Gender pay is currently top of mind in Canada. Despite the longstanding nature of equal pay and pay equity legislation in Canada, on average, women still earn less than men. A report by Statistics Canada shows that women earn approximately CAD 0.88 for every dollar earned by men (as measured by the wage ratio method, i.e., comparing hourly wage rates of full-time workers). The Ontario Government and the Federal Government recently took steps aimed at improving women’s equality in the workforce and addressing the gender pay gap in these jurisdictions. We outline the key aspects of both initiatives below. We also summarize existing gender pay legislation and highlight current opinions as to why the gender pay gap persists.
Ontario leading among global regulators intent on addressing the gap
Ontario is Canada’s most populous province and accounts for approximately 39% of the country’s labor force. Ontario’s newly introduced Pay Transparency Act, 2018 is set to come into force on 1 January 2019. The Act imposes requirements on employers to promote equality of compensation between men and women, and to increase the transparency of information regarding compensation and workforce composition. Ontario looked to other jurisdictions in developing the legislation, including the UK, Australia and Germany, and the Act puts the province ahead of other governments who are stepping up efforts to close the gap. Key requirements are as follows:
- A salary rate or range must be stated in all publicly advertised job postings.
- Job candidates may not be asked about their past compensation.
- No reprisals may be made against employees who discuss or disclose compensation.
- Employers with 100 or more employees and prescribed employers (i.e., prescribed by forthcoming regulations to the Act) must track and annually report compensation gaps based on gender and other prescribed characteristics (in “pay transparency reports”).
- Such employers will need to post their pay transparency report online, or in at least one conspicuous place, in every workplace of the employer.
- The province will also publish pay transparency reports, which may be done online.
The initial reporting dates are staggered:
- Employers with 250 or more employees must submit their first report by 15 May 2020.
- Employers with 100 to 249 employees must submit their first report by 15 May 2021.
“Compensation” is defined as “all payments and benefits paid or provided to or for the benefit of a person who performs functions that entitle the person to be paid a fixed or ascertainable amount.” However, other details of what information is to be tracked and reported on are reserved for the regulations, which have not yet been released. Also reserved for the regulations is information as to:
- which employers, in addition to those with 100 or more employees, will be subject to the tracking and reporting requirements
- the characteristics, other than gender, to be tracked and reported on
- the amount of the penalties that compliance officers will be permitted to impose upon employers who are found to contravene pay transparency requirements
At present, we do not know whether employers will need to report on the overall gap within their organization (as in the UK) or gaps between employees at the same level or in the same job role. The granularity of gap reporting can identify different issues - the UK single figure approach can reveal a representation gap, whereas the in-grade approach can reveal potential discrimination.
Preparing for pay transparency
The fate of the Act will likely depend on the outcome of Ontario’s provincial election on 7 June 2018. However, making pay distinctions based on gender is already prohibited by employment standards legislation in Ontario (and in all other jurisdictions in Canada). In addition, most employers in Ontario (private sector employers with fewer than 10 employees are excepted) are already subject to pay equity legislation.
Ontario’s pay equity legislation imposes an obligation on the employer to take specific steps to ensure that pay equity exists in the workplace and to prepare a Pay Equity Plan describing the steps taken, the outcome and any pay equity adjustments to be made. While there is no reporting requirement per se, the Pay Equity Office has a monitoring program pursuant to which it audits individual workplaces to ensure compliance. Under pay equity legislation, an employer must value every male and female job class in its establishment using a gender-neutral comparison system and compare the wage rates of all equally valued male and female job classes to ensure that there are no pay inequities. Effectively, this requires a pay audit of all job classes.
The new legislation adds more rigor to the government’s monitoring capabilities. It also adds a risk of reputational damage stemming from the public and the media having access to published gaps. This has been the case in the UK. The ban on salary history questions and the need to state salary ranges in job advertisements will also be a significant adjustment for many employers. It is a common practice for employers to base compensation offers, at least in part, on previous salary history. Typically, employers will seek to offer enough of a salary increase to attract a candidate based on the candidate’s disclosure as to his or her current salary.
Employers should prepare for the new legislation by taking steps to ensure that pay policies and practices are free from unconscious gender bias and considering what adjustments might need to be made to their recruitment processes in order to comply with tougher rules about salary history questions and requirements to publish salary rates. Employers should also review their obligations under pay equity legislation and ensure that they are in compliance.
Ontario’s new legislation demonstrates the global trend toward expanding regulation in this field. Other Canadian provinces will likely be keeping a watchful eye on these developments. It is also foreseeable that Quebec could build on the reporting requirements under their pay equity legislation.
Federally regulated employers are currently subject to pay equity requirements under the Canadian Human Rights Act. The existing pay equity system is a complaints-based model administered by the Canadian Human Rights Commission without a progress reporting requirement. The Federal Government plans to introduce a new proactive pay equity regime in federally regulated sectors, affecting approximately 1.2 million employees. According to the Federal Government’s budget plan, titled Equality + Growth: A Strong Middle Class, released earlier this year, the new legislation will:
- apply to federal employers with 10 or more employees
- build pay equity requirements into existing federal compliance regimes where possible
- establish a streamlined pay equity process for employers with fewer than 100 employees
- set out specific timelines for implementation and compulsory maintenance reviews
- include job types such as seasonal, temporary, part-time and full-time positions
- provide independent oversight
- ensure that both wages and other benefits are evaluated in a gender-neutral way
- apply to the Federal Contractors Program on contracts equal to or greater than CAD 1 million
- repeal previous legislation which is inconsistent with the goal of pay equity
In addition, to inform Canadians about the pay practices of federally regulated employers, the Federal Government plans to publish existing pay information filed by employers under the Employment Equity Act. The pay information will be made available in a user-friendly online format that identifies wage gaps. According to the budget plan, this approach will help draw attention to employers who lead in equitable pay practices, while holding employers accountable for wage gaps that affect women, Indigenous Peoples, persons with disabilities and visible minorities.