Changes ahead for Federal Employers - Pay Equity and Minimum Wage Obligations

Federally regulated employers face a number of new pay-related obligations. Between now and the end of the year, the Pay Equity Act, as well as a new federal minimum wage, will come into force. Collectively, these changes will have a significant impact on employers operating in the federal sphere, including impacting administrative and payroll costs.

1. Pay Equity Act

The Pay Equity Act will come into force on August 31, 2021. The Pay Equity Act is intended to close the wage gap between female and male employees and ensure that employees receive equal pay for work of equal value. Interestingly, the Pay Equity Act does not simply require that male and female employees in the same positions receive the same pay. Rather, it introduces a comprehensive regime aimed at ensuring work performed by females is compensated equitably, even in the absence of male comparators.

Pay Equity Plans:

Employers with 10 or more employees will have three years to develop and implement Pay Equity Plans in accordance with the Pay Equity Regulations, under the Pay Equity Act. To establish a Pay Equity Plan employers will need to do the following:

• Identify job classes;
• Determine which job classes are predominantly female or male job classes;
• Determine the value of the work performed in each of the predominantly female or male job classes and calculate the compensation;
• Compare the compensation for each job class; and
• Determine if a wage gap exists.

If a wage gap does exist, the employer must increase the compensation of the predominantly female job class to achieve pay equity. Employers are not permitted to decrease the compensation of the predominantly male class to achieve pay equity.

Any compensation increases required to achieve pay equity must be rolled out within this three-year timeframe. However, exceptions exist if the employer is required to increase compensation by more than 1% of their annual payroll. In those circumstances, employers will have a longer period to make the necessary changes, between three to five years.

Once implemented, employers are obliged to review and update their Pay Equity Plans every five years to address any new wage gaps.

Pay Equity Committees:

Under the Pay Equity Act, employers with more than 100 employees or unionized employers are also required to establish pay equity committees. A pay equity committee must be composed of at least 3 employees, 50% of whom must be women and at least one of whom must represent the employer, amongst other requirements. The purpose of the pay equity committee is to work together with the employer to assist in the development of the Pay Equity Plan.

The Pay Equity Act and accompanying Pay Equity Regulations also impose further notice obligations on employers, as well as provide for enforcement mechanisms to ensure employers comply with their pay equity obligations.

Employers are encouraged to proactively review this legislation in advance of it coming into effect and begin planning how they will meet their pay equity obligations.

2. New Minimum Wage

In addition to reviewing their payroll practices for equity, federal employers should also double check that all of their employees are paid at least $15.00/hour. Effective December 29, 2021, this will be the new minimum wage applicable to federal workplaces.

Currently, there is no specific federal minimum wage. Rather, federal employers must comply with the minimum wage requirements of the province in which their employees are employed. For example, a federal employee in Ontario must receive at least the Ontario minimum wage, currently set at $14.25/hour.

However, with the new federal minimum wage coming into effect, the Canada Labour Code has been amended to specify that employers must comply with the greater of the federal minimum wage or the applicable provincial minimum wage. For example, a federal employee in British Columbia would be entitled to receive at least $15.25/hour, which is the current minimum wage in that province.

Takeaways:

The introduction of new pay equity obligations as well as a freestanding federal minimum wage may have a significant impact on employer's payroll practices. Employers should take the time to understand their obligations, review their pay practices, and plan-ahead to ensure they comply with the minimum wage and Pay Equity Act requirements by the applicable deadlines.

Given the complexity of the new pay equity regime, and the impact the federal minimum wage may have on pay practices, employers are encouraged to seek professional legal advice. Lee Workplace Law would be happy to help.