 1993: the proxy method. The proxy method was actually repealed by the Ontario government in 1996; however, a 1997 court case declared the repeal to be unconstitutional. 1 The proxy method only applies to the broader public sector, and an employer must inform the pay equity office that it will be using the proxy method. 1 Service Employees International Union, Local 204 v. Ontario (Attorney General) (1997), 35 O.R. (3d) 508 (Gen. Div.). -3-
The proxy method is used where there is no male comparator within an organization (because the particular industrial sector is predominantly female). In such a case, the organization must look outside to another organization. It chooses a female job class in a balanced sector that has achieved pay equity and compares the two job classes. d) Exceptions to Pay Equity There are five statutory exceptions to pay equity. These are: > a gender-neutral seniority system; > temporary training or development assignments; > merit pay plans based on formal performance ratings and gender neutral; > skills shortages causing temporary wage inflation; and > red circling. Employers do not need to implement pay equity where the pay difference between male and female job classes is the result of one of these five factors. Special Duties in a Unionized Workplace There are special rules with respect to the application of pay equity in a unionized workplace. First, there is a duty to bargain with the union over the content of the pay equity plan. Unlike in normal collective bargaining, the employer may not engage in hard bargaining. Therefore, the pay equity plan is almost always negotiated separately from the normal collective agreement provisions. The union must aid in pay equity and in monitoring the success of the pay equity plan. There are no explicit rules for employer disclosure of financial data, but the duty to bargain in good faith requires that employer cooperate with the union when developing pay equity plans. Finally, the comparison between job classes takes place first within a bargaining unit, and then throughout the organization if no comparator exists within the bargaining unit. Obligation to Maintain Pay Equity Once a pay equity plan has been designed and implemented, that does not end the employer s or union s obligations under the Pay Equity Act. The Act also contains an obligation to maintain pay equity. This obligation to maintain pay equity requires employers to ensure that the job rates for female job classes have remained at least equal to the comparable male job classes, and that this equality has consistently been the case from the date that pay equity was achieved under the pay equity plan. Problems involving the obligation to maintain pay equity usually arise in one of four situations. First, a male job class disappears. If the employer used the lower paid of two potential male job classes, then the disappearance of the lower paid male job class means that pay equity is no longer being achieved and the female job class must be paid equally to the remaining male job class. Second, the sale of a business may change the scope of a bargaining unit, thus resulting in additional comparator classes. Third, a new female job class may be created by hiring women to replace men in a certain job class. -4-
Fourth, an interest arbitrator may increase the wages of a male job class. For example, in Welland County General Hospital (1995), an interest arbitrator awarded a raise of 7-8 percent for all employees. The union had asked for a percentage raise instead of an increase based on real monetary value. This 7-8 percent raise, however, increased the real value of the wage inequality between female and male job classes. The Pay Equity Commission therefore concluded that the employer had violated the Pay Equity Act by widening the pay gap. The employer attempted to shift blame to the union for proposing a percentage increase, but the Commission did not conclude that the union violated the Act. In Brampton Public Library No. 2 (1994), the difficulty of maintaining pay equity when the proxy method was used to achieve pay equity was demonstrated. The employer had achieved pay equity using an agreed upon male comparator outside of its organization. Some time later, that male comparator group received a wage increase. The union successfully argued that the female job class within the enterprise also needed to receive the same raise in order to maintain pay equity. It is important for unions and employers to remember the obligation to maintain pay equity when negotiating collective agreements. Both parties must be alert to the four pitfalls mentioned above, as well as any other circumstances that may result in a breach of the obligation to maintain pay equity. 2002, Christopher Rootham -5-