‘Critical’ decision released concerning multiple pay equity plans

Canadian National Railway Company and Unifor, IBEW and Teamsters Canada Rail Conference may not be familiar to many, but it’s a critical decision that a lot of employers have been waiting for.

The Dec. 8 decision was released by the interim pay equity commissioner, in response to a request for authorization by CN to establish multiple pay equity plans. Why? To comply with legislation that came into force in the summer of 2021, giving federally regulated employers three years to comply by posting a pay equity plan.

Many of these employers are looking to establish a multi-plan approach, given their size and varied workforce. And while CN requested four pay equity plans, the Canadian Human Rights Commission only allowed two.

It’s a “really critical” decision, says Stephanie Ramsay, partner at Mathews Dinsdale in Toronto — largely because it concerns relatively new legislation.

“In terms of employers getting into compliance with the act, the majority of employers are still in relatively unchartered territory. And this is one of the first, if not the first, decisions issued in relation to the interpretation of the act. And it's the first released decision on an application for multiple plans. So this decision contains the first substantive guidance for federally regulated employers on how multiple plan applications will be considered.”

A lot of employers have been waiting intently to see how the interim commissioner responds to an application for multiple plans, so it’s “a significant” decision, says Jackie VanDerMeulen, partner at Fasken in Toronto.

“The decision confirms that it is important for federally regulated employers who may be considering applying for multiple plans to ensure that their application doesn't inadvertently perpetuate the gender segregation of work, including if that segregation exists between unionized and non-unionized employees.”

The recent decision confirms that every case will have to be analyzed very much on its facts, she says, and a lot of employers operate along certain business structures or with different compensation policies across their workplaces — for very sound business reasons.

“But what this decision tells us is that those factors alone, without also being supported by pay equity theory and evidence that the proposed arrangement furthers the purpose of the Pay Equity Act, are unlikely to be sufficient to warrant the commissioner’s exercise of her discretion to grant an application for multiple plans.

“In other words, you've got to consider those business realities in the broader context of pay equity theory.”

‘Communities of interest’

For the pay equity plans, CN wanted to divide its workforce into four “communities of interest”: unionized employees (train operations, “other than” train operations and an investment division) along with non-unionized employees. CN has 14,892 employees, and roughly 11,600 are unionized workers, while 90 per cent of the overall workforce is male.

CN said it was not reasonable to expect a single pay equity committee to properly conduct all the required steps to establish a single pay equity plan, said the interim pay equity commissioner, Lori Straznicky, and one plan “would result in an unnecessary use of time and resources by the pay equity committee representatives because it would require an understanding of all the roles and compensation systems within the organization.”

Further, CN felt that having fewer job classes within a plan “will result in a more efficient process for completing the pay equity analysis and will enable the use of tailored and simple tools by those who are familiar with all of the jobs in a particular proposed plan,” she said.

However, the four unions involved said that there should be a single pay equity plan and urged the commissioner to reject CN’s request for multiple plans.

In evaluating CN’s application, Straznicky said the objective of a single plan was articulated clearly by the Task Force in its Final Report:

“[A single pay equity plan] provides the widest possible canvas for the comparison of jobs, and would thus reflect more accurately the complete range of wage policies followed by an employer. It does not distinguish between unionized and non-unionized employees with respect to the number and kind of comparisons which can be made in determining whether there has been wage discrimination.”

In considering multiple plans, the Pay Equity Act requires a threshold of “enough predominantly male job classes for a comparison of compensation,” said Straznicky — who determined that CN met that requirement.

Once the threshold question has been satisfied, the commissioner can authorize the establishment of multiple pay equity plans if they feel that it is “appropriate in the circumstances,” she said, but these are not fixed and could include “regional disparities, complex bargaining structures or communities of interest, as well as the governance structure of an employer.”

Here, “the focus must be on which approach will be most effective to overcome any systemic inequities in the compensation structures in federal workplaces,” said Straznicky.

The data that CN provided illustrated that the vast majority of women in its workforce occupy classes of jobs that have historically been seen as “women’s work” (such as human resources), she said.

“These jobs tend to be non-unionized, with the effect that employees have little voice in negotiating their salary and benefits,” said Straznicky. “Separating the 85% of the predominantly female job classes at CN into a single plan with no unionized male comparators would reinforce occupational segregation and frustrate the purpose of the act.”

While conducting a pay equity analysis for all CN employees in supply chain operations may be challenging, “that is not a sufficient reason to override the act’s presumption of a single plan, or to introduce the risk that multiple plans will reinforce occupational gender segregation and undermine the goals of the act in this particular case,” she said.

However, Straznicky did agree that the investment division’s mandate was different from that of the supply chain operations and it was responsible solely for managing CN’s defined benefit pension fund. The division has its own CEO and its own human resources system, for example, so it is “sufficiently distinct that a separate pay equity plan might be appropriate” and this would not “raise the same risk of reinforcing occupational gender segregation,” she said.

How multi plans work

Multiple plan applications are “one of the trickier and more critical preliminary issues that federally regulated employers are going to have to deal with,” says Ramsay.

“And it's a bit of a unique issue to the federal Pay Equity Act. The standard under the Pay Equity Act is that each employer has to establish a single pay equity plan in respect of its employees. And this is quite different from the Ontario Pay Equity Act, where it's actually commonplace for employers to have multiple pay equity plans, particularly in situations where there are different bargaining units within an employer, for example.”

A lot of federally regulated employers are large employers with diverse workforces and multiple bargaining units, and often they are spread out geographically,” she says, so “they have these distinct and divergent communities of interest within their workforce.”

To have a multiple plan application considered, an employer needs to demonstrate that there are sufficient male job classes in each of the proposed plans “for the purposes of making a meaningful comparison between predominantly male and predominantly female job classes,” says Ramsay.

Once an employer has met the threshold, it still needs to prove that having multiple plans is appropriate in the circumstances.

“And before this decision came out, employers didn't have much guidance on what ‘appropriate in the circumstances’ means. And this decision is really impactful and really meaningful because it provides some guidance on what appropriate in the circumstances means,” she says.

“Whether something is appropriate in the circumstances is very much going to be a case-by-case decision.”

In looking at multiple plans, it would appear the commission is striving to avoid having a workforce being divided so that the proposed plans are predominantly female job classes or predominantly male job classes, says Ramsay.

“They don't want that to happen, because it makes it challenging for an employer to make a meaningful comparison between its predominantly male job classes and its predominantly female job classes.”

A recent webinar for Canadian HR Reporter provided a comparative overview of the legislation and compliance obligations in Quebec and Ontario, along with federally.

Gender segregation

One of the more unexpected aspects of the decision was Straznicky’s reliance on the unavailability of unionized comparators for non-unionized employees, says VanDerMeulen.

“That was a significant factor that we had not previously seen articulated in the available guidance that warranted refusing the exercise of her discretion.”

The interim commissioner appears to have been influenced by the fact that most of the female job classes at CN were non-unionized, she says, and “appeared concerned that those non-unionized employees would not have access to the unionized, predominantly male job classes which may have stronger bargaining power — even though they would have had access to non-unionized male comparators.”

Straznicky appears to conclude that “this segregation of the predominantly female job classes in the proposed non-unionized employee plan would undermine the purpose of the act” says VanDerMeulen.

The decision focused a fair bit on occupational segregation, says Ramsay.

“[She] found that, in this case, separating predominantly female job classes into a single plan — for example, a non-union plan with many predominantly female job classes such as HR or administrative roles — could reinforce existing occupational segregation within the employer.”

In the task force papers and consultation papers that led to the creation of the federal Pay Equity Act, there was a lot of concern around the issue, she says.

“With multiple pay equity plans, if you had plans that divided employees into different groups that would reinforce traditional gender-based roles, there’s concern from the commission that it could undermine the purpose of the Pay Equity Act, which is to redress gender-based discrimination.”

In certain of CN’s proposed plans, the commissioner found that there would be a wealth of male job classes and a dearth of female job classes in one, or the reverse in another, which “could impact the employer’s ability to meaningfully assess whether its female job classes are being compensated appropriately,” says Ramsay.

On a global scale, Canada fares pretty poorly with pay equity, according the Organisation for Economic Co-operation and Development (OECD).

‘Complicated process’

Overall, pay equity is complex and challenging, says VanDerMeulen, and “there are a whole host of different decisions that have to be made in order to develop a pay equity plan.”

These include identifying job classes, determining gender predominance, valuing the work done by each predominantly male and female job class, calculating compensation associated with those job classes, comparing that compensation and identifying the wage gap.

“It's just a very, very complicated process, which really requires a lot of planning on the part of the employer… and, ultimately, a lot of work to be done by the pay equity committee… the implications can be so significant.”

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