'If an employer knows they won't be meeting the deadline, it would be prudent to formally request an extension'
“I think it might have been more prescriptive and more time-consuming than some workplace parties might have anticipated.”
So says Jennifer Hodgins, partner at Norton Rose Fulbright in Toronto, in discussing the new rules around pay equity coming into force for federally regulated employers on Sept. 3.
“There's a lot of learning being done by all parties about the act, its requirements, how it's going to be interpreted and so all of that makes this a process that is a bit more challenging than it would be if we were dealing with legislation that had been in place a long time and employers that were familiar with this type of prescriptive pay equity regime.”
While some employers have successfully prepared their pay equity plans and are ready to post them by the deadline, Hodgins notes that many have encountered delays and sought extensions — which have been granted.
“By this point, if an employer knows they won't be meeting the deadline, to help mitigate the risk of any penalties, it would be prudent to formally request an extension of time to post the plan.”
Challenges in complying with pay equity legislation
The new pay equity legislation applies to federally regulated employer with10 or more employees at the time the Federal Pay Equity Act came into force on Aug. 31, 2021. As part of the new rules, they must develop and post a pay equity plan by Sept. 3, 2024, and they must correct any pay gaps by increasing compensation to female job classes by Sept. 4, 2024, or the day after the final pay equity plan is posted.
However, several requirements have proven to be stumbling blocks for many employers.
One significant challenge involves the creation of pay equity committees, who are responsible for developing and finalizing the pay equity plans.
The process has been slower than expected, says Hodgins.
“It can be difficult through the committee process to get the plan created and finalized in a quick way, and many employers have run into some delays with that committee process, and reached out to the commissioner… with these extension requests,” she says.
"I've also seen situations where it's simply been difficult for the committee to obtain the necessary training for themselves, arrange enough time to meet and then gather all the job data that they need to do the work, including the plan, and so it simply required more time to get it done.”
Disputes among the various parties involved, including bargaining agents and employers, can also slow down the process, says Hodgins.
“They then lead to complaints to the commissioner, and then often may lead to a delay in creating the plan and need for an extension.”
Complexities of pay equity analysis
The prescriptive nature of the legislation has also added to the complexity.
"It's very prescriptive with respect to the manner of calculating the compensation rate and comparing compensation job classes, and so all of this required even more training and learning for employers… it’s a very technical exercise," she says.
The legislation is also quite different than that found in Ontario or Quebec, says Hodgins, plus there is the presumption that there be one plan with a workplace,
“That has been significant, especially for workplaces with multiple bargaining units or agents.”
Another big hurdle is the need to gather all the job data to complete each step required by the Pay Equity Commission.
“There's just a significant amount of information that needs to be compiled and, in some cases, updated,” she says.
“And for smaller employers, the challenge can be that there aren't necessarily big, large teams in human resources and compensation departments to do a lot of heavy lifting.”
Part of the new legislation requires employers to provide employees with a draft of the pay equity plan for comments at least 60 days before the deadline, which is another reason why many employers sought extensions, says Hodgins.
Extensions to pay equity deadline
For some employers, delays have stemmed from requests to the Pay Equity Commissioner for authorization to deviate from certain presumptions in the act. Hodgins cites the example of the Treasury Board, which sought authorization to have multiple plans.
"From the time they submitted that authorization request to the time they got a decision was about a year, so that’s quite a long time,” she says.
“I've seen that be a situation for other employers as well.”
But Helen Berry, human rights and pay equity specialist at the Association of Canadian Financial Officers (ACFO) moved in 2022, is not happy with the three-year extension granted to the Treasury Board, having requested an 18-month extension, not three years.
That’s in contrast to a seven-month extension given to NavCanada, which was reasonable for what they needed, she says.
“With the Treasury Board, there’s just too many things that could go wrong with waiting another three years. One is a change of government, we are concerned about that… because I have no doubt that if the Conservatives got in, they would just repeal this legislation.”
It’s also quite possible that some employees appointed or elected to participate in the pay equity process will be near or at retirement after three years — or tired of the process dragging out, says Berry.
“We're pretty upset by that, because I think we'll lose a lot of people that just can't do it for three years… and I may be one of them.”
Berry says she was “thrilled” when the legislation finally passed, having worked in pay equity for 20 years — including the case involving Canada Post — but now some union members say the pay equity process hasn’t even started with their federally regulated employer because they don’t know what to do.
“[These employers are] kind of pushing back,” she says. “I'd like to think it's not because they hope for another government to come in and wipe it out, because that would be a real shame… there's a lot of employers out there who are not going to want to spend this kind of money if they can avoid it.”
Addressing compensation increases
Despite the hurdles, if pay equity analyses reveal pay disparities, employers are responsible for implementing compensation increases. These adjustments are retroactive to the Sept. 4 deadline, even if an extension has been granted, with interest.
The act doesn't prescribe exactly how the increases in compensation are to be made, says Hodgins, though the PCO has indicated that employers may take different approaches depending on the nature of the gap.
“For example, an employer may decide to allocate increases in compensation to the positions in a female job class through an increase to the wage rate or salary, or by way of an adjustment to an indirect compensation element, such as available benefits or vacation, or a combination of these approaches.”
The key is that the compensation adjustment lead to the total compensation of the female job class being equal to the total compensation of its male comparator job class, she says.
Berry say she is “absolutely sure” that there are wage gaps between female-predominant work and male-predominant work in the Treasury Board, citing her experience with the Public Service Alliance of Canada where the salaries of male jobs “were very different to female jobs.”
Ongoing obligations for pay equity compliance
Beyond the immediate compliance requirements, employers have ongoing obligations under the new legislation. The first annual statement, due by June 30, 2025, will require employers to provide information about how the pay equity plan was developed and the outcomes of the pay equity analysis.
“And I understand from communications from the pay equity commissioner's office that there'll be more information about this annual statement requirement later this fall,” says Hodgins.
Additionally, there is a five-year maintenance requirement to ensure that pay equity is sustained — but that doesn’t mean employers should wait, she says.
“The lesson with this whole exercise has been it takes longer than an employer might anticipate and so it's helpful to leave as much time as possible to account for unexpected delays or challenges or a need to reach out to the commissioner, frankly, to help address the challenges [which can mean] waiting for that assistance or decisions to be issued.”
